The New World of business is now fully upon us all. Leaders of organisations are coming to recognise that the New World extends well beyond the publicised and high profile e-activities and ‘dotcoms’ to all their internal and external activities. They are beginning to realise that the speed of change, levels of complexity and the speed of information have irrevocably altered the business-sphere of operation.

So, the challenge - speed, agility, developing new capabilities, retaining talent, global virtual teaming, intelligent products, mass customisation of customer relationships, reach.

The solution - new business models, use of cyberspace especially the internet, local involvement of global leaders, new offerings delivered in new ways to new customers, 24*7*365*World-wide - business empires on which the sun never sets, clicks and mortar - marriage of touchspace and cyberspace. Altogether exciting, new and untried,

The paradox - how to stay in control in a business environment which demands that you create new ways of operating which no one yet fully understands. The simplest way to understand the paradox is through an ‘odd-one-out’ quiz.

Which of these is the odd one out?

1. run a formula one car using a steam engine

2. power a Boeing 737 with a water wheel

3. run a notebook computer using transistors

4. fuel a laser guided smart bomb with gunpowder

5. drive the screen of a palm pilot using valves

6. organise a new world global business model using a 100 year old command and control hierarchical structure

Did you guess right? Most people guess that number six is the odd one out. But why is it the odd one out? The reason; not because it is funny, not because it is obviously the only one related to the topic being discussed here, not because it is the only one which spills onto two lines of text, but because it is the only one out of the six which we actually try to do! As a result a significant amount of academic thought has gone into rethinking organisation However, in reality, there is little evidence of enterprises actually changing their traditional approach.

But it is not just because our thinking on how to organise is old that we need to reinvent it. There are a number of other reasons.

The New World

Over the past decade, for many enterprises the pace of change in their business-sphere easily outstrips the speed at which the organisation can learn or respond to the change. As this happens business forecasts become more difficult to achieve or sustain, market capitalisation valuations become less easily understood, the enterprise find itself constantly under pressure to re-organise or merge - either to align resources to take advantage of recently identified opportunities or to avoid un-anticipated threats and issues. The enterprise finds itself investing substantially in technologies or activities which in which it has little historical experience. This is the evidence of the transition from the Old World to the New. Miles Flint President of Sony Broadcast Europe reflected that in Sony our old world of analogue technology sold though a country based channel needed to be replaced by a European digital solution based approach.

The drivers of this transition are already well documented and understood - technology, aspirations/ expectations, new economics - especially information economics, global reach. What is less well documented is the impact on old assumptions about the best way to run a successful enterprise.

1. Business Model

2. Capturing and sharing knowledge

In the Old World a year really was a short time. It was the basis of the budgeting cycle - a reasonable planning and implementation horizon. Why was it a short time? Because in an environment focused on doing more-of-the-same, the few different or unanticipated issues which did occur were widely spread and did not cross-influence each other. As a result, knowledge acquired had a significant ‘shelf life’ The net result was that in an enterprise, the people with the longest experience of the industry were best placed to make strategic and tactical decisions. Knowledge was held at the ‘top’ of the organisation which was also where all the key controls on resourcing and finance were also held. By ensuring that the bulk of the people in the enterprise did what was demanded of them by the ones with the most knowledge, the security of an enterprise is best assured. As a result the management at the top closely determined the actions and focus of the rest of the organisation.. In order to deal with complexity, decisions and issues were aligned by function or segmented by department or division. Since the bulk of activity is repetitive and based on prior knowledge, Little information is required to flow up or down the organisation. In addition the volume of information flowing into the organisation is low, often limited to structured market research etc.

An important but little recognised fact is the fact that information velocity, the maximum speed with which we can move units of data, increases faster than the rate of computing power. Many managers will be familiar with Moore’s law which suggests a doubling of computing power every 18 months. Information goes faster - up by a factor of 10 every 3 years. Why is this important? It is important because there is a maximum speed at which a group of people can absorb information. Assuming a top management team of 25 in conversations the limit is about 1Mb/s. This rate is fixed - true you can get more out of your 1Mb/s by concentrating on information - on answers rather than data - by making information graphical and colour based by using audible warnings etc. but there is still a limit. Why is this a problem? - Well it wasn’t. In the Old World this velocity was more than adequate. In the New World though, the issues starts at a local level where the simple speed around a Local area network is two to three orders of magnitude faster - it is much faster to go across or around the organisation than up it. The problem is amplified because the global/ wide area networks operate at one to two orders of magnitude of the speed to management. Fast but lower than the local traffic - There are two frightening conclusions firstly the flow of information to the top management of a globally distributed organisation will/ has become a bottleneck to decisions and focus. Secondly the flow of synergistic/ knowledge management from one local operation through a formal process via top management to other local operations will not work.

