Antidote

Above is a visualization of my LinkedIn network (from LinkedIn Labs) – showing interconnections between networks of skills and relationships. Is this a clue to what corporates in the future might look like? It would be a big change from the old rigid structures…

I’ve been thinking about “tomorrow’s company” – not just the survivors, but the most innovative, progressive companies. Apologies it’s such a long post – but here’s seven characteristics I think the “Company Of The Future” will have.

1. Social Purpose
2. Diffused Power
3. Distributed Activities
4. Skills Networks
5. User Innovation
6. Failure Rate
7. Ambitious Goals

Companies which thrive in the future will be those with strong socially motivated innovation. We all know that one of the most innovative sectors in recent years has been Financial Services: high-frequency trading, arbitrage, complex new asset classes … none of which had any social purpose, and all of which have had negative or catastrophic consequences. As former Fed-Chairman Paul Volker put it (maybe harshly) “the only useful thing banks have invented in the last 20 years is the ATM”.

Maybe this is why CEOs are queuing up to talking about aligning business goals with a social purpose. Take Paul Polman’s Marketing Society talk, for example: “Brands and businesses that fail to integrate consumer needs with societal well-being will struggle to grow in the future.”

Michael Porter talks about innovation in his recent HBR paper, where he describes social purpose in terms of creating shared value:

Shared value holds the key to unlocking the next wave of business innovation and growth. It will also reconnect company success and community success in ways that have been lost in an age of narrow management approaches, short-term thinking, and deepening divides among society’s institutions.

…and he concludes:

We need a more sophisticated form of capitalism, one imbued with a social purpose But that purpose should arise not out of charity but out of a deeper understanding of competition and economic value reation. This next evolution in the capitalist model recognizes new and better ways to develop products, serve markets, and build productive enterprises.

As organisations grow they become subject to centripetal forces – power tends to accumulate towards the centre, instead of diffusing through the company. Laszlo Bock, vice-president of people operations at Google, tells the EIU:

“As you get bigger as an organisation, you have to work harder and harder, and more deliberately, to unpack the biological and cultural trappings that people normally bring with them. [People] assume other people will take care of things. They assume there’s some infrastructure for them. They don’t look at every activity in the company and think first, ‘I’m responsible for everything, whether it’s my job or not.’”

Block runs Google’s Advanced Leadership Lab, which aims to have people “think like owners” rather than employees – to consciously push power out from the centre.

It’s commonplace in Silicon Valley, of course – companies who distribute their activities across a range of geographical locations – companies like Automattic, supported by a range of cloud tools like SocialCast, Yammer, and real-time group blogging on WordPress P2.

That’s just what you’d expect from Silicon Valley – and Automattic’s Tony Schneider blogs on why this works so well. But the big beasts are doing it too: the EIU report talks about GM, who are using a similar model, supported by a robust development platform for advanced engineering:

Cars are becoming more technically complex. There are constant advancements in electronics and alternative propulsion, and high demand for engineers who are expert in the field. Ms Barra believes global collaboration lets GM leverage scarce human resources and innovate more quickly, while its regional engineering centres allow it to leverage knowledge of markets.

Social networks are now a mainstream mental model. At the top of this post is my own LinkedIn Map – a nice visualization of how individuals are thinking about their professional connections. So why is the organagram still the mainstream model for management? It’s only a matter of time before organagrams get superceded by skills networks, enabling communities to form around individual interests. Companies like Royal Sun Alliance and IBM are working on developing internal skills networks, and IBM’s Social Business initiative is worth looking at.

Skills networks would have a number of benefits:

I’ve heard the word intrapreneur floating around recently – and it’s true this would boost internal enterprise. However, more interesting is the possibility of making the company more porous: the skills map and the supply chain could begin to integrate into each other.

Eric A. von Hippel at M.I.T recently completed the first ever large-scale survey of consumer innovation. His finding – in this soon published paper – is that individual consumers spend twice as much making and improving products as companies spend on product R&D. He calls it the “dark matter of innovation”.

A recent New York Times article takes up this story, pointing out how most approaches to R&D are “completely dated”. It’s not just about crowd-sourcing, co-creation, or other buzz-words; it’s about being open to collaboration with individual users, groups, stakeholders, and widening the skills network to embrace people outside of the company.

We’re no in an age of perpetual beta: getting to market and then optimizing, rather than the other way around.. low cost, high failure rate. As this Business Week editorial describes it, fail fast and fail cheap:

The math of fail fast and fail cheap is simple. If it takes six months and $100,000 to take a product from idea to customer reaction, then at best you’ll get two cycles in a year. However, if you can do a complete cycle of learning in a week for $1,000, you can get 52 cycles in a year at about half the cost.

This isn’t new – the editorial is from 2007 – but it’s becoming widespread. For example, YouTube is buying Next New Networks, a Web TV show producer with a radical new take on content development: instead of spending $1million on a pilot, spend it on a hundred pilots, and test in the market. And it’s working – they’re generating huge volumes.

Another example comes from the Bill & Melinda Gates Foundation, which recently conducted a major review which resulted in a major shift of strategy – away from “big bet” large investments, towards high volume small seed investments, capped at $100,000. As they might say in India, let a thousand flowers bloom.

Future-facing companies will understand how setting ambitious goals can unlock innovation. Some recent examples from consumer packaged goods: