Thomas W. MaloneThomas W. Malone

MIT MIT

Inventing the Organizations Inventing the Organizations of the New Economyof the New Economy

What’s happening?What’s happening?

Some possibilitiesSome possibilities

•SpeedSpeed

•StructureStructure

•ProcessProcess

S P E E DS P E E D

How long does it take to build How long does it take to build a house?a house?

QuestionQuestion

Videotape courtesy of: Videotape courtesy of:

Building Industry Association of Building Industry Association of San DiegoSan Diego

San Diego, CaliforniaSan Diego, California

StructureStructure

Conclusion from MIT researchConclusion from MIT research

•Highly decentralized Highly decentralized systems will be much more systems will be much more important in the future.important in the future.

LinuxLinux

• Computer operating systemComputer operating system

– Unix for PCsUnix for PCs

• Developed and tested by thousands of Developed and tested by thousands of volunteer programmers around the volunteer programmers around the worldworld

• > 3M users today> 3M users today

• No one “in control”No one “in control”

Organizations in the 20th Organizations in the 20th centurycentury

o

o

o

ooo

o o

o

o

o

oo

o

o o

xo

o

o

oo

o

o o

1950 20001900

Small, local businesses

Large, centralized corporations

“Delayering”, “Empowerment”, “Outsourcing”, “Networked organizations”

What will these networked What will these networked organizations look like?organizations look like?

Scenario: Scenario: The E-Lance EconomyThe E-Lance Economy

•1 - 10 people per firm1 - 10 people per firm

•Temporary combinations for Temporary combinations for various projectsvarious projects

•ExamplesExamples

– Making filmsMaking films

– ConstructionConstruction

TopsyTailTopsyTail

• Hair care productsHair care products

• $80 M revenues$80 M revenues

• 3 employees (CEO, CFO, Marketing 3 employees (CEO, CFO, Marketing Director)Director)

• 20 outsourced vendors include:20 outsourced vendors include:

– tool makers, injection molders, package tool makers, injection molders, package designer, logo designer, fulfillment houses, designer, logo designer, fulfillment houses, mailing list firm, PR, distributors, sales repsmailing list firm, PR, distributors, sales reps

• Keeps inside:Keeps inside:– new product development and marketing new product development and marketing strategystrategy

Example: eLance.comExample: eLance.com

• On-line auctions for professional servicesOn-line auctions for professional services

– Software development, graphic design, research, Software development, graphic design, research, translation, etc.translation, etc.

• Buyer posts project, selects winning bidder, Buyer posts project, selects winning bidder, evaluates completed workevaluates completed work

• Over 200,000 businesses from over 140 Over 200,000 businesses from over 140 countries registeredcountries registered

• Over 40% of transactions cross national Over 40% of transactions cross national bordersborders

Example: Asynchrony.comExample: Asynchrony.com

• Provides infrastructure for e-lance software Provides infrastructure for e-lance software development projects.development projects.

• Project manager posts idea, recruits team Project manager posts idea, recruits team members, negotiates shares, manages members, negotiates shares, manages development and beta testingdevelopment and beta testing

• Results marketed by Asynchrony.com with Results marketed by Asynchrony.com with 75-90% of revenues going to developers75-90% of revenues going to developers

• Over 25,000 active members so farOver 25,000 active members so far

Textile industry near Prato, Textile industry near Prato, ItalyItaly

• Over 15,000 small firms Over 15,000 small firms – Average no. of employees < 5Average no. of employees < 5– State-of-the-art factories, warehouses, and other State-of-the-art factories, warehouses, and other

equipmentequipment

– Cooperative ventures for purchasing, logistics, R&DCooperative ventures for purchasing, logistics, R&D• Brokers (Brokers (impannatoriimpannatori) coordinate work) coordinate work

– assemble groups of firms to meet needs of specific assemble groups of firms to meet needs of specific customerscustomers

– electronic market for production capacityelectronic market for production capacity

• Result: Preferred material for fashion Result: Preferred material for fashion designers around the worlddesigners around the world

QuestionsQuestions

•What if the managers of an What if the managers of an organization are not in control?organization are not in control?

•What if power, ownership, and action What if power, ownership, and action initiatives come from throughout an initiatives come from throughout an organization?organization?

