Tag Archives: Industrial Revolution

Problems and the people who solve them

Note: This is the sixth and final part of a longer series on how social media is affecting management. You can find the earlier posts – The future of (knowledge) work, Knowledge Workers in the British Raj, The north-south divide, Working in Hollywood and World of Warcraft in the workplace – elsewhere on this blog.

What impact will Social Media have on your business? Is it evolution, revolution, or a non-event? It’s hard to deny that Social Media is changing how we understand the role of government, and how we interact on the social commons. But what is its impact on the private sphere: the gated communities which are our businesses and organizations? Some folk claim that we’ll see a similar shift in the private sphere as we’re seeing in the public one. A revolution in the workplace as the workers realize that they really do control production, downing tools in search of a better deal and conditions.

This point of view ignores two key facts. First, that private spaces are, by their nature, more flexible than public as we are free to define who can inhabit them. Revolution is unlikely. Business owners still need someone to hold accountable for the performance and behavior of their businesses, just as regulators and governments want to ensure that someone in the organisation is on the hook for meeting their demands. Management will continue to manage, and to be held accountable, no matter how empowered the workforce becomes{{1}}. Second, that the technologies we’re deploying don’t just change how we carry out the tasks our businesses needs, as they also change what tasks we need to carry out. There is no reason for tomorrow’s organizations to operate within the same framework that yesterday’s ones did.

[[1]]The future of (knowledge) work @ PEG[[1]]

The nature of work is changing, and the shift in work practices looks like it will be comparable to the shift we saw during the Industrial Revolution – between the 18th and 19th centuries – when almost every aspect of daily life was influenced in some way. Before the Industrial Revolution people worked from their homes, farming or blacksmithing as the need arose, and the concept of work-life balance hadn’t found its way into the dictionary. After the revolution most people worked in vast bureaucracies, leaving home every morning to travel to work (or, early on, living in vast company owned dormitories next to their work) and fit themselves to into the tasks demanded of them.

The Industrial Revolution gave us Taylorism, a view of business which equates the organization to a vast programmable machine. Businesses were inward looking, intent on improving their internal operations. Optimizing business was the challenge of defining the perfect sequence of tasks, each carefully sculpted to deliver maximum value at minimum cost, and then selecting and shaping employees to fit the tasks.

The environment business operates in today has changed dramatically since Frederick Taylor created scientific management. The world used to be fairly stable; you wore the same clothing styles (more or less) as your parents before you, as would your children following after. Today, however, the environment changes significantly every year, if not every month or week. Nowhere is this more evident than with the creation of fast fashion, with Zara flipping the company’s supply chain on it head to optimise time from runway to shelf rather than cost, swapping the seasonal fashion collection for a constant stream of new products and driving new customer behaviours in the process.

The stability business used to rely on has given way to a more uncertain environment; the predictable progression of the business seasons in a temperate climate exchanged for the unexpected and often unpredictable storms and hurricanes of a more tropical clime{{2}}. Our success used to rely on the quality of our toolkits – the business processes and assets at the heart of our business – as it is these toolkits that enabled us to survive the steady progression of the seasons. Today our success relies on our skill – our ability to leverage the on-demand services and capabilities we find around us – as it is our ability to adapt these tools we find around us to the unexpected threat or opportunity, that now determines our success.

[[2]]The North-South divide @ PEG[[2]]

The old, highly specialized and highly entailed experts we used to rely on are rapidly becoming a liability, and we’re incrementally replacing specialized skills with solutions, frameworks and on-demand services. From IBM’s first election toting machines built with repurposed punchcard readers from knitting mills, through early departmental computers (such a L.E.O., the Lyon’s Electronic Office) to the birth of enterprise IT (and client-server along with it) and more recent web technologies, the history of technology in business has been a story of slowly reifying layers of expertise in tools, enabling this expertise to be distributed and leveraged. Social Media is just the latest step in this evolution, the key difference being that it automates and streamlines the communication and collaboration between individuals, rather than tasks that these individuals work on.

Our companies are being hollowed out, their middle layers of management replaced by software and solutions. Rather than empowering middle management, Enterprise 2.0 and Social Business Design is eliminating them. Social Media is empowering the team at the front line and the executive to connect directly with each other, bypassing the many layers of middle management most organizations contain. They’re externally focused – the front line intent on tending our customers and delivering product, the executive focused on understanding the waves in the market and charting the business’s path forward – where middle management was internally focused, concerned with keeping the bureaucracy functioning, a bureaucracy that many organizations are in the process of dismantling. Similar to the rural Indian civil service in the British Raj{{3}}, we’re moving to flat, or even super-flat, organizational structures which swap the command-and-control of the past for clear objectives and the devolution of responsibility for decisions to the front line.

