The 20th century corporation was designed in 1926. That model remained predominant until the past decade. Digitization, reinforced by the Covid-19 pandemic, created a paradigm shift in the circumstances of 21st century business, relative to the previous 100 years.
What would have happened if, instead of the model of a business being designed in the early 20th century, it was designed now, in the pandemic and post-pandemic world?
I’m going to skip historical information and the rationale behind my thinking. Instead, here’s a crack at the actual answer.
The scenario below is not my imagination. It’s real. You may not see it, if your mind is still conditioned by the premises and constraints of the 20th century.
This is my description of a Teal Organization in 2021.
- The economy is moving to Cyberspace.
- Consumers are in Cyberspace; you need to reach them through social media. So are manufacturers and service providers.
- Customers can be anywhere in the World. In Cyberspace there is no physical distance (or limitations).
- Organizations have people from anywhere in the world working on activities anywhere in the world.
- Goods are in Cyberspace (NFT’s) and currency is also there (crypto).
- Cryptocurrencies overcome political borders. The same currency can be used anywhere in Cyberspace, anywhere in the world (with some autocratic exceptions). Money moves instantaneously between trading parties – because it doesn’t need to move physically.
- Production of physical goods is not centralized and then shipped and distributed. Physical goods are produced in micro factories that are local to each geography. Transportation and Distribution are no longer an issue.
- It’s never been so easy to start-up and operate a business.
- Investment availability is abundant.
- Technology needed to operate any business is inexpensive and easy to reach without large investments – it’s all in Cyberspace, in a thing called “the Cloud”.
- Access to expertise is also easy to find and doesn’t require that businesses hire “in house” resources.
- People network; businesses network; easiest thing is to create a cyber supply chain, without owning all the parts.
- “The Cloud” is evolving to what some call Metaverses. A Metaverse contains or links all the parts of Cyberspace needed for anything: lifestyle, business operations and even government services.
- Hence, the business environment is not encompassed by buildings and offices with geographic limitations. It’s contained in Cyberspace within Metaverses – whether they are private or public.
- The 20th century model is a hierarchy and the core component of the hierarchy is a functional department.
- In that model, Power and Authority are essential elements for the model to work. Hence, a few people have that power and tell everybody else what to do; everybody else (supposedly) does what they’re told. The relationship between boss and employee is “I pay you to do what I tell you to do”.
- The corporate hierarchy follows a pattern that started thousands of years ago – the powerful leader and the subordinate employee. These powerful leaders are focused on shareholders first. A customer is a means to achieve benefits for a shareholder – as are employees.
- It’s a two-class system where it is difficult to create an environment where people can do work and be happy.
- Power is the inherent attribute of the hierarchy. It’s how one class of individuals identify themselves – by the power they have over a group of 2nd class people.
21st Century – Teal
- Humans have evolved to a new stage where we are all the same and equally important for the promise made to customer constituencies. That’s the premise in Teal.
- In this model, there is no separation of classes. The company is the people doing the work. There’s no such thing as a shareholder or a boss saying “this is my company”.
- This is not corporate socialism. It’s just a more Humane perspective of work. There are still investors that own shares. There may be majority or private shareholders but they don’t “own” the company and its people. A company is not a thing. It’s an activity involving humans, benefiting customers.
- The relationship where bosses tell employees what to do in exchange for a salary, is no longer valid.
- The perpetual conflict between work life and home life and the [purely artificial] separation between the two is dead. A person is just one person and the day has 24 hours. The need to separate the two stems strictly from the hierarchy. In Teal, this is not an issue.
- The Hierarchy is no longer needed. Neither are specialized departments.
- Since business operations are now in Cyberspace, there is no challenge scaling, being too big – and needing to breakdown tasks into small chunks.
- We rely on intelligent people working together dynamically, within the freedom and ease of Cyberspace to deliver what is promised to customers.
- The core component is no longer a functional department. Instead, it’s a self sufficient, End to End (E2E) team, with all the skills needed to complete a macro process.
- Several individuals working together to achieve a common result, are perfectly capable of figuring out how to get there; how to make decisions and overcome obstacles.
- Therefore, they don’t need to be told what to do. The need for traditional management disappears – Directors and Managers are not needed.
- For scale, several E2E teams are needed to deliver on a complex promise to the market and so teams network with other teams.
- This network of several teams needs a Leader that monitors the efforts of the network and helps with inter-team snags.
- These Leaders, however, are not bosses, in the hierarchical sense. They have the role of the eagle that hovers high because someone needs to keep an eye on those networks. That’s what a Leader does but it’s not more important than and doesn’t subordinate the rest of associates.
- There is no bureaucracy in Teal.
