Reading :: The "Virtual Corporation" and Army Organization

The "Virtual Corporation" and Army Organization
By Francis Fukuyama and Abram N. Shulsky

This 1997 RAND research report examines the trend toward flat, virtualized organizations in business and asks how that trend might be applied to Army organization. As the authors describe it, “the economy is moving from an industrial-age model, in which machines and natural resources are used to produce material product, to the 'information-based organization' that produces goods or services through the use of human capital”(p.x). They point out the consequences for commercial organization: the need for faster information exchange leads to smaller organizations; flatter hierarchies and/or networks of agile firms; the continued devaluing of low-skilled labor; more self-organized teams replacing individual effort; and more flexibility, learning, and adaptability to address the more chaotic environment (p.x).

Yet centralization has its advantages as well. Centralized organizations can often move more quickly and decisively and can leverage scales of economy. “A military organization seeking to accomplish a specific goal in the near future needs centralized command authority; a military seeking to adapt to a fast-changing and uncertain external environment needs a higher degree of decentralization in order to adapt adequately” (pp. X-xi). The authors argue that the US Army is in the latter situation.

So they anticipate several organizational changes for the Army. They anticipate a smaller number of echelons (p.xiii); smaller size, yielding easier logistics (p.xiv); more innovation in procurement (p.xiv); and working to keep experience distributed throughout the argument rather than pooling, so that soldiers can be better prepared to take initiative and responsibility (p.xiv).

The authors walk us through the established ground here, distinguishing among hierarchical organizations, virtual or “flat” organizations, and networks (p.5). The latter two are distinguished in that the flat organization still has a hierarchy, but the network doesn't. Consequently, the network really isn't applicable to an army with a focused objective. “Successful networked organizations ... constitute a framework within which their individual members can operate” (p.19).

The authors claim that armies are actually leaders in flat organizations due to the critical problem of operating in the face of inadequate information (p.28). Flat organizations, due to their nimbleness, often result in tactical successes that spark strategic overextension (p.39) – examples of which include Napoleon and the Wehrmacht. But flat organizations also pose another danger, the “CNN Effect,” in which pushing discretion and decision-making to lower levels results in newsworthy incidents; a “zero-defects” mentality reinforces a strict, and slow, centralized hierarchical structure (p.49). “It is impossible to routinize error-free flat organizations; when errors occur in a politically sensitive environment, there is a tendency to recentralize authority” (p.50). The authors urge instituting a “freedom to fail” (p.77), recalling the Web 2.0-era mantra to “fail faster,” although they don't delve into how much failure can be tolerated when failure is measured in, for instance, civilian casualties.

Overall, this report is a well developed treatise that identifies different organizational structures and thinks through how they can be applied to the Army. It's thought-provoking and really complicates some of the simplified distinctions from, say, The Starfish and the Spider.