Companies today are pushed to adapt to a changing environment. Just as it happens in any natural evolutionary process, those changes can be prompted by opportunities but also by threats.
Short-term and profit-ruled thinking has brought us a production model that is based on the standardization of customer expectations and large scale productions—made highly profitable by economies of scale and process consolidation. Unfortunately, this model is based on protection more than competition; companies are pushed to protect their market with every possible mean, with no qualms about slowing down innovation to protect advantages, monopolies and rents.
If a company succeeds in convincing consumers that they have certain needs (which used to be easily accomplished through television ads) the market status quo and related profits can be generated for a long period of time without being concerned too much about innovating from the users point of view. This model has been the cornerstone of our economy for decades.
These days, some signs of a shift can be observed. Access to the means of production is democratizing rapidly. We have common platforms for creation—not only with digital goods—and the list of new, open and collaborative production methodologies is growing. As a result, a number of small, independent, networked players are gaining market shares. Of course, much of the responsibility of this wave of change and democratization goes to technological developments such as the Internet, advanced electronics, automation and the resulting interconnected culture. But there is more to it.
These transformations produce an environment where the existence of a market of individuals cooperating on a project by project basis (possibly improving a set of shared knowledge commons) becomes possible. A market where people don’t only sell labor to corporations but sometimes compete with them by means of micro or small entrepreneurship, often coming up with new and game-changing innovations.
A market made of self-employed, niche players bringing on project-focused efforts to create highly shared value may seem, at first glance, strange and inconsequential. But let’s take the software industry as an example. It started following such a formula years ago when open source software adoption started to rise. Twenty years on, open source software literally runs the Internet. Think of Linux, Apache or even Android. Think of the structural software components of the cloud.
Today’s software economy is heavily based on collaboration and common goods; open source companies are thriving and, in some cases, have supplanted incumbents and eliminated rents.
When such an example is taken into account, the vision we depicted earlier seems much less absurd.
These transformations in the knowledge and digital economy are allowing new disruptive models to emerge, adding to the complexities of a world ever-increasingly interconnected, causing further headaches to corporations. At the same time, evermore frequent crises due to political and social conflicts, natural disasters or frictions on the allocation of critical resources are regularly causing dramatic and sudden impacts in supply chains and markets. Post-crisis (when there is a ‘post’), returning to the previous stable/normal state is proving more of a challenge every time.
As a result, some large corporations that so far had little or no strategic interest in sustainability and long-term, shared thinking, are reconsidering their views and embracing a transformational enterprise model. Such transformation will not come easily to corporations as they often lack adaptability and have historically sought static efficiencies in management instead of creative destruction. For a long time creativity has been, at best, separated from the rest of the company and at worst, simply outsourced to external agencies. As a result of this separation, companies with overgrown organizational charts and processes become siloed and unable to adapt.
Clay Shirky put it thusly in his 2010 post, “The Collapse of Complex Business Models”:
Bureaucracies temporarily suspend the Second Law of Thermodynamics. […] It’s easier to make a process more complex than to make it simpler.[...] When the value of complexity turns negative, a society plagued by an inability to react remains as complex as ever, right up to the moment where it becomes suddenly and dramatically simpler, which is to say right up to the moment of collapse. Collapse is simply the last remaining method of simplification.
This discussion on challenges and complexities of the interconnected world could seem quite recent but the concept of a transformational company that can tackle opportunities while responding to change was already being envisioned decades ago. Going back to Taiichi Ono, father of ‘Lean Thinking,’ who asked for a ‘Lean Corporation’ that could understand the promises of efficiency, productivity and purpose by letting “flow manage the processes and not management to manage the flow.”
Still, too often today this is not the corporation we face as consultants, employees and customers. In the vast majority of cases, corporate innovation remains burdened by the conflict between the production of new ideas and the static organizational efficiencies that tend to slow down and reject change.
Transformation to the world of enterprises and corporations is not only ongoing but accelerating, a transformation which will allow new players to emerge, pushing existing giants to adapt to a changing environment. Following are some signals of possible paths. Some are outliers, to be sure, but all are proof positive that completely rethinking old models is possible and can lead to new forms of success.
1. The emergence of non-hierarchical management
Hierarchies are often an expression of the sclerotization endemic to large corporations and often impede response to change. When seeking agility within today’s new business environment, personal purpose gets more and more important in labor. As Daniel Pink pointed out in his wonderful book Drive, the role of motivation is key in enabling one to achieve results. So businesses transform, traditional top down and hierarchical management starts leaving room for non-hierarchical solutions where workers make a personal choice to follow projects or give shape to new initiatives.
Valve Software, a world leader in gaming, famous for its Half Life and Portal games, is in fact governed by a non-hierarchical management model where, in the words of Michael Arash:
People commit to projects, and projects are self-organizing; there are leads, but they’re chosen by informal consensus, there’s no prestige or money attached to the label, and it’s only temporary—a lead is likely to be an individual contributor on their next project. Leads have no authority other than that everyone agrees it will help the project to have them doing coordination. Each project decides for itself about testing, check-in rules, how often to meet (not very), what the goal is and when and how to get there. And each project is different. It’s hard to believe it works, but it does.”
