Inventing the Organizations of the 21st Century

MIT Management

by David Lampe

Few people foresaw the vast changes that would be wrought by the invention of the steam engine and the host of other mechanical devices that were the technological driving force behind the Industrial Revolution. Yet these advances completely transformed the nature of work as many of the old ways of organizing and managing business died away and new concepts emerged. The network of crafts and small cottage industries that had dominated the production of goods for centuries gave way to large centralized factories, and the concept of mass production not only opened the door to new opportunities and unprecedented growth, but also reshaped the way we live, work, and play. 

"We are now at the threshold of a new era, driven this time not by the technologies of production and transportation, but by the technologies of information, communication, and coordination," says Thomas W. Malone, Patrick J. McGovern Professor of Information Systems at Sloan. "These technologies, guided by the organizational needs and human values that are important to us, hold the potential to completely transform the nature of work throughout the world."

To meet the challenges posed by these changes, Malone and his colleagues at the MIT Sloan School of Management are joining with a select group of industry partners to launch a major new research and educational initiative: Inventing the Organizations of the 21st Century. The overall goal of this landmark interdisciplinary effort is to work with business leaders not just to understand, anticipate, and exploit novel ways of working, but also to build on Sloan's broad-based knowledge of organizations, economics, and emerging information technologies to actually invent entirely new approaches that can be put into practice. 

The faculty are now in the process of assembling a team of participating companies to help scale up and expand the scope of research that has laid the groundwork for the initiative. Already, three companies have signed on: British Telecommunications; EDS; and National Westminster Bank. 

A New Era of Business

Driving the new initiative is the fact that today's business climate is undergoing a profound and far-reaching transformation. The last few years have brought a revolution in the worldwide political landscape, the rise of intense international competition, faster product development cycles, and explosive growth in the service sector. As we edge toward the next century, all signs indicate that both the complexity and the pace of change in the global economy will increase.

Together, these changes are tearing at the fabric of traditional organizational structures and management practices. "The command and control design is dead," insists Edgar Bronfman, Jr., President and CEO of the Seagram Company, Ltd. who participated in last fall's CEO Roundtable on organization in the year 2020. "It's just that we haven't buried the body yet."

Indeed, sweeping transformations have produced startling setbacks for what have been some of the world's most successful companies. Countless firms are struggling to adapt to new pressures--or even to survive-- by downsizing, redesigning their business processes, and rethinking their strategic focus. Some of these efforts succeed--at least for a while--and many fail.

Increasingly, top executives are seeing the need for a more thoughtful and far-reaching response. "Experience is showing that reengineering our existing structures will never be enough," concedes Derek Wanless, Group Chief Executive of National Westminster Bank. "We've got to reinvent."

Against the backdrop of political, economic, and social turmoil, an extraordinary array of information technologies is providing not only powerful new tools for dealing with these changes, but also a promising framework for creating entirely new opportunities. Advances in computers, software, telecommunications, networking, and electronic media are vastly increasing the quantity, quality, and accessibility of all forms of information. 

At the same time, insights into the structure and dynamics of organizations and the process of learning, coupled with expectations of a more demanding and educated workforce, are challenging our conceptions of the nature of relationships in the workplace. Taken together, these developments are transforming the capabilities for communication and coordination among managers, workers, customers, and suppliers--nearly everyone involved in the conception, production, delivery, and use of products and services worldwide.

"Technology is one of the key enablers fueling globalization and organizational innovation," explains Les Alberthal, Chairman, President, and CEO of EDS. "It provides virtually unlimited freedom of access to information, and opens the door to previously unimagined ways for people to work together."

Bruce Bond, Managing Director of National Business Telecommunications at British Telecommunications, concurs. "The working environment over the coming decades will be radically different from the current model, with fewer and fewer people working under the traditional corporate umbrella," he asserts.

The unprecedented complexity and uncertainty that characterizes today's business environment, coupled with the rapid-fire developments in information technology and organizational dynamics, pose a host of urgent questions for today's business leaders. Many senior executives are already grappling with such pressing issues as the following:

* Learning to Adapt--How can an organization effectively deal with constant and multi-dimensional change? How can it boost its capacity for learning and adaptability?

* Structure--How should a company be organized for maximum responsiveness to continuous and often unpredictable changes in the marketplace? How should it relate to its network of customers and suppliers?

* Skills--What leadership qualities are needed to guide tomorrow's organizations? What skills will be crucial to success at all levels of an organization operating in such a dynamic environment?

* Management Styles--What happens when "command and control" styles of management collide with ongoing efforts to empower workers? When more workers have greater access to more information, how should business decisions be made?

* Impact of Information Technology--What will happen to industry structures when "electronic markets" and "information highways" make it possible for buyers and sellers of any size to find each other easily anywhere in the world without human intermediaries? 

* New Ways of Working--With greatly increased capabilities for communication and coordination, how will individuals work together? How will their work be evaluated? Will there be less need for large offices and factories? Will more people become "telecommuters?"

* Innovation--In such a competitive world where the winners are likely to be the companies that are the first to recognize new ideas and implement them, how can an organization create the environment needed to spur continuous innovation?

