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  • The end of the organization as we know it

    23.07.15 | Door: Appian

    The end of the organization as we know it

    Erik Moti, Appian Corporation 

    july 2015

    An analysis of the history of technology shows that technological change is exponential, contrary to the common-sense “intuitive linear” view. So we won’t experience 100 years of progress in the 21st century — it will be more like 20,000 years of progress (at today’s rate). The “returns,” such as chip speed and cost-effectiveness, also increase exponentially. There’s even exponential growth in the rate of exponential growth.

    These are the first sentences of the essay ‘The Law of Accelerating Returns’, written by Ray Kurzweil in March 2001; an essay very worthwhile reading.  What it boils down to is that one technological change initiates multiple next changes that, on their turn, each initiate multiple changes of their own. The changes coming to us in the next ten years are likely to be the equivalent of, let’s be very conservative here, the same as the past fifty years. To put that into perspective: fifty years ago we didn’t land on the moon yet; we were using punch cards to operate computers – the modern ones; most people didn’t have a color television yet; ABS was unknown by the fast majority; things like the Internet, smart phones, and car navigation systems were unthinkable.

    A very important result of technological changes is that we can make technological change become available much faster than we were able to, say twenty years ago. In those days, people were exposed to new technology mostly in the workspace. The desktop computer, for example, became available at work long before it became a common device at home. Organizations possessed the resources to implement and adapt new technology way too costly for an individual to have at home. Sometime during the second half of the first decade of this century, it changed. Today, individuals have access to new technology long before organizations are able to adapt it. Smartphones, GPS, tablets, cloud, social apps; today individuals dictate the technology organizations need to implement.

    I’ve mentioned that organizations used to have the resources to implement and adapt technological change. One very important resource organizations had, was time. Introducing the desktop computer was not something that happened over night, it took years for an organization to move from no desktop computers at all to have one available for all employees. Even if an organization in that time was one of the Late Majority, the pace of technological change was at a rate it would not suffer significant disadvantage. Today, time is a very scarce resource. Look at it this way: how would you implement in your organization the same amount of technological change in the coming ten years as your organization did in the past fifty years?

    The challenge of organizations for the years ahead of us is not the readiness of implementing new technology. The ‘Millennium’ change and the introduction of the Euro proved that if organizations are forced to implement change, they will do so. If, for some reason, the law dictates that every employee is entitled to choose to do his or her work on a desktop or a tablet, organizations will comply with that law. The decision is forced upon them, making it actually no decision at all. The real question is whether organizations are able to make decisions at the same speed as technological change is coming to them. My answer is no, organization will not be able to do so: time is a resource organizations don’t have anymore. The real challenge will be to cope with that inability.

    What does this mean? What is definitely doesn’t mean is that organizations need to speed up their decision making process. There is only so much you can do. If you would be able to boost up the process to outrun the current pace of technological change, it will be temporary: technological change continuously is accelerating and will overrun you eventually. It also doesn’t mean you’ll need to hire more people to comprehend all the technological changes. That is way too costly, if you already would be able to absorb an increasingly growing workforce. Organizations that think that they can be self-sufficient on their technology and built everything themselves are on the road to extinction. And elaborating on that one, it doesn’t mean organizations need to outsource their technology, although doing so on commodity is probably a good practice to begin with.

    What it does mean is a fundamental change in how organizations are organized and how they operate.

    Traditionally, organizations are organized hierarchically, having levels of responsibilities. A decision to be made at a certain level is divided in sub decisions and delegated below where again division can take place, until no delegation is possible anymore. At a certain point, all the sub decisions come together on the highest level, are evaluated separately and as a whole, and, after some going up and down the levels for clarification and additional sub decisions, an overall decision is made. Tender procedures and RfX-processes are the most striking examples. I’ve seen these processes take eighteen to thirty months. If you consider that the initial request was made more than two years before the final decision was made and that implementation on an average takes twelve to eighteen months, the change requested was implemented more than three years after the initial request was made. Today, according to Kurzweil, this would be experienced probably as forty years.

    Hierarchical decision making takes the one resource we don’t have anymore: time. As a consequence, hierarchical organizations won’t be able to cope with exponential technological growth. New forms of organizing need to be developed, there needs to be a paradigm shift in operating models. This will be the subject of my next blog.

    It also transcends the level of the organization itself. Let me use an example from the industry I’m working in: software. If technology – and software for that matter – changes exponentially, why do we still sell and buy perpetual licenses? Doesn’t it sounds strange that we sell and buy something ‘to use forever’, when it becomes outdate increasingly quicker. From a buyers’ perspective, buying term licenses would be more logical. This also puts the pressure on the seller. Sellers need to offer software that is very frequently updated - think in weeks or months, rather than years and quarters - and for each update it must possible to be implemented instantly and without disruption of the business processes, making sure software is used that complies at least to market conform technology continuously. By the time the term expires, software companies must prove that the current version is technologically up to date or they lose opportunity for renewal. The days of service and enhancement packs are over, as are the days of costly and time consuming upgrades. Changing the organization operation model also means changing the fundamentals of how organization interacts with the outside world and how organizations collaborate with each other. Buying and selling software is a prominent example of that.

    Some time ago I watch the documentary ‘Mankind from Space’ on National Geographic Channel. It shows what exponential technological change did to our world over the last century. It’s astonishing to see what technological change can cause. The introduction of the assembly line by Henry Ford made cars affordable for the mass. A hundred years later, the network of highways in the US grow from close to nothing to over 250.000 kilometers today. If it was a linear growth, this would be seven kilometers of new highway every day, seven days a week, over a hundred years. But it wasn’t linear. Technologies to build highways improved, speeding up the production, causing innovations for materials of which highways are constructed to be improved and vice versa. Improved materials were supporting different kind or weather conditions, resulting in new technology in the tire industry. Automated signaling systems were embedded in roads to monitor the pressure on the surface and the volume of traffic passing over, leading to signaling systems to reroute drives in case of too much load or traffic jams. It developed new industries, like gas stations, roadhouses and malls. I could go on for a while with this. I recommend you’ll watch the documentary, be amazed and see a glimpse of what is ahead of you.

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