Quo vadis, change?
History of organizations I
By C&J
Today we are facing what seems like a true phase transition. A giant leap comparable to that of Sapiens 300,000 years ago. Or older. But now we will not have to wait thousands of years, but only a few decades.
More than 300,000 years ago, accidental genetic mutations changed the connections in the brains of our hominin ancestors. This allowed them to think and communicate through sound in a completely new way. The ‘COGNITIVE REVOLUTION of Sapiens (Yuval Harari)’ had emerged.
At that time, these modest primates did not suppose great novelties, but they would end up placing themselves, 300,000 years later, at the top of the pyramid of species.
10,000 years ago, Sapiens had already acquired the ability to analyze the cause-effect of many events and transmit that knowledge from one generation to another. Their knowledge of nature and the climate caused a drastic change in their way of life: almost everywhere, they left their hunter-gatherer nomadism to become sedentary. They had learned to ‘tame’ wheat, rice, or potatoes. The AGRICULTURAL REVOLUTION, in the words of Harari.
With the changes in his way of life, the agricultural Sapiens now needed to ‘compute’ large amounts of elements, such as the accumulated grain in the harvests, record exchange transactions and perform basic arithmetic operations, which the hunter-gatherers had never required. For the first time, these beings needed to store information outside of their own heads. Thus, writing and mathematics arose, probably simultaneously.
The agricultural revolution increased the amount of available food, and this caused a demographic boom. The development of writing generated laws, and cultures gradually became larger and more complex civilizations, which in turn developed mathematics, philosophy, and art. The changes happened more and more frequently: from thousands to hundreds of years.
Renaissance, science and technology
500 years ago, the resurgence of science in the Modern Age, and the subsequent widespread application of the scientific method gave rise to what is known as the SCIENTIFIC REVOLUTION. And the appearance of capitalism generated the capitalist company, whose first manifestation was the factory: a new organization that would turn scientific results into technological investments.
Then, not one, but several TECHNOLOGICAL REVOLUTIONS arose, the first two known as ‘industrial revolutions’. All of them were changes that occurred more and more quickly, in the same century or, later, within the same decade.
Today we are facing what seems like a true phase transition. A giant leap comparable to that of Sapiens 300,000 years ago. Or older. But now we will not have to wait thousands of years, but only a few decades.
Some voices speak of cyborgs, humanoids with almost unlimited computational capabilities, within this first half of the 21st century. There are even those who announce the end of biological death during this same century… utopias until recently, before other dystopias of planetary annihilation are also drawn, such as climate change or mutually assured nuclear destruction.
However, we must not delude ourselves, revolutions are not anticipated. We tend to see history as a linear relationship between causes and effects, although the truth is that the complexity of the factors is only obvious a posteriori. In other words: it is not possible to drive forward, just by looking only at the rear-view mirror.
It does not seem relevant, therefore, that we play at being Jules Verne. There are very few geniuses like him in each generation. In addition, today it would be impossible to identify the true visionary disruptor among the hundreds of thousands of imposters who daily pour their craziness on social networks.
However, the rear-view mirror is a very useful element when driving by preventing events that may arise unexpectedly from blind spots. Therefore, looking at history is always useful if we know where to focus.
Everything changes, and nothing stands still
HERACLITUS OF EPHESUS
History has shown us that ‘everything changes, and nothing stands still (Heraclitus of Ephesus) and that it has been accelerating exponentially. Organizations must start from these two premises to analyze the present.
Organizational models in times of change
Based on these two premises, we can focus on other key factors that recent history has taught to us. Key things that will help lead our organizations in the devilishly accelerated and complex change in which we are immersed.
If we go deeper into recent history, there is a highly recommended analysis that provides us with interesting keys: the article Industrial revolutions and the evolution of the firm’s organization: an historical perspective [*] | Cairn.info) published by the ‘ Journal of Innovation Economics & Management’. It is a review with a historical perspective of the changes that organizations have undergone in the three main most recent technological revolutions, key moments of great transformations.
The First Industrial Revolution, in the eighteenth century, was the largest set of transformations of humanity since the Neolithic. Barely, in a century, it helped developed countries in the transition from a rural economy based on agriculture and commerce to an urban, industrialized, and mechanized economy.
The factory itself was the result of that revolution and was born to carry out production there, instead of in homes. Its distinctive feature is the predominance of authority among the coordination protocols used within the organization.
Team production required greater specialization of work and required greater coordination of activities. On the other hand, the new machinery required a higher level of competitiveness and led to a better division of labor. The factories needed expert engineers, mechanics, chemists…
In the factory, individuals knew and could trust each other, and this turned out to be an efficient way of sharing knowledge. They had a simple basic organizational structure with highly centralized decision-making and accountability processes. The factory owner regulated almost everything within the factory, administered discipline, organized the flow of goods between processes and workers, and exercised great control over quality.
