Organizations are Marketplaces
In an Age of Complexity, that’s what it is.
In the last couple of months me and the team at platformdesigntoolkit.com have been repeatedly involved with organizations interested in exploring how platform strategies could help them drive change and digital transformation. These projects happened in the context of strategic issues such as organizational and business model innovation, data intelligence, new services development and more.
The recurring beyond these initiatives has been the urge to go over and beyond hierarchies, command and control structures where objectives are predetermined and work is expected to be mechanistic.
Companies are eventually grasping the power of self-organizing, not only as a prerogative of long tails, and open markets but also inside themselves: as they realize they’re not impermeable to techno-social change, they also realize that the potential is growing at the periphery of their systems, and that value is increasingly created at the edge of the organization.
The potential of each employee to shape and impact the organization-at-large is growing: every day is more comparable to that any given executive trying to extort change by fear.
Today, the amount of change you — as an individual — can drive into your organization depends more than ever on your vision, curiosity, influence and on discipline (to experiment and learn), more than it depends on your position inside the organization.
If we piggyback for a moment on Niels Pflaeging’s, awesomely clear, three structures inside organizations, we can definitely say that, increasingly — also thanks to maturing enterprise social tools and technologies — the Social Structure of organizations is growing its importance at the expense of the traditional Formal Structure. Organizations are finally catching up on new ways to appreciate, nurture and reward social and interactive leadership and often invest in developing the related skills and capabilities.
The Elephant that too often is not in the room: the Value Creation Structure
But the main issues in existing organizations are often related to neglecting the third structure, the one that enables Value Creation.
It’s exactly in the definition of the Value Creation Structure, we believe, that platform design thinking can help the most: designing strategies that enable individuals and small groups (such as teams, or BUs) to create networks and relate in self-organized transactions inside the organization and beyond.
As we explained recently in our essay about the Elements of the Platform Organization the transaction engine is indeed one of the two essences of platform strategies: one that always needs to be accompanied by the improvement engine in a dual system.
Transactions add up with platform provided components and services in well designed and replicable journeys and workflows. Platform experiences range from solving an innovation challenge, to creating a new application or service, from developing a new capability, to hiring a new employee, from co-creation something with a third party, to investing in a startup: the more these experiences are clear, designed and replicable — as well as adaptable — the more they will likely happen.
As we explained widely in our introduction to Lean Ecosystem Development: platforms grow as a dynamic sum of validated experiences that the platform owners build for participants. The experience is the smaller and most tangible element of the platform strategy: the one that can be effectively designed, and the context where one can validate the business model, the value proposition and the attraction for the ecosystem.
Facing the Organizational Challenge: Opportunity versus Fear
But beyond the growing potential of applying platform thinking to rethink organizations as networks of small units that interact directly, we learnt that, to improve the chance of success and the attraction, you need another essential ingredient: an opportunity based narrative.
In this excellent and short presentation, John Hagel explains this brilliantly: in the connected world value creation happens in small groups based on tight bonds, small units that — if motivated by a message of potential expression and prosperity — can achieve remarkable outcomes. These entities can make “small moves, smartly made” that “can set big things in motion” as Hagel remarks.
Way too often, the narrative of the impact of digital transformation into existing organizations has been instead focused on a messages of fear and disruption — and I think we made this mistake as well, sometimes:
“you will loose your comfortable (bullshit) job!”
“artificial intelligence and machine learning will make us useless!”…
What if instead we realize that the essence of our work — as organizational developers — is to enable the large scale exploitation of the incredible potential that is available in the organization ecosystem? Internal, external and at the edge? This will require competition and cooperation at the same time and I’m afraid that old recipes won’t work.
To start working as a modern, connected, system, organizations need to break strong, century old beliefs. The first thing they need to acknowledge is that top down allocation of objectives, budgets and work is failing. The industrial approach is failing to cope with a post industrial world (of course how can it be different?) that is made of uncertainty and volatility. In current organizations we often over-plan and over-organize to later find out that our plans and expectations are just another source of organizational frustration and anxiety: we fail to accomplish self imposed objectives that, sometimes, don’t make sense anymore after a few days from inception, due to a continuously changing business landscape.
When we work on these organizational challenges with our partners, bringing the fresh perspective of Platform Design, we help them re-envision how the organizations can pursue any given strategic mission in a pull fashion: attracting and facilitating change, instead of pushing it inside the organization and the ecosystem.