* Measures of Success--As intellectual capital and other intangibles play a larger and larger role in a firm's success, can we adapt traditional accounting measures to more accurately portray the true assets, liabilities, and long-term prospects of a company?

A Distinctive MIT Approach

Questions such as these have no simple answers. Indeed, they challenge many of the basic organizational principles and practices that have served managers so well since the beginning of the Industrial Revolution. Answering them thus requires an innovative approach.

"No short-term analyses or trendy management techniques are likely to provide the depth of understanding required to fully appreciate the implications of the fundamental changes now under way in society," maintains Michael S. Scott Morton, Jay W. Forrester Professor of Management and one of the leaders of the new initiative. "Nor are they likely to point to realistic new possibilities. What is needed is a thoughtful and creative approach that actively synthesizes the best insights from the worlds of theory and practice to lay the groundwork for the future." 

Building on Sloan's broad base of ongoing research in information technology, organizational learning, and strategic management, the initiative will explicitly integrate a thorough understanding of the nature and potential of emerging information technologies with an in-depth reevaluation of ways to organize work. This knowledge will be balanced with a sensitivity to evolving needs and expectations of the workforce along with the operational experience of the partner companies. 

Several of Sloan's research centers are participating in the initiative, bringing together the broad base of knowledge and expertise required to address the multiple facets of the challenges ahead. Among the centers joining in are: the Center for Coordination Science, headed by Malone; the Organizational Learning Center, directed by Peter Senge; the Center for Information Systems Research, directed by John F. Rockart; and Project Delta, directed by Professor Arnoldo Hax.

The proposed initiative has six major components:

* Study today's innovative organizations--Like biologists cataloguing new forms of life on a planet never before explored, an important part of the work will be to find and carefully study current examples of companies using innovative organizational approaches or advanced technologies. A key facet of this work will be the establishment of a global "intelligence network" to keep up with the latest organizational innovations wherever they are found in the world. (See box on page ___.)

* Experiment with new technologies--Many of the most important organizational innovations will arise from advances in information technology. Some of these technologies are already being developed and tested at MIT. Special attention will be paid to identifying and understanding the most promising new technological opportunities from around the world long before they are widely used. 

* Develop new theories about the nature of work--In order to systematically create or evaluate new organizational possibilities, it will be especially helpful to build a conceptual framework for understanding them. This will involve blending insights based on economics, organization theory, management science, and other disciplines with lessons drawn from practical experience.

* Create scenarios of future possibilities--A crucial step will be to build on the knowledge and insights gathered through other program activities to formulate a series of practical scenarios of possible organizations. The object of this novel approach is to break the bonds of preconception to create, explore, and evaluate alternative futures and how to get there.

* Encourage testing and implementation of new concepts--The true test of a new idea is how it works in practice. Corporate partners will receive advice and support in applying appropriate research results and insights as they arise.

* Develop educational programs--To help bring new ideas to practice, specific resources from the initiative will be allocated to develop educational programs for corporate partners as well as for other audiences, and to establish links to existing Sloan executive education programs. Sloan faculty will also integrate the findings of the initiative into courses offered through the Master's program to help prepare a new generation of managers to be leaders of the organizations of the 21st century.

Early response to Sloan's abilities and plans in this area has been favorable among industry leaders. "MIT has both the technical understanding and the management insight necessary to be able to understand how one influences the other in an organization," says Gerhard Schulmeyer, President and Chief Executive Officer of Siemens Nixdorf Information Systems AG.

Partner Firms: A Creative Collaboration

Because of the practical focus of this initiative, the active involvement of a select group of corporate partners is crucial to its success. The perspectives of senior executives familiar with the special demands and constraints of day-to-day operations will be central to the development of workable alternatives to today's organizations. Furthermore, the leadership of these same executives will be required to test and implement proposed changes in their own organizations.

Malone and Scott Morton plan to limit the size of the partner group in order to build a close-knit team in which participants can learn continuously and efficiently from one another, respond quickly to unexpected developments, and achieve a focused spirit of invention. In addition, they believe the initiative will be best served by a group of partners representing a wide range of industries with a global scope.

Corporate partners will be in a position to benefit broadly from their association with MIT and with each other. They will have the opportunity to serve as field sites for specific research projects, to help evaluate research directions, and to participate in the creation and critiquing of future scenarios. In some cases, partner representatives will be invited to collaborate directly with research teams, either on site or at MIT, for periods ranging from one week to one year.

According to Malone, the more significant benefits of participating in the program will emerge from the deeper and longer term perspective on the forces at work in our society. "Just as at the dawn of the Industrial Revolution, our society is at a crossroads," he says. "In such a volatile environment, the future belongs not to those who are buffeted by change, cautiously adapting to it as needed, but to those with the foresight to recognize and embrace the potential offered by the very changes that others find so unsettling." 

Malone is also quick to point out that among the greatest beneficiaries of this ambitious initiative will be Sloan students. "The broad insights as well as the specific results arising from the initiative will inform and enrich the content of a wide variety of classes on subjects ranging from organizational behavior to information technology," he explains. "And ultimately, we have to realize that graduating students, along with participants in short courses and executive programs, are one of the most important paths for knowledge transfer from universities to industry."


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