Here’s an excerpt from a related blog post:
“I’ve noticed some troubling trends lately in the business world. A recent analysis of S&P 500 companies shows that when you triple the number of employees in an organization, its productivity drops by half. The average life expectancy for a U.S. firm today is just 15 years, down from 75 years on the heels of the Great Depression. What’s more, only 40 percent of companies survive more than a decade.
I believe all of this is happening because businesses are growing increasingly complex and are collapsing under the weight of that complexity. If we are to avoid such failures in the future, we need to understand the nature of large, complex systems and let go of traditional notions of how companies function.
Historically, we have thought of businesses as machines and designed them with similar characteristics. We tend to expect them to perform a certain function, so we design and build them to perform that function for their entire lives. Either that, or we divide up tasks into machine-like parts. We separate departments and tasks from one another (finance, sales, operations, etc.), and we design work-flows that process inputs into outputs (raw materials into products, prospects into customers, complaints into resolutions, etc.).
The problem with this thinking is that the nature of a machine is to maintain consistency, while the nature of a company is to grow. Customers want new products and services. Different systems are needed. And companies are made of people, not levers and gears. Some executives may wish they could put their business strategy into a machine, push a button, and wait for results. But it doesn’t work that way. If you want results, you have to execute your strategy through people.
So, what happens if we stop thinking of the modern company as a machine and start thinking of it as a complex, growing, and connected system? What if we manage our companies as we do our cities? Cities are more productive than corporations. A study by the Federal Reserve Bank of Philadelphia shows that when the working population in a given geographical area doubles, its productivity (the rate of invention) goes up by 20 percent.”
In the video above, Dave talks more about how companies could evolve in our new social age. He’s such a great, visual presenter; I would rate this a “MUST WATCH”. See what you think.