InternetInternet

0

20000

40000

60000

80000

100000

120000

1981 1985 1987 1989 1991 1993 1995 1997 1999 2001

Internet hosts (thousands)

Source: Internet Software Consortium (http://www.isc.org/)

Internet (cont.)Internet (cont.)

•Decentralized design principlesDecentralized design principles

– ““No one in charge”No one in charge”

– Agreements needed only on interaction protocolsAgreements needed only on interaction protocols

– Anyone who follows protocols can be aAnyone who follows protocols can be a

»Service providerService provider»Service userService user»Network providerNetwork provider

•Result: Amazing growth and flowering Result: Amazing growth and flowering of innovationof innovation

QuestionQuestion

•How much of the intelligence of How much of the intelligence of

people throughout an people throughout an

organization can we use in a organization can we use in a

decentralized organization?decentralized organization?

Videotape courtesy of Videotape courtesy of

Cinematrix Cinematrix Interactive Entertainment Interactive Entertainment

Systems, Inc.Systems, Inc.

voice: 415-892-8254, fax: 415-892-4469voice: 415-892-8254, fax: 415-892-4469

ProcessProcess

How can we understand all How can we understand all this?this?

If the boundaries between organizations are If the boundaries between organizations are blurring. . .blurring. . .

If products, tasks, and organizations are all If products, tasks, and organizations are all temporary. . .temporary. . .

If everyone makes their own decisions. . .If everyone makes their own decisions. . .

. . . How can we think about the organization . . . How can we think about the organization of work?of work?

What will replace organization charts?

Conclusion from MIT researchConclusion from MIT research

•Processes (not structures) Processes (not structures) are the key building blocks are the key building blocks for inventing new for inventing new organizations.organizations.

A slogan for process A slogan for process managementmanagement

We need to give as much We need to give as much

attention to managing attention to managing processesprocesses

as we have in the past to as we have in the past to

managing managing productsproducts..

Needed: Needed: Process Knowledge Process Knowledge

RepositoriesRepositories• Consistent, easy-to-use collections of Consistent, easy-to-use collections of

knowledge about activities, their variations, knowledge about activities, their variations, and interrelationshipsand interrelationships

• Used for multiple purposesUsed for multiple purposes

• Including many kinds of knowledge...Including many kinds of knowledge...

– ““Best practice” librariesBest practice” libraries

– Measurement and benchmarking dataMeasurement and benchmarking data

– Software configuration and change management data Software configuration and change management data

– On-line discussion forumsOn-line discussion forums

Example: Example: MIT Process Handbook MIT Process Handbook

• SoftwareSoftware

–Repository engine, web server, editing Repository engine, web server, editing toolstools

• ContentsContents

–Over 5000 processes and activitiesOver 5000 processes and activities

»Generic business models and activity Generic business models and activity types, case examples, on-line types, case examples, on-line discussion forumsdiscussion forums

Example: Example: Dow Corning CorporationDow Corning Corporation

• $2.5B chemical manufacturing firm$2.5B chemical manufacturing firm

• Installed SAP and standardized key business Installed SAP and standardized key business processes at same timeprocesses at same time

– Needed to design and communicate new business processesNeeded to design and communicate new business processes

• Created detailed process models cross-linked Created detailed process models cross-linked to other business processes and other to other business processes and other knowledgeknowledge

Example:Example:MIT eBusiness Process HandbookMIT eBusiness Process Handbook

• Includes:Includes:– Case examplesCase examples

– Descriptions of innovative technologies Descriptions of innovative technologies

– Descriptions of innovative business modelsDescriptions of innovative business models

– Etc…Etc…

• Organized by:Organized by:

– Business modelsBusiness models

– Business processesBusiness processes

Available on the web at: ccs.mit.edu/eph

ConclusionsConclusions

• ““Empowerment” is not just a fad, but a Empowerment” is not just a fad, but a response to fundamental changes in the response to fundamental changes in the economics of communication and decision-economics of communication and decision-making.making.

• Explicitly and systematically managing Explicitly and systematically managing business processes will be critical for most business processes will be critical for most successful businesses in the 21st century.successful businesses in the 21st century.

• What do we really want?What do we really want?