Historically, we have designed companies like we design machines. We need the company to perform a certain function, so we design and build it to perform that function. But once a machine’s purpose has been set, it has no way to adjust to new situations; it just becomes obsolete.
Given the rapid changes buffeting businesses today, it’s no wonder companies that thrived for decades with a machine approach are rapidly dropping out of the world’s top stock market indexes. To survive and thrive in periods of rapid change we need companies that can adapt, as organisms do.
Organisms are different than machines in one key way: They learn. Learning is a creative process, not a mechanical one. So what happens if we stop thinking of the modern company as a machine and start thinking of it as a complex adaptive system that learns and grows like a living thing? Like a city, for example.
Cities are not organic, but they act more like living organisms than machines. Yes, cities have planners and managers, but unlike companies, they don’t try to direct the activity of every citizen. Instead, a well-managed city provides infrastructure for a wide variety of activities. As a result, cities are more productive than their corporate counterparts. As companies add people, productivity shrinks. But as cities add people, productivity grows. A 2006 paper by the Federal Reserve Bank of Philadelphia, “Urban Density and the Rate of Invention,” found that as the working population in a given area doubles, the rate of invention climbs 20%.
THE LONG-LIVED COMPANY
Can companies thrive like cities? In the early 1980s, Shell Oil commissioned a study of companies that survived more than 100 years. These companies had a lot in common with large cities: decentralized decision-making, strong shared values and a relentless focus on the outside world, which made it easier to spot and rapidly capitalize on opportunities. In short, these companies were deeply connected to their purpose and their customers, and they gave employees wide latitude to learn, adapt and act as circumstances changed.
IT'S TIME TO CONNECT
You can’t adapt if you can’t learn, and you can’t learn unless you have the freedom to experiment. Too many companies still constrain their employees with rigid policies and procedures that make experimentation and learning impossible. Today’s business environment is uncertain and variable. It’s impossible to know in advance what kinds of actions will constitute good performance. By giving their employees the freedom to make decisions, connected companies learn and move faster. While others analyze risk, connected companies seize opportunities. While others work in isolation, they link into rich networks of possibility and expand their influence. While others plan, they act. Connected customers are already demanding more than divided, industrial-age companies can deliver. In the future, every company will be a connected company – or they will be extinct.