- Bureaucracy – procedures, approvals, cycles (weekly, monthly, quarterly, etc.), HR programs and procedures – they all exist strictly because of the functional hierarchy. The same reason that justified VP’s, Directors and Managers also justifies bureaucracy.
- In the new, more Humane way of people working together, teams and networks of teams know how to do things and do so correctly. Because of the fabric of the network, the environment is self-correcting. And since everything happens in Cyberspace, anyone can see anything anytime. Both the events and the decisions made in reaction thereto, are visible and so other teams will detect mistakes and work together to fix them (look at how Wikipedia works – since 2001!).
- It is difficult for people to commit fraud, carry on offensive behaviour, be underhanded – and other things that HR needed to be created for.
- There is no need for approval cycles and documents “circulating for signatures”.
- In Cyberspace, everything functions in Now Mode – including the monitoring of business performance. There is no stop::wait::meet::make decisions::continue; instead, event::decide::continue are nearly simultaneous.
- There are no meetings.
- Thus, everything goes very fast and this dynamic occurs not only within the space of a business, it also occurs between and across businesses. No inter-company bureaucracy either.
- The Digital paradigm of the 21st century makes it possible to hyper-simplify technology infrastructures.
- In the 20th century, corporations typically had an IT department. All the needs for information technology were fulfilled (supposedly) by that department.
- In the 21st century, there is no need for an IT speciality. The Teal organization is not modelled on the principle of “I own my stuff”. The culture of Teal in Cyberspace is a networking culture – within a business and between businesses.
- Getting access to technology is as simple as networking with another business – which is simple if you operate in this paradigm.
- Business technology is not centred around so-called core systems, like ERP’s and CRM’s.
- Instead, the information support that teams need comes from Big Data and AI. All planning and management technology is replaced by AI and rendered extremely simple.
- In Cyberspace, trade is easy, transactions are easy, there are no buildings or distances imposing constraints in how we work.
- Hence, all trade occurs in the space between companies (smart contracts) – not inside each company. Blockchain is the technology made for that space outside companies.
- Classical information systems will gradually be replaced by Blockchain Apps – just as cold medicine is being replaced by mRNA solutions.
- It will make little sense to use internal systems for things happening inside the company; and blockchain for inter-company trade – because, in Cyberspace, it’s all the same. As the paradigm of networking takes over activities in cyberspace, data, apps and transactions contained inside one particular company will cease to make sense.
- In a Teal model in Cyberspace, activities and transactions occur between Humans. It doesn’t matter if two Humans are in one business or in two businesses – the technology is the same.
- People don’t work in office cubicles with desktop (or, frankly, laptop) computers. Everybody operates with Mobile units – producers and consumers – and there will be no office network as such. The only network is the internet.
- Don’t get me wrong – data and transactions are still private and segmented. Some of it is private to a business; some will be private to two businesses. I’m not referring to the privacy and security of the data. I’m referring to the technology.
Costs and Efficiency
Due to the ethereal nature of Cyberspace and the freedoms it offers and due to a new mindset amongst Humans at work, a Teal model is hugely less expensive than the same activity organized in a Hierarchical model.
It’s impossible to talk about this phenomenon in a single article – it’s too complex. What I can is give you a rule of thumb just for reference and to help you come to terms with the paradigm shift.
If a business functions as a 20th century hierarchy and a competitor is a Teal organization, relative to the former, the latter will have:
- Number of operational Leaders (as outlined above) – 20%-50%;
- Number of Strategists (equivalent to Executives) – 50%;
- Number of associates (equivalent to “employees”) for the same output – 70%
- E2E process speed – 4x
- Growth – exponential
- Capacity to adapt quickly – 10x
These, of course, are not precise numbers; they are orders of magnitude of what you should expect.
The comparison, actually, is not that simple because the amazing-ness doesn’t occur inside one business alone; there is a much more meaningful and larger benefit that occurs in supply chains as a whole.
A Teal supply chain’s capacity to handle the needs of customer constituencies can’t compare to a classical supply chain between classical companies. It’s not just another order of magnitude, it’s a different paradigm altogether.
This may not be obvious at first but the Teal model is applicable to any type of activity in Humanity where a group of people get together and deliver something to another group of people.
This includes private and public businesses, large and small, in the service sector or the industrial sector; government services; NGO’s; schools and universities; etc.
There are, evidently, some exceptions that are expected. Take, for example, the Military. Hierarchy is inherent to the way armies function. Over thousands of years, power and authority, compartmentalization – they were born in a military setting. It’s part of the identity of the Military entities – if they exist, they are hierarchies.
Clear and succinct. Thanks Tony.