Future Organizational Structures

For many years, we all heard predictions of intellectual assets becoming more important to organizations than tangible assets. We are now in the era of intellectual assets. In 1997, Stewart’s research found, "Capital spending on information technology, which in 1965 was only one-third of that of production technology, now exceeds it."

Information technology will allow organizations to maintain large databases of customer needs and preferences. The new customer-based operations will cause organizations to move away from traditional hierarchies toward inter-company collaborative ventures. These new structures will include suppliers, customers, and even old competitors.

In 1999, Dunning described three stages of market-based capitalism based on three key characteristics:

1) 17th and 18th Centuries:
primary source of wealth - land
spatial dimension - local
organizational form - feudal or entrepreneurial

2) 19th and 20th Centuries:
primary source of wealth - machines
spatial dimension - regional/national
organizational form - corporate hierarchy

3) 21st Century:
primary source of wealth - knowledge
spatial dimension - global
organizational form - alliances

These changes are the causes for the reconfiguration of value-added activities, the expansion of spatial dimensions, and the restructuring of organizational forms. These changes will result in "soft boundaries" for organizations.

While large corporations are downsizing the value-added activities they do in-house, "they are not replacing these with arm's length transactions, but rather with a series of on-going and hands-on technological and marketing relationships with their new suppliers, customers, and competitors" (Dunning, 1999, p.6).

Dunning offers the following comparisons of the old and new paradigms:

Old - an organizer of human and physical resources
New - an innovator and product improver
Old - gain competitive advantage with tangible assets
New - gain competitive advantage with core competencies
Old - "an island of conscious power"
New - a member of an alliance or network
Old - arm's length relationships with suppliers & customers
New - partnerships with suppliers and customers

The network structures of the 21st century will afford distinct advantages. Network structures will enable organizations "to gain many of the efficiencies traditionally reserved for large firms while remaining small and nimble" (Cummings & Worley, 2001, p.617). Network structures can quickly adapt to changing customer needs.

Is your organization, or your client’s organization, structured to compete successfully in the 21st century?

For more discussion about organizational structure, see chapter 8 of my book, “Strategic Organizational Change.”

For free articles and resources on leadership and organizational effectiveness visit my website www.mikebeitler.com.