[[3]]Knowledge workers in the British Raj @ PEG[[3]]

Tomorrow’s business, after it has adopted Social Media, will not just be a new command-and control paradigm (bottom-up rather than top-down, distributed rather than centralized) retrofitted to our existing bureaucracies. Tomorrow’s business will be something different, smaller and much leaner, built from dynamically forming coalitions focused on achieving a common goal. The highly skilled specialists concerned with building the complex toolkits will become a thing of the past.

The transformation from large bureaucratic organizations to more fluid coalitions will result in a similar shift in work practices as we saw during the Industrial Revolution. We can already this the beginnings of this with companies starting to understand that their knowledge workers prefer to supply their own tools (such as mobile phones and laptops), as well as the current trend for organisations to restructure their contracts with suppliers, focusing on the outcome they want delivered rather than quality and cost. Smaller workforces holding more general skills will integrate themselves with a community of partners, suppliers and high value free agents, with the company functioning in a similar way to the studios in modern Hollywood{{4}}. The company sets the agenda by determining what problems it wants to focus on, while providing its staff and the broader community swirling around them with a platform to dynamically form teams around specific challenges and goals, World of Warcraft style{{5}}. Rather than defining the perfect task and then fitting the employee to the task, we need to define our goal and then assemble the perfect team to achieve that goal.

[[4]]Working in Hollywood @ PEG[[4]]
[[5]]World of Warcraft in the workplace @ PEG[[5]]

The most significant shift for our businesses is the transition from being knowledge using organizations, to knowledge creating organizations. While the world might be flat (as Thomas Friedman showed us{{6}}), with globalization and the Internet providing on-demand access to low cost products and services from around the globe, the world is also spikey (as Richard Florida claims{{7}}) as the need for localized and personalised services drive demand for unique and creative solutions which fit into a local context. The winners in this race will be the businesses that can marry the two.

[[6]]Thomas L. Friedman (2005), The World if Flat, Farrar, Straus & Giroux [[6]]
[[7]]Richard Florida (2005), The World is Spikey, The Atlantic [PDF][[7]]

Which brings us back to the impact of social media on your organization. It’s not a revolution that will remove the need for the C-level; someone still needs to sign the books and be held accountable to shareholders. Social media might tip the balance a little toward a more collective form of management, but it will not rewrite the rules overnight. Nor is it little more than better and more efficient groupware. Creating a social business is not simply rearranging the people (and power dynamics) or your existing business; it demands smaller, more dynamic teams with more potent and focused team members who might not be on your payroll full time.

What Social Media is doing is driving organizations to complete the shift started in the last few decades, moving from manufacturing centric enterprises to knowledge creating organisations.

The basic economic resource – ”the means of production,” to use the economist’s term – is no longer capital, nor natural resources (the economist’s “land”), nor “labor.” It is and will be knowledge. The central wealth-creating activities will be neither the allocation of capital to productive uses, nor “labor” – the two poles of nineteenth- and twentieth-century economic theory, whether classical, Marxist, Keynesian, or neo-classical. Value is now created by “productivity” and “innovation,” both applications of knowledge to work.

— Peter Drucker, The Post-Capitalist Society{{8}}

[[8]]Peter Drucker (1993), The Post-Capitalist Society, HarperCollins[[8]]

Historically companies have provided a locus to gather the capital, resources and skills required to provide the scale needed to manufacture products cheaply and efficiently. Today problems, the problems of our clients and customers, are increasingly becoming the focus of our organizations, as capital, resources and skills are commoditized, caught between globalization and the Internet. The strongest determinant of success in business today is the ability to solve problems that other people (and organizations) care about. Companies are transitioning from an internal focus to an external focus, intent on gathering the skilled craftsmen required to deliver the projects needed to solve the problems that the company concerns itself with. Companies are becoming the focal point for a network for skilled craftsmen and service providers who are required to solve the problems that the organisation is interested in.

Business is increasingly becoming a question of forming the right team, at the right time, in the right place, with the right tools to provide the best possible outcome. We’re also trying to achieve this in an environment where it is no longer feasible to own all the resources and people we need. Consequentially, success now depends on our ability to mobilize the resources and skills we need from across a broader network that includes not only our (few) employees, but our contractors, partners and even customers. Social media and social business are the tools that allow us to tweak our operating models to do this.

So the impact of social media on our businesses is to strip them back to their cores and (re)focus their energies on what really matters in a rapidly changing and unpredictable environment: problems and the people who solve them.

Knowledge Workers in the British Raj

Note: This is the second part of a longer series on how social media is affecting management. You can find the first post – The future of (knowledge) work – and subsequent posts – The north-south divide, Working in Hollywood, World of Warcraft in the workplace and Problems and the people who solve them – elsewhere on this blog.

Prior to the industrial revolution, most folk, apart from apprentices and other people in training, worked for themselves. Home wasn’t here and work wasn’t there: they were in the same place and tightly intertwined. For the last few decades though, we’ve all become used to working in the large bureaucracies that most modern companies use to manage their workforces. For many pundits the shift to a more social business – driven by Enterprise 2.0 and Social Business Design – is the chance to humanize these bureaucracies that we’ve created, bringing back some of the more personal experiences we used to enjoy. However, this ignores the fact that while we’ve used technology to change business, business has also evolved to the point that it’s changing how we think about and use technology.

Tomorrow’s more social companies will not simply be our existing bureaucracies humanised. They’ll be something more compact and collaborative, extremely flat organisations where the executive is responsible for steering the boat while handing responsibility for operations over to the frontline. Rather than enabling a more human bureaucracy, one where the power structures are inverted or middle management empowered, Enterprise 2.0 is returning us to an earlier time, more akin to the British Raj in India, when the world was more uncertain and communication within a bureaucracy was slow (when compared to the pace of business). We’re returning to a time when self initiative, the ability to collaborate with your peers, and a focus on bringing whatever skills and tools you can to bear on the problem in front of you, is more important than deep specialisation and formal communication and career structures.

Our companies are not what they used to be

The template for our large, vertically integrated enterprises was stamped out for us by the likes of Cornelius Vanderbilt{{1}} during through the development of the transcontinental railroads in the U.S., and perfected by the conglomerates and multinationals in the sixties and seventies. Our organisations were seen as vast machines, machines staffed and operated by an army of people.

[[1]]Born the son of an impoverished farmer and boatman, Cornelius Vanderbilt (May 27, 1794 — January 4, 1877), died the wealthiest man in the United States and probably the greatest of the nineteenth century railroad barons. Starting with money he borrowed from his parents to buy a boat which he used to ferry passengers between Staten Island and New Your City, he became a American shipping and railroad magnate who acquired a personal fortune of more than $100,000,000.[[1]]

For a long time a company’s workforce was considered just one of three factors of production{{2}}, and a fungible factor at that – homogeneous and easily interchangeable. Recently companies have taken a more humanistic approach, with many human-resources departments proclaiming “people are our organisation’s most important asset,” and driving companies to construct ever more complex career management, renumeration strategies, and recognition and reward schemes to make the most of each employee’s individual skills and foibles.

[[2]]The other factors of production are stocks (including land) and capital goods.[[2]]

A factory in the industrial revolution, where the key to scaling a business was to employ more workers, and then employ an additional layer of management to manage the workers you hired in the first place
A factory in the industrial revolution, where the key to scaling a business was to employ more workers, and then employ an additional layer of management to manage the workers you hired in the first place

Our organisations, however, have been shrinking over the last couple of decades. Initially this was from automation on the factory shop floor, where repetitive tasks were replicated in technology, man replaced with machine. Overtime we’re used technology to chipped away at increasingly complex problems, working our way from simple manual tasks such as swinging a hammer on command, through to today’s modern, automated production line marvels.

At LEGO HQ in Billund, Denmark, where raw plastic is transformed into finished bricks (including stormtrooper helmets), and packaged into sets, with very little human intervention other than to fix machines when they breakdown.
At LEGO HQ in Billund, Denmark, where raw plastic is transformed into finished bricks (including stormtrooper helmets), and packaged into sets, with very little human intervention other than to fix machines when they breakdown.

A similar journey has occurred inside the office: computers (the teams of people computing ballistics tables and payrolls by hand) have been replace by computers (the electronic gizmos prone to bugs), the typing pool was phased out in favour of management using word processors to automate the creation their own documents, and a large chunk of the customer service team has been replaced by self-service kiosks and web sites which allow customers to attend to their own needs. Most recently, the midlevel management responsible for command and control – both between teams, and between teams and the C-suite – is being replaced by software{{3}} as social media tools automate the communication and information aggregation tasks that have traditionally been the domain of middle management.

[[3]]The future of knowledge work @ PEG[[3]]

Our vast, vertically integrated enterprises have been flattened and hollowed out, creating a new generation of organisations which have a large workforce at the coal face working under the direction of a with smaller and more focused team of executives. The frontline is interacting directly with customers and suppliers or managing production, responsible for the day-to-day operation of the business. The executive is looking into the future, responsible for placing bets on where to deploy the organisation’s resources most efficiently to meets tomorrows challenges.

