Competing in the New Economy
the realm of the unknown.
Today’s economy thrives by leveraging uncertainty. Successful organisations do not choose environments that limit uncertainty but strive for increased uncertainty. Competitive advantage may no longer be a function of a ‘fit’ between uncertainty and information processing capacity as we have traditionally understood – but a function of an organsiation’s ability to continually navigate its way into realms of the unknown and concurrently develop requisite new expertise. Newer organising principles like self-organising teams, with dynamic capabilities based on increasing absorptive capabilities, may replace the more conventional structures designed to process information efficiently.
Two key strands of ideas are worthy of exploration in terms of conceptualising organisation governance in this era. One is a view that an organisation is not merely a nexus of contracts but is a generator of future options. A firm exits to create future options and this potential drives its value. Executing current strategies consequently becomes a necessary but not sufficient condition for success. Accordingly, one has to understand not just what a company does in the short term but what it does to generate options so that it is best positioned for the uncertain and fast-changing future through its investments in relationships.
The second strand is about employment contracts for expertise. HR resources have become central to organisational design and governance issues. The next evolution of strategic human resource management may prove to offer useful insights. This calls for understanding who takes the risks and who gets the rewards in the knowledge economy. Microsoft went public not to raise financial capital for its operating cash flow but to monetize the value of knowledge and expertise of its workers and to provide an external perspective on how their expertise creates value (Stewart, 1997). In the knowledge economy, the organisation is a network of expertise with positively reinforcing and escalating network effects (feeding off each other).
Companies are in the midst of trying out many other forms. Organisational design then is one of facilitating the acquisition and use of expertise across boundaries including the portfolio of relationships. What we need is a typology of organisational governance that is suited to the idea of generating future options through expertise and recognising closer alignment between expertise and employment contracts. Then, we can access how the specific organisational design type supports and shapes the strategic requirements in the expertise era. The evolution can be seen as shifting from knowledge sharing across functions (era 1) to across businesses (era2) to across companies (era 3). Hence we still need to think through a network centric view of organisational design.