September 6, 2010 at 6:26pm
Business professors think I am out of my mind, but I think business professors are out of their mind if they think that models they teach in business school really work. The business model I am proposing redefines the organization as we know it.
Traditional business models rely heavily on a number of orthodoxies that create competitive disadvantages. Some of them are as follows:
1. Having employees. Having employees carries costs, liabilities, legal burden, and a number of side effects (e.g. costs of hiring, firing, and things managers would rather do instead of hiring people). This concept also relies on scarce [human] resources. These resources are in abundance on the planet but are scarce because of costs.
2. Having the wrong employees. Having employees is bad enough. Having the wrong employees is even worse. The problem is that sometimes we hire employees who want the job in order to get paid, and not because they will enjoy doing it. Sure, there're many people who want to do a good job. But most of people do it for money and will never accept the job if it pays nothing. These people are only marginally passionate (if any) about their jobs.
2. Traditional management structures. This web site and numerous other articles talked a lot about disadvantages of traditional management. That's why the moonshots have been developed.
3. Poor management of competitive disadvantages. Many firms have disadvantages they don't know how to manage. Some of them are related to products. Others are related to competencies. For example, if you have a weak sales team, you aren't able to sell, no matter how good your product is.
4. The innovation constipation. Many firms don't know how to innovate. This may be related to people, culture, organizational controls, the system of rewards and punishments, management, and other deceases.
5. The entrepreneur's dilemma. Most entrepreneurs lack the skills needed to run the entire business. For example, engineers can't sell and salespeople can't engineer. As a result, many entrepreneurs fail in functions they can't handle and their businesses fold.
6. Many other problems. Organizations have many problems they aren't aware of. They hire incompetent people. These people make mistakes and then spend time learning about those mistakes. While this concept seems somewhat reasonable, it makes the organization highly inefficient.
I propose an operating model that changes the way the organization functions. Here's how it works:
This organization has no employees. It does, however, have a number of its normal functions, such as marketing, sales, engineering, accounting, etc. In order to bring talent onboard, this organization will use a process similar to that of open source software, such as Linux. It will allow anyone with any skill to join the organization and allow people to contribute in any way they are passionate about. The open source model recruits software engineers.
I simply propose to do the same for every single function in the organization and manage the organization as a network of crowdsourced communities of passion.
A web based social networking software will be used to power the organization.
When people join, they will see a number of communities that rotate around lines of business or core competencies. When they select one, they will see communities that rotate around functions (e.g. sales or marketing). When they select a function, they will see subcommunities that rotate around specific projects (e.g. advertising, enterprise sales, etc).
People can apply to join each community and/or subcommunity. They will then be voted in or out by current members. Once they join, they will work in a team of other people with a chosen passion. As a result, software engineers will join the engineering community and sales folks will join a sales community.
Each subcommunity is self-managed. Teams can vote members out at any time. Because firms must be profitable, each community must become a profit center, generating money for its members. As a result, these communities will create an internal market for products, services, and ideas and trade with each other. Most will probably trade by using stock that carries dividends made from sales.
For example, let's say the firm is in the software business. There're five communities of engineers making five different products. When the product is ready, the engineering community joins the sales community, the marketing community, the accounting community, and any other relevant parties and create a relationship whereby each member gets stock in the venture. They work together and receive profit distribution based on stock ownership.
This model has a number of practical advantages:
1. No more employees. This means there's no cost (no salary), and no burden that normally comes with having employees.
2. Better people. The types of people to join this organization will be passionate and entrepreneurial. People won't be interested in careers and promotions. They will be interested in doing the very best job they can and doing it better than anyone else. Their pay will depend on their ability to execute!
3. This structure will solve a number of management moonshots. You will have a different management hierarchy (a collection of communities of passion consisting of teams [potentially without] leaders. People will be in control of their own communities, so they will trust communities more. There will be no fear or any reason to fear anything! There will be the ethos of community and citizenship. The work of leadership will be very different. The means of control will be different as well. Because people will be entrepreneurial and leadership is different, people will be allowed to experiment more and come up with better, more innovative ideas. There will be no excuses no to do it! There will be an internal market for ideas, cash, and talent. This organization will run as a collection of communities of passion. Because passionate people often blend work and play, the two concepts will be merged into one. In fact, for some people this may not be much more than play (think open source software!).
This is easier to setup in a new organization. There are several keys to success:
1. Create a software that encourages effective communications between parties.
2. Bring A LOT of people to the organization. The more people you bring, the more effective you will be.
3. Let people free. Crowdsource every single function in your organization without any exceptions.