Thursday, June 11, 2009

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.

Reading :: The Starfish and the Spider

The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations
By Ori Brafman and Rod A. Beckstrom

The Starfish and the Spider has gotten a lot of press and attention since it was published in 2006. As the subtitle states, it's about leaderless organizations and how they function. It's a quick read – I finished it in two sittings – and turns out to be a good entry-level text for understanding the difference between hierarchical and networked organizations. Like most such popularizations, it loses a little in the translation, and those who have read more complex texts on networks (such as Castells or Arquilla & Ronfeldt or, ahem, Spinuzzi) may feel like they're playing in the shallow end of the pool. But for those who are just getting into the literature or who want to get the concept and apply it rapidly, the book is definitely a good place to start.

The metaphor in the title refers to two organisms that are superficially similar, but organized differently. If you destroy a spider's head, you get a dead spider; if you cut up a starfish, you get two starfish. Since starfish are decentralized, they are more resilient and better able to recover from shocks that would kill more centralized organisms.

The authors apply this metaphor in a number of comparative cases – the Aztecs vs. the Apache, Napster vs. eDonkey, and classifieds vs. Craigslist, for instance – and abstract a number of principles that describe decentralized organizations:

  1. “When attacked, a decentralized organization tends to become even more open and decentralized.” (p.21)

  2. “It's easy to mistake starfish for spiders” (p.36) – i.e., decentralized for centralized organizations.

  3. “An open system doesn't have central intelligence; the intelligence is spread throughout the system” (pp.39-40)

  4. “Open systems can easily mutate” (p.40)

  5. “The decentralized organization sneaks up on you.” (p.41)

  6. “As industries become decentralized, overall profits decrease.” (p.45)

  7. “Put people in an open system and they'll automatically want to contribute.” (p.74)

Some readers will recognize many of these principles from different sources, but they're well summarized here. On the other hand, the summaries tend to be a bit uncomplicated – networked organizations are sometimes decentralized operationally but very centralized doctrinally, such as Aum Shinrikyo, for instance – but the principles are a good overall sketch.

The authors spend most of their time describing such organizations and discussing how to make them work better. But they also offer advice for combating decentralized organizations:

  1. Change their ideology (p.144)

  2. Centralize them by centralizing key resources (p.151)

  3. Decentralize yourself (p.155)

In a later chapter, the authors discuss hybrid organizations, organizations that are either “a centralized company that decentralizes the user experience,” such as eBay (p.164) or “a centralized company that decentralizes the internal parts of the business” (p.175). This is a good move, although it does not exhaust the dimensions along which companies can be centralized or decentralized. I was left wanting more of these dimensions and deeper discussion of them.

Finally, the authors outline the “new rules of the game.” I won't list the many rules here except to say that they follow naturally from what the authors discuss earlier; the chapter has the feel of a summary for those who have skimmed the book.

So would I recommend the book? I already have to at least one person, and I will to others. The book is a nice introduction to those who want to work up to more complex texts, but it also works well for its intended audience – C-level execs – and for undergraduates. Check it out.