The aim of the course is to provide you with a comprehensive framework for understanding both the traditional principles of management inside companies today as well as the alternative principles that are becoming increasingly important. It provides both theoretical and practical perspectives on the nature of management in today’s organisations.
2.5 Moving from hierarchy to collective wisdom
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From the course by University of London
Managing the Company of the Future
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From the lesson
Week 2
Welcome to Week 2 of 'Managing the Company of the Future'. This week, we'll be learning about traditional and alternative approaches to coordination and decision making, and how you can experiment with some of the new alternative ideas in your own company.
Meet the Instructors
Julian BirkinshawProfessor of Strategy & Entrepreneurship
London Business School
[MUSIC]
In this segment,
we're going to talk about moving from hierarchy to collective wisdom.
In other words, we're going to talk about examples of companies that have so,
of sorts to move from a more traditional top down approach to making decisions,
to one that gets greater input from the masses.
And just as with the previous dimension around coordination,
we've got a similar sort of schemer going on here, which is to say,
on the one hand, hierarchy and collective wisdom can be seen as opposing principles.
But on the other hand, it is actually the case that many organizations get
a reasonable balance between them whereby they actually get
the benefits from hierarchy, and also the benefits of collective wisdom.
So they're kind of a hybrid models, that you see on the chart here,
are about essentially trying to get that best of both worlds.
I'm going to give you a couple of examples of organizations which have done this and
we're going to have some links to some of the materials in the course room,
to provide a great, a greater detail on these.
So let's take IBM.
IBM is a big company, one of the biggest companies in the world.
And we're going to look at particular example from a decade or so ago.
Whereby they used their intranet, their corporate intranet as a,
as a vehicle essentially for mobilizing tens of thousands of
people across the company to offer their views, their inputs.
And we've got two parts to this story.
The first was in 2003.
When Sam Palmisano, the chief executive at the time,
decide that they needed to kind of reinvigorate and rethink their values.
The corporate values of IBM, the things that they all hold dear.
And so using the corporate internet they created a, a mechanism.
They called it a jam.
Which was a 72 hour online forum where literally
tens of thousands of people around the company would collaborate and
share ideas about the, the old IBM values, the emerging values,
what people thought about each other's ideas.
And over the course of that 72 hours they had a, a massive conversation.
There’s no other word for it,
a conversation between people in different parts of the IBM world across the world,
about what the values are, what they should be.
And coming out of that, there was an agreement on a new set of values.
And the case study I provide will give you details of exactly what those were.
And because 10,000 people had become involved,
it was much easier of course subsequently to endorse and believe those values.
So that was 2003.
In 2006, they tried the same sort of technology, but
with a different idea, and they called it an innovation jam.
And here they said we're going to do something even more adventurous,
which is to say, can we get a bunch of IBM technologies,
a bunch of stuff that we're working on in our labs, put it online.
And then get people to use those technologies and
use those ideas to build their own ideas on top of that.
That's a very ambitious undertaking.
They used the technology.
It, it works, meaning they got lots and
lots of people involved in sharing their views.
They got up to 150,000 participants in total.
To at least look at the conversation that was going on there.
I think fewer actually posted,
I think 46,000 people actually posted comments through this 72 hour jam.
And they went through a two phase model, phase, phase one was basically throwing
lots of ideas out there around the technologies which were put online.
And then they went through a sorting process.
And then they went through a phase of trying to kind of whittle it down to some
focus areas.
And then subsequently six months later, Sam Palmisano actually,
I think in China somewhere, announced the winners of this competition,
they actually put some funding behind the ideas that had come out of it.
Now, having spoken to people involved in this, it was only a partial success.
It was a success to the extent that getting lots of people involved
in the innovation process.
But it was not as successful as they hoped it would be in terms of coming up
with genuinely new ideas.
I guess some people were being a bit cautious about sharing their ideas.
And it also turns out that actually aggregating and
compounding and creating new stuff online is very, very difficult.
So I give you this an example of a deliberately, a kind of a hybrid between
top down and bottom up decision making, it was basically a success.
And IBM continues to use this jamming technology.
But it perhaps wasn't the ultimate success they were looking for.
And particularly the more creative part of the process did not
yield the results they would, they would've liked.
So that's the IBM story.
The second story I want to briefly talk about here, in terms of
moving more towards collective wisdom, is a software company called Red Hat.
Now Red Hat, some of you know some of you don't know it, it is a,
it's company that sells essentially services, warranty services,
licensing services, you know, helping to provide support on top of the,
the Linux platform, Linux is free software.
But if a company wants to use the Linux software,
they will often turn to Red Hat to make sure that they've got
the necessary servicing abilities on top of it.
So that's what they do for a living.
The chief executive who joined the company some four years ago,
Jim Whitehurst was his name.
He said to himself, look, I need to kind of practice what I preach if I'm going to
be the chief executive of a, an open source software company.
So, and he came from the airline industry.
Which, of course, is a much more traditionally managed industry.
And so he said, I'm going to kind of syndicate the strategy process to my team.
And so he went through a process, you'll see it on the slide here,
he created eight priority areas.
He had a five month idea generation phase, online chats between the people in
the teams who were working on the various differences and
the parts of the, of the, of the strategy.
And then they went through a phase of consolidating the ideas, created nine
strategic priorities out of which he ultimately ended up making the choices on.
But these were choices which were built around the,
the involvement of more than 100 people.
So his view was that, essentially, this was a better way of doing things.
As it says on this slide, it takes us much longer to make decisions this way,
because so many people are involved.
But once we've made that decision, there's no problems with execution,
because we've got a hundred plus people already bought into what we've done.
And as he also says it took me about a year to really understand the open
source sort of way of working.
And another year to realize that as a leader, my job is to be a catalyst rather
than to be an authoritarian kind of top down decision maker.
As he says, this doesn't make us a democracy.
It makes us a meritocracy, the people with the best ideas are the one's whose
ideas actually get taken seriously.
So to summarize, what are the things you have to bear in mind if you
want to move from hierarchy to collective wisdom?
What you see in this slide, is just a kind of a,
a classic way of mapping the journey, a sort of an eight point guide
written by somebody else around how do we make a crowdsourcing process work.
And I’m not going to read the details of that, you can read if for yourself.
What I would point out here is the, the risks involved with such a process.
I think it's a giant process, don't get me wrong.
But if you're thinking of putting something like this in
place inside a company, you have to also be aware of the limits or the risks of it.
And one of the risks is that, that you define the process poorly,
you don't actually think through in advance, whose views you want.
Most companies define that people who are being invited to
take part in these processes is much too broadly.
You also have to accept that there is a loss of control for
you towards the top of an organization.
If you create a, a crowdsourcing process almost by definition, you
are saying that you are allowing people below you to not just have an input, but
ultimately to have a stake.
And that means you've gotta change your view in
terms of exactly what role you play.
You can't just overrule them.
You've gotta have a, a logic for
the process you will follow that allows you to go from point a to point b.
And then finally, you've gotta keep in mind this risk of
what we've called the disenchantment of the crowd.
There's risk that unless you actually provide people feedback,
you actually give them a motivation to be involved.
Then they're going to quite quickly lose interest in the whole project.
So, those if you like are the, the pros and the cons of moving from
a principle based around hierarchy, to a principle based around collective wisdom.
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