The provincial civil service

The emerging organisational structure we see today is of a different nature to the monolithic institutions required to run the train networks in the 1800s or multinational conglomerates of the more recent past. The impact of the latest wave of automation – the move to social business – is not to simply take the existing organisation and applying a new style of command and control, one based on bottom-up empowerment and where middle management use these new media tools to streamline motivating and managing the teams under their guidance. It’s more akin to the extremely flat structures used by organisations such as the British civil service in India during the 1800s.

As a colonial power, Britain built an administrative centre in India (initially under the monopoly of the East India Company, but later under direct government rule{{4}}), staffed with highly competent expatriate civil servants who had signed on for a tour of duty. This tour of duty was usually seen as the route to wealth and influence, as it was easy to tap-off a little of the money – the vast sums of money – which flowed past these civil servants as it made its way back to the home country. (It wasn’t uncommon for senior members of the British Raj to return to Britain at the end of their tour with suspiciously large collections of expensive trinkets and locked boxes.) A complex bureaucracy developed, constructed around the Governor-General based in Calcutta, with Mandarins gathering staff and wealth as they fed their own feeling of self importance.

[[4]]John W. Kaye (1853), The Administration of the East India Company, Richard Bentley[[4]]

Managing the provinces, however, was a completely different problem. Covering a vast, populated area, and with little incentive for senior civil servants to get directly involved, the provincial civil service had to make do with a very flat organisational structure, one where every manager was responsible for roughly one hundred direct reports. Such a high management ratio naturally precluded many of the practices we take for granted into our large matrix-managed organisations. A manager couldn’t afford to spend more than a few minutes with each of their direct reports in the course of a month, and even those few minutes might not occur as transport and communication were much more expensive than they were today. The high-touch style of management we are familiar with in recent history wouldn’t work.

The expanse of the British empire in India in 1909
The expanse of the British empire in India in 1909

From demand-side to supply-side

The strategy which enabled the provincial civil service to function – and to function very effectively – was clear objectives. Field staff were engaged for their ability and interest in taking on responsibility for a problem on behalf of the management (usually this problem was the collection of the taxes, duties and excises required by the British crown in a specific province). A set of policies and procedures were put in place to ensure that they conducted themselves in a fit and proper manner, however, generally, the field staff were provided with a great deal of discretion in how they achieved their goals, collaborating with their peers were needed.

Behind this flat organisational structure was a hiring and training process designed to find candidates who were focused on solving the right class problem, rather than candidates who specialised in a discipline or process. All candidates had to sit an extensive test covering a broad range of topics, and were then trained in the skills and processes they might need in the field. Their induction was finished off with and apprenticeship under the guidance of an experienced worker. The civil service was looking for those individuals who had the kit bag of skills and the aptitude needed to find their way to their goal on their own. Those selected were then train in the business processes and policies they needed, and provided them with the time they needed to integrate into the community of front line workers. Much like today’s emerging workplaces, the team at the front line was empowered to collaborate as they worked toward their respective objectives, rather than micromanaged.

We like to think that we’re all hired for our unique skills and paid according to the value we bring to the business. Unfortunately this is not generally true. Our large company legacy means that most managers need to think in terms of roles, cogs in a machine that they need to assemble. Measuring each employee by their contribution is a complex and laborious task which does not scale well, so companies manage large populations of employees by defining standard roles tied to specific skill sets, and then measure each employee by their ability to fulfil the role. Hiring then becomes the easier supply side challenge of finding and evaluating people with the requisite skills.

As companies flatten it is becoming less important to assemble large teams with specialised skills. Teams have shrunk as technology has replaced specialists with potent technological tools: the skilled printer replaced by the printing press, the complex task of computing ballistics tables moved from people to machines, the distributed computing specialist made redundant by an open source framework, and your procurement specialist replaced by the on-demand SaaS fulfilment solution.

Our focus has shifted from the capabilities we need to the outcomes we need to deliver. We’re swapped from the supply side problem of finding enough people who have the specialist skills we need to staff our business, to the demand side problem of finding the people who we can delegate some of our problems to. One of the organising principles behind business is changing, driven, most recently by a shift to more social businesses.

The future of our business – post Enterprise 2.0 and Social Business Design – is not in applying a new human-resources paradigm to our existing workforce. Much like the British Raj in provincial India, our businesses need to adapt to an environment where we don’t have the time or resources to micromanage every task. The workforce which staffed our bureaucracy in the past is not the same workforce we need in the future. The future of our business is with a smaller, more dynamic workforce of self-starters, built around flat organisational structures and more general skills which devolve responsibility for operational problems to the front line and empower them to work together and solve these problems under their own direction, while freeing the executive team to focus on steering the organisation through the challenging environment we operate in today.

Continued in The north-south divide.