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Mobilizing Minds

Creating Wealth from Talent in the 21st Century

By Lowell Bryan And Claudia Joyce

When organizational innovations are introduced into the business environment, adaptation, adjustment, and implementation of "best practices" take time. A study of the past reveals that organizational change is conducted by trial and error; it takes a while for others around the globe to realize the most successful approaches and apply them to their own organization. For example, in the industrial age, it took six decades for companies to refine the industrial organizational models innovated in the 1920's by GM, Standard Oil, and DuPont. Success in today's digital global economy will require a much faster approach to change, considering the accelerated evolution of economic conditions in the last 15 years. Mobilizing Minds was written to help large companies quickly adopt new organizational models for the digital age, considering the trial-and-error period of the modern economy has already been underway for over ten years.

In today's low-interaction-cost world, the question is not whether an organization should take a centralized approach or decentralized approach, but which company functions should be centralized and which should be decentralized. Questions of hierarchy vs. collaboration are now irrelevant--success in the digital age requires both.

The book is rooted in the unpleasant truth that most jobs at most companies call for workers to use only a fraction of their thinking capacity. Companies must redesign their organizations to tap into existing underutilized talent, knowledge, relationships, and skills. Falling interaction costs have greatly increased the value of such intangible assets.

Examples of intangible assets:

Knowledge Firms can combine private knowledge of multiple individuals to provide value through intellectual property (example Microsoft Windows)

Relationships Firms can create value through building and leveraging proprietary networks (example Google)

Reputation Firms uniquely own reputation through a trademark or brand (example iPod)

People Firms can mobilize individual's talent by organizing work that could not otherwise be self-organized (example Toyota)

These assets are so unique to a company that they can create a natural monopoly that other companies have a hard time competing away. One example is GE, who leverages its distinctive knowledge and capability in the aircraft market by making aircraft engines, financing the sale of aircraft, maintaining engines and planes, and brokering used aircraft and parts. GE is the only company with this particular set of capabilities and is thus a unique provider of comprehensive aircraft service.

In spite of the increasing external complexity (increasing size and diversity of markets) associated with the dawning digital age, from 1994 to 2004 the largest 150 companies grew at an impressive 11% per year, even the midst the bursting dot.com bubble. The lion's share of these increasing returns were realized by 30 of the very largest companies. How did they do it? The companies allowing their thinkers to translate mind work into high-return intangibles earned higher profits per employee (on average increasing profits per employee by 70%). Yet even these top 30 companies have slowed down in the last few years; even the best companies continue to face growth limits resulting from their internal complexity--mostly because organizational models still employed by many companies were adopted for the older industrial era.

A concept introduced is the "complexity frontier," a limit on the profit per employee companies earn as the numbers of employees grow. Most companies still focus on mobilizing their labor and capital assets and have created an unnecessary unproductive complexity that wastes resources. Such companies continue to operate beneath the limits of the complexity frontier and earn low-level 20th century profits. Symptoms include hard-to-manage workforce structures, thick silo walls, delayed decisions due to scheduling conflicts, e-mail overload, and task forces that go nowhere. Time spent navigating corporate complexity is time spent not thinking. Surveys show that a majority of workers in thinking-intensive jobs believe they waste up to two days out of the workweek on unproductive meetings, voice mails, and e-mails. As interaction costs (the costs of parties with dependent economic interests working together within the same economic entity) head toward zero, the volume of interactions heads toward infinity. Much of the communication is worthless noise; the thinking machine isn't working nearly as well as it should be.

The good news is that the complexity frontier can be pushed back by reducing internal complexity and helping workers leverage the knowledge of the best workers. For a large company, a better organizational design would mean tens of billions of dollars in increased market value. The book is written from the perspective that the anchor of corporate strategy is organizational design. The authors believe it is possible to deliberately design an organization (internally) to fit the conditions of the 21st Century. In the digital age, organizational design is where the money is. Help is needed to convert thinking to money-making activity.

Removing complexity by improving use of hierarchical authority

Organizational models designed for the 20th century depend on a vertical (top-down) hierarchical authority. This model was adequate for the industrial age. In the 21st century, however, value is created by horizontal collaboration across the entire company. The problem: collaboration requires a greater volume of transactions, and the silo effect of hierarchy blocks high-traffic horizontal collaboration across the boundaries of authority.

One approach, which attempted to infuse horizontal communication into a silo environment, was the introduction of matrix structures. This model was created in the 1960s and forced managers to collaborate. The authors argue that a matrix was never intended to be a long-term solution. Matrix structures, which remain common at the intermediate levels of organizations, have convoluted reporting relationships, actually leading to communication gridlock. The authors remind us that true collaboration is based on mutual self-interest, not forced interaction.

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