Twenty years ago, Peter Drucker wrote about the coming of the new, information-based organization, which twenty years later we now take nearly for granted as incarnate everywhere. While information-based organizations rely on and have been largely created by advanced IT, Drucker notes that not all such organizations require advanced IT. Advanced IT lets firms eliminating layers of management that previously served as filters and transmitters of information. IT-enabled point-to-point delivery of relevant information lets companies build scale without building mass. Learning from industry, the United States military has taken notice and found ways to do the same.
Drucker identified three major evolutions in the concept and structure of organizations. The first occurred in at the end of the 19th century when management of an organization became distinct from ownership. The second occurred in the early 20th century as the large modern corporation with a command and control structure (borrowed from the military) took form. The third period of change, which we are still in the middle of, is a shift away from the large command-and-control organization to one comprised of information-based knowledge specialists.
Following Drucker, this information-based organization, powered by advanced IT is flatter. It has fewer layers of management and few managers in numbers. It makes liberal use of task forces, or special project teams, made up of knowledge specialists across different divisions of the firm (cross-functional organizational designs). This organization relies on lateral, point-to-point information flow and “one version of the truth” in data to guide necessary improvising that occurs in more decentralized and distributed teams.
Today, many, if not most firms, still have troubles with cross-functional structures. We aren’t quite yet there. The dominant form of the organization is not quite as cross-functional as Drucker and others may have envisioned it should be by now. What is standing in the way? I contend it is the preference for management practices still deeply rooted in the second age. Cross-functional teams alter the distribution of power, challenge compensation systems which must close the gap in pay between information specialists and management, and require a different kind of organizational culture to use them well. Over the past decade, firms have been continually reorganizing themselves to get leaner and leaner, largely ignoring the cross-functional nature of knowledge flows that are critical for firm success and the social and cultural impediments.
But despite the ongoing battle between the promises of advanced IT and the inertia or even rigidity inherent in human cultures, I believe we are entering a fourth period of change. We are shifting from a decentralized and cross-functional team of information specialists to a high-performance, highly digitally interconnected expert teams of information specialists. This shift is about moving beyond (or even away from) total quality management, replicated business processes, goal alignment, distributed decision making and more effective hiring, training and developing of people.
This shift is characterized by firms that spend more time shaping a corporate culture that can find deeper alignment between people’s passion for work and the work at hand; about how to collectively develop shared mental models about how their world works that differ from competitors; about developing idiosyncratic patterns of work activities, tailored to employee personalities, likes/dislikes and ways of working and adjusting environmental factors such as geography and organizational structure; about spending more time actually addressing their own internal social and psychological learning pathologies top to bottom; about increased reliance on social tacit knowledge; about developing personal leadership at all levels, not just upper management. Perhaps the agile software development methods are a small precursor for what lies ahead.
In short, with more data than can possibly be absorbed and plenty of advanced IT around, these firms will be more directly managing social knowledge through manipulation of context-specific factors. The goal will be to build smaller, tighter, geographically distributed expert teams and then leverage this largely tacit knowledge base across larger sections of the firm and across markets.
Unlike the third age, this fourth age won’t need any new specific technology. The new social and collaboration tools of Web and Enterprise 2.0 will prove attractive since they allow person-to-person transmission across great distances of mostly unstructured data that can be readily converted to tacit knowledge. Otherwise, conventional third-age IT will be assumed to be in place and highly effective. Organizing such an intense knowledge-based team will require intense (or extreme) management practices.
I suspect that firms will have to transition to this new age or wait until the fifth age, when machines will do easily what the expert teams of the fourth age do well.
But then again, all this tractate may be but a dream. Maybe we are happily doomed to witness firms and teams locked in endless struggles with themselves and we can continue going about our business in the back room quietly creating more IT than human cultures can effectively use.