There is general agreement that the corporation is going through dramatic changes in the 21st century, driven by a combination of advances in information technologies, the Internet, the fast-changing market environment, and the heightened competitive pressures brought about by globalization. Business strategist and author Don Tapscott, whose research and writings have focused on the changing nature of companies, said it nicely in this article:
"We came to the conclusion that the corporation is arguably going through the biggest architectural change in a century. Throughout the 20th century we created wealth through vertically integrated companies that did everything from soup to nuts. . . . But the rise of the Internet means that boundaries are far more porous. A new model is emerging, enabled by IT and networks. Vertically integrated companies are unbundling into business Webs, or what I call the open networked enterprise. These are companies that think and act differently, that take a new approach to doing business in a highly networked world."
Companies are embracing a more distributed organizational style. The foremost reason is the need to become more flexible and adaptable in response to changing market conditions. A highly centralized organization may have worked well when markets changed slowly. It was then possible to have a command and control approach to management, where authority and information flowed down from small groups of executives back in headquarters.
But, as we know, this does not work so well today, especially for global companies that operate within complex supply chains and industry ecosystems and need to react fluidly to dynamic market conditions all over the world. The expertise is out in the field, where the rubber meets the road, as it were. That is where people know what is really going on and what they should do about it.
It is hard for people back in headquarters, no matter how competent and committed they might be, to stay on top of what is happening all over their company. Their own development labs and manufacturing plants are generally located all around the world. It is even tougher for them to have the proper understanding of the changes underway in all the various cities, countries and communities where they do business. The experts in the organization are those people closest to their products and services, their clients and their markets.
But, for a distributed organization to work effectively, it must adopt a culture of collaboration across its most important tasks. As you distribute leadership and responsibilities, your employees should not feel that they are being asked to solve complex problems all on their own. They should be encouraged to reach out to colleagues across the company, especially those with the proper skills and resources to be of help, - subject matter experts as well as managers. Collaboration is particularly important when facing new kinds of problems from those you usually deal with – the kinds of problems where truly innovative approaches are typically most needed.
In our increasingly networked world, collaboration also extends beyond the firm. A key finding in the IBM 2006 Global CEO Study is the link between external collaboration and innovation. An increasing number of CEOs stressed the importance of collaborating beyond company walls, with business partners and clients as top sources of innovative ideas. This is very different from previous organizational models that assumed innovation was too critical to involve outsiders.
Turning from business to government: Can we envision a parallel move from a centralized style toward a more distributed, collaborative style? Could such a shift in style help governments derive the benefits that have been working so well for companies and other societal institutions?
This question has been debated in one form or another ever since the birth of the Republic. The early days of the US government saw fierce political battles between the Federalists, led by Alexander Hamilton, who advocated a strong national government, and the Democrat-Republicans, led by Thomas Jefferson and James Madison who favored states' rights and a strictly limited federal government.
In the years between the Civil War and the Civil Rights Movement of the 1960s, states' rights became closely associated with segregation, with the federal government as the chief protector of civil rights for all, especially with the passage of the 1964 Civil Rights Act.
Fortunately, those days are behind us. But the governance debates continue. For example, New Federalism has emerged as a political philosophy which aims to devolve back to the states some of the autonomy and power which they lost to the federal government in the decades since the New Deal in the 1930s. Supporters of New Federalism and related initiatives have generally been conservative politicians like presidents Richard Nixon and Ronald Reagan.
More recently, this philosophy has been embraced by people across the political spectrum. As I was doing research for this blog, I came across the writings of Jonathan Taplin, a Professor at USC's Annenberg School of Communications. In this entry of his blog, he writes:
"I have come to the conclusion that we have to use the same devolutionary technology that has transformed business to transform our republic. I call the movement, The New Federalism and its principles come from Thomas Jefferson’s belief that 'The true theory of our Constitution is that the states are independent as to everything within themselves, and united as to everything respecting foreign nations.'”
In another entry in his blog, he writes, "The basic economic problem we will face in the next few years is that the Federal system no longer works correctly. In the same way that giant corporations like G.E., News Corp and Berkshire Hathaway have flattened their organizations and shrunk their corporate staff, we need to redesign the way we govern, tax and spend. The States are without sufficient taxing power to provide basic services for their people, as every single state government is in a fiscal crisis, exacerbated by the inability to keep capturing falling property tax revenues from county governments."
He further adds, "Since most of the concerns of citizens are local matters: Schools, Police, Housing, Power & Water, Public Transportation, and Health Care, these should be funded at the local level. Even though the Federal Government provides block grants to the States for these concerns, much of the tax revenue gets wasted in the Federal Bureaucracy."
He then uses California as an example. “In four years the state has passed laws on auto emissions, CO2 levels, stem cell research, personal data privacy and appliance energy standards all of which have clashed with the neoconservative agenda of the Bush administration. As the governor pointed out, the power and size of the California economy has allowed the state to create de facto national standards that the corporate sector has been forced to follow. And although both the auto, oil and banking industries have joined with the Bush administration to sue for relief from the California standards, to date the courts have not struck down any of the state laws."
New Federalism might give us a framework around which to apply the principles of distributed, collaborative leadership to government, especially in important areas that are naturally the province of state and local governments more so than of the federal government, such as economic development and education, along with major issues like healthcare and infrastructure which are closely related to economic development. These are not only critically important areas to the country, but also areas where we are badly in need of fresh thinking.
In healthcare, for example the states and the private sector are ahead of the federal government in experimenting with new ideas. Over the last few years we have seen Massachusetts and other states enact or propose comprehensive health care reform plans and universal coverage. We have also seen new private sector initiatives like miniclinics, which hold great promise for delivering "entry-level" primary care at reasonable prices.
Support of fundamental research has long been the province of the federal government through key agencies like the National Science Foundation and the National Institute of Health. However, we are now seeing states taking the lead in certain areas of economic importance in partnership with the private sector.
In 2004, California voters approved the creation of $3 billion in state funds over ten years for human embryonic stem cell research. This led to the establishment of the California Institute for Regenerative Medicine, whose mission is “to support and advance stem cell research and regenerative medicine under the highest ethical and medical standards for the discovery and development of cures, therapies, diagnostics and research technologies to relieve human suffering from chronic disease and injury.”
Another example is the leadership of New York State in establishing the College of Nanoscale Science and Engineering at SUNY Albany, doing so by working closely with IBM and a number of other industry partners. This has enabled SUNY Albany to be recognized as the top university in the world for nanotechnology, and has transformed Albany and the mid-Hudson valley into the worlds leading region for nanotechnology, with all the economic benefits that implies.
We need to get beyond the tired ideological debates of the past. In effect the governance debates have been framed as: Do you want a centralized, authoritarian government, or a weak, incompetent one?
That is no longer the right question. In business, you need very strong and competent leadership at the top to effectively implement a distributed, collaborative model. Such leaders understand the limits of their power. They know they must hire the best possible people, listen to their advice, empower them to act and truly delegate responsibilities. The best leaders know that they must foster a spirit of innovation and collaboration across the organization.
It should be no different in government. We must do everything possible to find the organizational models that will best help us address and make progress on our critical issues. This is one of the most important innovations we need to step up to, to safeguard our country’s (and our world’s) future.