Or look at Semco, the Brazilian conglomerate that specializes in complex technologies and services, with $200m (USD) in annual revenues. Semco is a ‘self-managed’ company, with no HR department. In the words of David Gray, author of The Connected Company: “Workers at Semco choose what they do as well as when and where they do it. They even choose their own salaries. Subordinates review their supervisors and elect corporate leadership. They also initiate moves into new businesses and out of old ones. The company is run like a democracy.”
2. The future of brands could be collective
Still at a very early stage, Openwear—an initiative that defines itself as a collective-open source brand—collaboratively produces fashion collections that anyone can use to start local production. If the brand awareness grows, it is not hard to imagine that an openwear shop could pop up in your city in the not too distant future, as an ‘open source franchise.’
In such a scenario, instead of creating a classic franchise, future entrepreneurs would be allowed to download schematics and digitally fabricate (almost) everything locally with their personal twist.
We can foresee a future in which these transparent, sustainable, common brands coupled with cooperative production facilities could finally set up as a practical alternative thanks to a new awareness on the part of the consumer.
3. A renewed concept of product lifecycle
Manufacturing is a field where a lot of new experimentation is being done. OpenStructures is a project that defines a model for modular construction. Using a shared library of designs based on a common, well-specified, geometric spatial grid, products can be designed to be mixed, remixed and reused creating a kind of collaborative Meccano to which everybody can contribute parts, components and structures.
While this may seem far off, big names are already warming to the idea of enabling post-production innovation by communities, helping to push their products further. In January 2013, Nokia released the 3D designs of one of its phone covers to allow user-driven innovation. What if IKEA decided to create furniture based on Openstructure’s vision? Existing communities such as IKEA Hackers would likely jump on such an opportunity.
4. The dawn of garage factories
Even robotics and automation, historically the prerogative of heavy industry, are finally seeing some democratization. Revolutionary products like Rethink Robotic’s Baxter are early examples of industrial robots created to work alongside humans. Safe for humans to work with, easily programmed through step-by-step assisted-movement training and expected to be dramatically cheaper than other industrial robots, Baxter becomes affordable for the average small business.
Innovations of that kind will make automation possible for very small businesses, letting them compete on bigger and previously unreachable markets, bringing forth a new breed of garage factories and amateur captains of industry.
5. The relocation of manufacturing
Many have written of the intentions of giants such as Apple, Ford or Caterpillar to bring the manufacturing back home. One such early example is General Electric which started by partially re-activating the ‘Appliance Park,’ a multiple factory facility from 1951 that had been largely abandoned.
Having production facilities closer to the design centres helps to make the whole business leaner and able to react/innovate faster. Moreover, with the increase in wages in the developing countries, any small hiccup in the chain threatens the margins gained through offshore production. It will not happen over a few months but we can surely expect a future in which industrial production will occur closer to the place of consumption, and where design will be adapted to local preferences and feedback.
6. No more intellectual property obesity
Another new breed of company deliberately decides not to focus on the traditional protection of competitive advantages. Those companies bet on a different advantage: their ability to innovate with the guidance of their community, adapting and evolving to become the company (and products) the community needs. Nathan Seidle, founder of SparkFun, a DIY company that manufactures in Boulder, Colorado often mentions ‘intellectual property obesity,’ which he defines as: “when a company relies too heavily on patents and enforcement rather than innovation.” More and more structures will leave intellectual property protection strategies in favour of a lean and agile approach to empowering markets and communities.
7. A new role for resources in trade
In June 2012, a fascinating article appeared on PLOS Biology called “The Macroecology of Sustainability” reminding us that it is impossible to derogate from the principles that govern physical systems. It encourages an honest look at current human systems (such as our states, cities, factories) and shows how highly unbalanced they are in terms of resource consumption.
To sustainably cope with the needs of humanity, wealth and goods production transforms and becomes more decentralized and just in time (in contrast to mass production), and less prone to waste generation. In such an environment, open and exploratory projects like OpenMaterials are key to gaining understanding the vital role that materials have in production. Furthermore, understanding will have to extend to design itself, as it will have to become more independent from raw-materials sourcing and tolerant to changing availability of resources.
Fairphone, a project that promotes the realization of a smartphone made with materials coming from fair trade, contributes to advancing the awareness that consumer electronics (among many other items) are built on unsustainable and non-humane sourcing and practices, and will not endure long if we don’t change the overall approach.
We can reasonably expect that, in the long run, environmental responsibility and resource consumption will be included in pricing decisions. This would finally help companies to contribute to a virtuous circle of saving resources through transforming customers’ consumption habits.
Market transformation—both in terms of access to the means of production and consumer awareness—is constantly operating to push cooperation up the product (and solutions) design cycle.
Is a complex, fully cooperative, decentralized and non-hierarchical organization, producing impactful changes, somehow possible? Will we succeed in finding new exciting ways to cooperate in building deeper and more powerful peer production and decentralized infrastructures? Watching those answers develop is sure to be fascinating and packed with lessons.