In Modular Organization 1.0 (read Enterprising with the Flow, [updated to] Modular Organization 1.1), we establish the framework where organization works to develop alternate competencies in "blocks and clusters" format that can be used to redesign the business model or develop a completely new one. In Modular Organization 2.0, we look at the scenario how a group of modular organizations can change the way the marketplace operates by making collaboration works faster and enabling companies to unlock a deeper unrealized potential that creates additional value to the stakeholders.
Shareholders and top management continuously seek new ways to unlock unrealized potential of their organization so that the organization can go that extra mile in value delivery to the marketplace. But what new ways are available to them?
Collaboration, partnership and mergers are some of the traditional options for companies to extract that additional value from their business. But how to ensure a more exact fit when different companies collaborate? How to get the collaboration going at “gear 4 or 5” even from the start?
The basic idea behind a modular setup is to enable the organization more flexibility in redesigning its business model or even to change industry altogether - giving the organization the agility to chase where the money is as business climate changes. Modular organization operates on blocks of alternate competencies that it develops from the same set of people and assets it have, plus new work processes…that can be clustered to enhance or replace its core competencies. Competencies are structured in blocks and clusters so that organization can quickly identify and speedily apply key capabilities that are needed to operate in this new business climate. Ideally a mature modular organization will have a set of competencies for every situation that enable the organization to enterprise with the flow of the increasingly volatile economic cycle.
The unique way modular organization is designed offers a new kind of advantage where in Modular Organization 2.0, we look into how the competency blocks, that essential DNA of modular organization can effectively become the new currency in a marketplace to enable better, faster and cost-effective collaboration through competency modeling.
To approach new projects, organizations (be it companies, investors and entrepreneurs) can now now look for the right competencies by acquiring the relevant blocks or clusters (competencies) – instead of the whole company or division that carries with them their own set of redundancies and excesses thus the ability to get to work at a faster pace. In one simple example, a snack company looking to produce instant noodles can seek to buy the capability (complete with the key people, asset-machines and work process-recipes) from another firm that have such competency without the need to go through an expensive firm-acquisition process which may drown the acquirer with excesses and redundancies. In the same manner where common management practices have allowed managers to move from one company to another with relative ease, the whole integration process where one competency "jumps" into another company can become more expedient if the transaction is between modular organizations, having learned the "tips and tricks" themselves in integrating new competencies into their business model.
What is evident in the above scenario is that modular organizations are now in the business of selling those extra competencies in addition to selling products and services core to its business model thus further unlocking the organizational value. Modular organization can actually establish a price on these modular competencies based on demand from the marketplace, a business scenario that will not be possible if these competencies remain unknown, untapped and unutilized. This potential alone should be a powerful incentive for companies to advertise their "extra" competencies beyond their internal boundary. In this scenario, modular setup even offers a possible model for two direct competitors to collaborate, because in essence it is no longer about competing core competencies but mashing of completely new competencies altogether that may produce the next big thing for customers.
Modular organization makes collaboration more predictable as critical background information is made available provided that the modular blocks are properly documented. Because each modular block comprises of individuals, assets and processes so with proper documentation, collaborators will have an inside-out view of the inner-workings of each block and a greater understanding how a particular competency come about. They can instantly know the individuals behind each competency, their profile and background, the process needed and the assets required to make the competency works. In other words, it is ready for application. And since it is competency-centric minus the bureaucracy, integration will become more straight forward.
In many ways, modular organization is also changing talent search and acquisition practices. It is a norm for companies to identify star individual, attract and even pinch them to gain access to his/her expertise and experience to develop a particular business. This situation happens a lot in the financial services industry where money managers often moves, bringing along with him/her their clientele-base and networking contacts. In modular organization setup, the competency takes centre stage as organization can look past the personalities. Integration is potentially faster because the kind of assets and processes have been identified. Again, using the financial services example, a modular block not only brings with them the relevant individuals (money manager-s) to the table, it also brings the financial modeling, marketing techniques (process) and the tools (computers and its specialized software etc.). Certainly in the case of modular block, it does look that the odd of success is higher!
The critical first steps for modular organization 2.0 to become effective;
1) Standardized the documentation process - establish a common format of how the modular blocks and clusters can be best explained to the marketplace. When we get all modular organizations on the same page, it will be easier to evaluate and understand of what being offer. And it may even provide some clarity to others in getting the competency applied.
2) A clearing house - to make the process of exchanging, comparing, selling and buying blocks and clusters more effective, create a clearing house especially to establish a pricing mechanism for the competencies. Since modular networks are essentially organized on social platforms, then the best clearing house format can perhaps be organized on one.
3) Start consulting practice - get consulting work organized around organizational modularity; to find the best set of competencies using blocks and clusters that is compatible to a particular industry and provide the best winning formula to a successful business model. This will be a niche knowledge especially for organizations that seek to explore new industries altogether...and it will make the learning curve steep without the need for organizations to over-experiment in mixing and matching the competencies themselves.