The end of the corporation (2): do megacorps now cause more inefficiency than they solve?



We will see the end of the corporation soon, wrote Frederic De Meyer on Whiteboard recently, because it will become entirely possible to spin out huge parts of the operations  to smaller contractors, and basically run a multibillion euro enterprise with a dozen or so people.

The P2P Foundation blog has an extract from a book review by John Hagel about this very subject, although from a different angle. It’s called ‘The End of Scaleable Efficiency’, and it too predicts the end of the corporation, albeit for different reasons.

1. Corporations now cause inefficiency instead of solving it

Corporations thrived in the 20th century because they were so damn good at scaling efficiency – by becoming larger, they could produce cheaper.  The downside is that to scale, you need to standardize your production and you become ever more reliant on demand forecasts.

That model is now broken, argues Hagel, because we no longer live in a predictable world. We live in a world of black swans, extreme, unforeseen events that shake our society to the core. The reaction to these black swan events are, as we all know, reorganizations, lay offs, etcetera. The demand forecast model now causes inefficiency instead of solving it, which will makes it unsustainable in the long run:

The push programs that seemed so essential to scalable efficiency now produce the opposite: increasing inefficiency, as rigidly constructed programs face unanticipated changes in the market.

2. Your knowledge is no longer your piggy bank

The half time of knowledge is considerably shorter : the value of knowledge rapidly decreases in today’s world. Today’s knowledge flows are constant and multidirectional. The advantage lies no longer with corporations and their huge, in house R&D labs. It lies with nimble, porous organisations who are efficient at managing information flows and doing something useful with them.

we’re moving from a world of knowledge stocks, where competitive advantage resides in proprietary knowledge of lasting value, to a world of knowledge flows, where competitive advantage can only be attained by participating effectively in a larger and more diverse set of knowledge flows. In a world that’s changing more rapidly with growing uncertainty, knowledge stocks depreciate in value at an accelerating rate.

 3. Technology provides a framework for demand driven programs rather than supply driven programs

A feature of these new organisations is their ability to tap into people’s creativity, and the fact that for the first time in history, we’re actually able to organise these systems thanks to technology:

These pull platforms are much more challenging to scale without digital technology infrastructure. At long last, we will have an institutional framework that requires us to race with the machine, rather than simply racing against the machine.

Instead of machines pushing us out of the workforce, like they did in the corporation with its standardized products, the machines will enable us to produce individually tailored, crowdsourced solutions on demand.

If you think about this from a business perspective, it also means that the most successful companies will be those that have the skills and the trust of their clients and suppliers – their clients, because if you want to do business, you will have to be VERY good at extracting from your customer or client information about what his problem really is.

Somehow, reading about this reminded me of reading about the difference between fast food and slow food: fast food is prepared in anticipation of a customer’s order  - it’s the epitome of the corporation’s ability to forecast demand! Slow food, on the other hand  can sometimes be produced very fast – think street food – but what’s essential is that it’s made to order. For consumers too, it won’t be bad to live in a demand driven world.

via P2P Foundation: The End of the Age of Scalable Efficiency?.

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About the author

Raf Weverbergh

Editor of whiteboard. Raf Weverbergh was a magazine journalist whose work appeared in magazines like Rolling Stone, Playboy, Mail on Sunday, Publico and South China Morning Post. He is the co-founder of FINN, a corporate communications agency where he advises startups and multinationals on their PR and Mustr, the easiest media database for PR professionals. You can contact him on Twitter, Linkedin or Skype (rafweverbergh).

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