3. Movement and realignment of resource

The third reason for the need to change is the increasingly debilitating effect of what I describe as the Petronius Paradox. At the pace of change suffered by organisations in the New World, it is difficult to sustain alignment of functional or divisional resources on the key priorities for very long. This leads to a constant re-organisation cycle which is often exacerbated if there is rapid turnover of key executives. Furthermore, organisations who are unable to cope with the pace of the New World have two legitimate options; ‘accelerate’ or ‘die’. But they often choose a third option- ‘get really big and dominate the market place, then we won’t need to go faster’. This strategy drives the logic of consolidation affecting most business-spheres. Mergers, and Acquisitions have in the New World become part of business as usual. Every acquisition or merger - unless innovatively handled simply leads on to additional pressure for realigning resources. In theory the process should be quick - instantaneous! In practice, because of the impact of reorganisation on the status of individuals, their potential power positions and therefore relationships, their potential career opportunities, their role in the organisation - and especially if they still have one after re-organisation, far from being a quick logical process it is a slow emotional roller-coaster which takes months, if not years to fade into the background noise of personal and organisational priorities.

Realignment of resources and people’s roles and priorities in the New World should not be so intricately linked with power position and opportunity. But instead with the current challenge or opportunity and should allow individuals in the company to use their attitudes and capabilities to fulfil their potential.

4. Management/ leadership balance

The final driver is the change in emphasis of the behaviours within the enterprise. Old World enterprises, with their focus on experience and procedure, could be effectively driven through standard management practices based on past activities. New or innovative challenges had, as always, to be led. The role of leadership was given to the senior managers - which it had to be, since with their powerful control levers they could actively prevent any change led from elsewhere in the enterprise. Leadership and management came from the Top. In the New World the enterprise’s agenda includes significant change, demanding a higher level of leadership. However, since most senior management teams are now bottlenecks suffering data or information overload, often relying on past and now obsolete experience they may not be the best people to lead the change in many circumstances. So leadership shifts from the ‘top’ to ‘who ever is in front’ - and that might be anybody, right down to the new recruit with knowledge on particular protocols!

Not a matrix - a new dimension

The death knell of the Old Command and control Hierarchy has sounded often before. As early as the last century, in the 1970’s enterprises were experimenting with ‘matrix organisations’. Success was limited because the duplication of the command and control structure which ensued allowed the creation of an intensely political and bureaucratic operating and working environment, and a mish-mash of confusing and confused accountabilities and responsibilities. Furthermore, the information requirements to sustain a matrix organisation are tremendous and in the last century there were few tools capable of providing the information transparency required. The experiments usually ended as disappointments.

With the cyberspace and touchspace opportunities the New World gives us, it is possible to give ourselves another approach. However, any attempt to suggest a working organisational framework must satisfy certain conditions if it is to be practical and to be viewed with any sense of reality.

Conditions for a New Organisation for a New World

Enterprise objectives match - the organisational framework must recognise that enterprises exist usually to generate money for some of the key entities of the business model.

Allow personal aspiration, commitment, growth and development - without compromise.

Ease of explanation - like the ‘Old World ‘garden fork’ used to explain a hierarchy the framework should be visually simple and easy to communicate to all from the new undergraduate recruit to the global chairman.

Scalability - the framework should be capable of being interpreted at all levels of scale; individual, local team, global team, local enterprise, global enterprise, multi-global enterprise.

Resilience flexibility and adaptability - must not be compromised

Comprehensiveness - the framework should be capable of fitting the majority of New World enterprises without additional modification

 

...Your last re-organisation ever...

In order to break the Petronius Paradox it is essential to build an organising framework which is designed, not around command and control, but instead around the key elements of an enterprise which remain constant in a changing business environment. The model must be complex enough to deal with the real issues involved but not complicated. We base our model on what we refer to as ‘dimensions’ of an organisation.

For a business enterprise with a goal of making money, the dimensions can be grouped around six purposes.

Making money through processes and projects

Offering and Solution development and Relationship management

Providing leadership co-ordination and an appropriate working culture

High quality internal application of professional services

Gaining access to appropriate suppliers/ alliances and partnerships

Developing excellence in core current and future capabilities

The framework described below, the Organisational Pentagon or Organisational Grid, has now been successfully implemented in several Fortune 500 organisations described elsewhere. At Pentacle we often refer to the transition as ‘the last re-organisation ever’. Geoff Hall Vice President of Technology at Nortel said, ‘We aimed to make the natural way of working the actual say of working.’

The framework can be applied at an individual, team. enterprise, regional or global level without requiring additional explanation. Some people in the organisation will find themselves involved in more than one area

Organisational Pentagon Pre-requisites

There are five pre-requisites to the realistic and effective functioning of the Pentagon.

1. Interdependence

2. Separate accountability and responsibility. Focus accountability on the purpose.

3. Federalism: the best person to do it should do it without duplication

4. Virtuality: the effect is more important than the form

5. Control must never outweigh leadership

1. Interdependence

2. Separate accountability and responsibility. Focus accountability on the purpose.

3. Federalism: the best person to do it should do it - without duplication

This rule is best supported by the creation of transparent internal activities - the use of an intranet to ensure that there is not unwitting addition of complexity or duplication. Jacques Racloz then Chief Executive of Novartis Pharmaceuticals said, ‘Federalism is essential to success. It allows alignment without confusion and internal fighting’

4. Virtuality: the effect is more important than the form

5. Control must never outweigh leadership

Control is the hallmark of the Old World whilst leadership is a measure of the New

Conclusions

Over the past six years a number of organisations have put into place and benefited from the implementation of the pentagon. Each implementation has been different and unique - completely dependent on the organisations situation and strategic imperatives. Each of these implementations has been heavily dependent on the visionary leadership of key individuals. This article is dedicated to the courage and determination of these New World Pioneers.