These are three “ah moments” we often have, that are worth mentioning:
- REPUTATION SHOULD EMERGE AND CONSOLIDATE : the realization that we need to enable the creation of operational¹ reputation to make the best emerge (among the small entities participating) and link the reputation directly with how we review and appraise employees and, more meaningfully, teams;
- NURTURE SELF DETERMINATION: the realization that we need to enable small entities (individuals & teams) to be independent in searching for missions and the relative (value) budgets to accomplish them, nurturing their internal locus of control;
- PREPARE FOR PERMISSIONLESS-NESS: the realization that, inside the organization, the ability to experiment and learn what works and what doesn’t work — without having to rely on a bottleneck’s approval — is crucial to enable large scale learning and that this mainly relates to creating safe spaces for experimentation and visible paths to it;
In the end of the day — when we platformize organizations — what we want to create is an inner market(place), where dynamic market signals, such as reputation and price formation, help the organization move beyond top down processes of budgets and objectives allocation that are loosing meaning day after day in an unpredictable world.
In such a context, the freedom to evolve will come alongside the responsibility to care about your own long term survival as a team, employee and human — inside a greater system.
Eventually, the more we move into this space the more we realize that organizations are economic spaces, entangled together and in a larger system (the flat world’s economy and society), and that we can design them. The recent explosion of Blockchain enabled economic spaces — based on tokens — is just a signal of how technology is enabling permission-less, inter-operating markets: why should an existing organization be blind to these possibilities in developments?
The Organization as an Open Marketplace
Of course these insights are bringing us to stretch the very concept of the organization we are accustomed to. Once you overcome command and control, you understand that the organization should be designed as a sum of market-networks. These networks are able to self-organize and self regulate, so — instead of regulating them — you’ll want to focus your efforts in relentlessly drive more participants into the system: more participants will mean more relationships, more transactions and this in turn will mean more learning and reputation, eventually sustaining better experiences for all the participants involved, and a better quality of the organizational outcomes.
Put simply, self organizing markets perform better than command and control structures when facing complexity. Seeing the organization as a network is an imperative, the boundaries between inside and outside have fallen.
Naturally, when you embrace this model you stop thinking in terms of designated experts, or reference persons: you want to break the access barrier on the supply side of your economic space; you want practitioners to learn and eventually become experts, you want teams that are more keen to explore and learn to offer their capabilities for cheaper budgets.
On the other side, that of demand, you want to eventually allow more entities to join: maybe those that want to spend less are less risk adverse; all the system can grow and learn by tearing town the barriers to entry.
Betting on the potential of newcomers, opening them to new possibilities: that’s how these platform-systems grow and empower evolution.
Attracted by network effects, you’ll so much want to grow the platform-system that you’ll start thinking about opening it more radically: first to small, independent, third parties that can compete with your internal players (for example freelances and startups competing directly with employees, BUs and competence centers), and later figuring out that other large partner organizations may be willing to create a shared ownership system. In these shared systems a bank can first collaborate with a retailer, a logistics company or a manufacturer and eventually learn how to coopete with other banks as well to create larger markets. If you create a marketplace for digital innovations why shouldn’t be open to your industrial partners? More demand will drive more quality of supply.
In the end you’ll have a context where more errors are made, more learning is unveiled and — in general — where participants can pursue their objectives more widely and where work is more easily flowing where is needed.
This is how the future of your organization looks like: a loosely coupled marketplace with entities that compete and cooperate, where value pulls work and there’s no bottleneck.
In such a system you’ll need to learn what to measure, to be sure that’s not only the organization getting better and producing better outcomes, but also that every participant is achieving more, expressing a wider and wider potential: the number of transactions and the quality of the reputation will provide you some handy places where to focus your organizational intelligence lens.
Takeaways
- Techno-social enablers of the networked economy are at play also inside organizations, therefore we need to redesign them to thrive in this new setting.
- Moving from hierarchies and top down mission and budget assignments to self organization around needs and potentials, will improve the quality of the outcomes and let you learn as an organization.
- You need a positive narrative of opportunity and a marketplace structure, then the rest will happen: reputation will be created, participants will grow, outcomes will improve.
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(1) I need to refer to Stelio Verzera for the idea of “operational” reputation, as reputation that comes from the value you’ve been able to provide to others. At least he’s the one I stole this concept from.
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Cover Photo by Phad Pichetbovornkul on Unsplash
Court Photo by Filip Mroz on Unsplash