At the end of the 19th century and the beginning of the 20th, with the use of gas, oil and electricity, the development of new materials such as steel, and new transportation systems, such as the automobile, and communication systems, such as the telephone and radio, the changes underwent a strong acceleration. The economic growth model also underwent drastic changes and evolved remarkably.
In this period, of barely 50 years, known as the Second Industrial Revolution, there is a ripple effect and transformations were induced, affecting the labor and the educational and scientific systems; to the size and management of companies, to the form of organization of work, to consumption, until it also ends in politics.
Thus, the factory paradigm was challenged, causing gradual changes in the organization of companies, culminating in the emergence of the multi-unit company. This Revolution gave rise to the great modern commercial company around 1920. A firm organization that was called the Multidivisional Form (M-Form),
There came a time when the increasing complexity of business operations required professional managers who subdivided their operations into smaller groups and then appointed middle managers to supervise and monitor the different functional activities.
To operate these activities both, concepts like departments and headquarters were born. More modern financial institutions emerged, and due to the volume of transactions, accounting became more complex, requiring new standards and new techniques. Another new need for well-educated managers was created.
The new technology went hand in hand with mass production, which meant exploiting economies of scale, reducing production costs, and increasing productivity. At the same time, heavy investment in production facilities was required to exploit these potential businesses. This required more organizational innovations, that is, new ways of coordinating and controlling the movements and activities of workers and managers.
The emergence of the M form gave rise to professional management, which in turn relied on the educational system and at the same time stimulated it. The ‘style’ of management had also changed: scientific management (Taylorism) was based on the professionalization and specialization of the various management functions and in some cases also on the design and development of personnel. Several novelties appeared: delegation, divisions with responsibility… the new company in M-Form had improved in many aspects compared to the factory.
Nowadays, the Information and Communication Technology (ICT) revolution, where the computer and the semiconductor have transformed telecommunications, has given way to new industries such as Internet technology, the information industry or biotechnology.
But the change is so transversal that all traditional industries are changing their character. The requirements of new technologies in terms of company organization affect the way in which work is coordinated within companies, Bringing about the emergence of a new business organization in which:
- Knowledge has become the critical input. This requires new organizational forms that are more team and project-based, and the use of more flexible methods. Therefore, managers exercise guidance, manage conflict, and enable communication between teams rather than direct old command and control rules.
- Today’s businesses must increasingly focus on core intellectual and service competencies. Which also means that they retain only those activities where they are ‘best in class’, so activities that cannot be performed at best levels should be considered for outsourcing. This strategy is leading to the appearance of companies that are small in traditional terms, but huge in value-added terms, i.e., smart companies.
- The modularity of the product requires project- and/or customer-oriented teams. Autonomous self-organized teams that are transversally configured around a well-defined task, a clear result, or a project, comprising a combination of people with diverse and highly specialized skills.
Consequently, large vertically integrated companies are becoming flatter and more decentralized.
Purpose and adaptative culture at the forefront of disruptive change
The historical perspective reflects the evolution of organizations. It provides a ‘great picture’ of the context, where the era of disruptive changes we are immersed is clearly portrayed, with two considerations:
- From a macro perspective, we can see that the time between one revolution and the next has been progressively halved. This gives us an idea that the global processes of disruptive change are accelerating.
- There is a clear evolution of the purpose of organizations, from a concept focused on efficiency or profit, to a modern conception where the primary purpose of organizations is becoming much more humanistic, focused on people (employees, customers, and the rest of agents).
One of many definitions of ‘history’ is the ‘Successive succession of successive events’. If we forget it and do not keep it in mind, the errors will continue to be that succession of events and nothing else, and not a source of learning, which is what it should be. We have very little assumed the binomial fail-learn.
‘It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment’
CHARLES DARWIN
History and the related macro indicators make us think that times of disruptive change and profound transformation are coming. To the initial question of where the change is going, we can answer categorically: we do not know. What we do know is that we must be prepared to adapt to it.
In that changing environment, learning to fail ‘right’ is the first step to start adapting. To fail small and ‘cheap’ is to learn without cost.
In times of great transformations, organizations with an adaptive culture integrate change into their strategy as something natural and necessary. That is nothing else but innovation.
Therefore, innovation today is a need for survival in all areas. Innovation must be culture and attitude, and this will not happen without purpose in capital letters, a compass for organizations, but, above all, a reason for people.
If, like Sapiens, we want to be part of the pinnacle of adapted species, we must mutate the DNA of our organization, introducing the triple helix of STRATEGY, INNOVATION and PEOPLE:
- History without strategy is not experience, it is a good novel.
- Strategy without innovation is not strategy, they are just good intentions.
- Innovation without people is not innovation, they are short-path ideas.
HADRONE, is a systemic thinking transformation agency that operates in a network of open innovation alliances.
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