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What are companies for? (from the group to self-organization through social media) | Anozomart


They serve_company Final Thursday I used to be invited to provide a small speak on the Mashable Social Media Day From Valencia along with a number of good buddies, and for a change I made a decision to start out the dialog with the next guess:
“I guess € 10 with any of you (Sure, it’s little, however the disaster is the disaster) to that in that group (of about 36 individuals) there are not any two individuals whose birthdays coincide “

As all the time occurs once I suggest this guess, virtually no person determined to guess towards me … I believe that this resistance arises as a result of the overwhelming majority of individuals strategy the issue via the next thought course of: “With 365 days a yr, a bunch of 36 individuals has roughly a barely lower than 10% likelihood of agreeing … it does not matter!”

Nevertheless, my query was not if a sure particular person had their birthday coinciding with any of their friends within the group, but when two individuals had their birthdays throughout the group…. with this situation, the strategy adjustments to be “many doable pairs of relationships there are in a set of 36 individuals“.. and the reply, stunning, …
is that greater than 600 !. This assumes that anybody who had guess with me would have about 80% likelihood of successful.

This guess is named the “birthday paradox”(Actually the one paradoxical factor about it’s the identify, since it’s not a paradox), and it helps us to grasp why social media works effectively for one sort of group and others not, and I’ll attempt to use it as a foundation to lift how you bought to your present position. For them, nothing higher than profiting from the guess to grasp the three primary ideas related to group dynamics and their administration wants:

  1. Teams are advanced, and their complexity grows exponentially with measurement: In a bunch of 10 individuals there are 45 connections, however in a bunch of 36 there are greater than 600… they can’t be handled the identical.
  2. The essential factor is just not the individuals, however the relations which are established between them: The measure we actually want to concentrate to is the quantity and sort of connections, not simply the variety of people that make up a bunch
  3. We are likely to suppose individually fairly than as a bunch: We normally strategy issues as a person, with out relying on the group (neither what it represents nor its particularities)

This anecdote helps me to start out speaking concerning the teams (be they staff, social golf equipment or soccer groups), that they’re organized in another way in accordance with their measurement, and the way social media and the Web have revolutionized its administration. One of many fundamental concepts that I need to convey is that, at a degree the place complexity forces you to take a leap, what works for one group measurement is not legitimate for the following, or put one other method:



Earlier than speaking about advanced teams, firms or social platforms, we should begin at first: the situation of organizing a small group, which remains to be able to taking a choice with common settlement, that’s, wherein all members of a bunch agree. For small teams (normally as much as about 10 individuals) this strategy is possible, since regardless of being advanced, it’s doable to achieve agreements between all.

From this attitude, for the primary time, we start to grasp why the texts of administration classics say that the optimum measurement to handle a bunch is 10 individuals… From this level on, the intrinsic administration complexity derived from placing so many individuals in settlement will increase an excessive amount of


Ronal Coase in 1937 this question, since in precept the markets ought to be a enough surroundings in order that those that must contract a activity discover sufficient individuals to hold it out in alternate for a consideration (the basic imaginative and prescient Keynesiana of provide and demand)…

Coase understood that, to do easy duties or duties involving few individuals, that is the proper strategy (the truth is, the work base of freelancers / freelancers) … however think about for a second that the federal government decides to subcontract the development of an AVE prepare line to hundreds of freelancers, and that to make choices, the hundreds of freelancers ought to agree (chilly sweat runs down my again)

With this situation, Coase got here to the conclusion that how a lot the extra advanced a activity, the better the variety of “potential offers»That have to be negotiated. The transaction prices, as he known as them, embody from the conferences, choice making till the bureaucratic features of labor (every part that’s not pure execution)dilbert-1x07-tower-of-babel.

From this attitude, firms emerge as a way to simplify communication between individuals who should carry out a activity and scale back transaction prices (Subsequently, your staff can dedicate extra time to the execution)

In its early days, firms adopted the group format, wherein a bunch of individuals was made depending on a number of supervisors …


However what to do when an organization should face extremely advanced duties? In the midst of the 18th century, the big firms that operated the railroads in the USA, akin to Western Railroad, they started to face a extremely advanced activity: managing roughly 12 day by day trains that crossed at totally different occasions on a single monitor, crossing the nation from east to west (it was too costly to have two then). The totally different areas of the highway have been run by totally different teams, struggling to agree, which was inflicting the profitability of the enterprise to plummet (not like what occurred with the competitors fashioned by small, extra agile and worthwhile firms – one thing that has not modified …). After a fairly infamous railroad crash it was decided to implement a hierarchical structure (it was not the primary time, the East India Company I already used them) and set up what we now know as a «conventional» Firm (separation of communication between ranges, reporting… and so on.)…. And mainly nothing has modified the administration constructions since then!

Corporations, because of this philosophy, started to flip self-preservation and survival of hierarchical constructions into precept number one, relegating the unique activity to second (and even third) place, and forgetting the organizational work for which they’d been created … Which has quite a bit to do with the mistaken imaginative and prescient (in my view, after all) that you’ve when main, as we talked about a while in the past.



Coase found that, from a sure firm measurement, administration prices grew exponentially (A consequence of what was seen above), and a degree was reached from which the stated administration prices shortly ate up the advantages, making it not possible in apply to develop extra.

This restrict is known as higher restrict of Coase, and the same old responses to keep away from it undergo flatten the group (which reduces the reporting ranges however introduces extra transaction prices inside every stage, by having extra individuals) or in introduce better autonomy and even separation between the areas (even with a small level of chaos, a tactic that General Electric dominates completely and partly inflicting it to be one of many few firms that linger on the Forbes 100). The opposite various, nonetheless in drive, goes via scale back transaction prices (enhancements in high quality, effectivity, lean administration, course of administration, ERP … virtually all of the initiatives lately are geared toward this level!)

One other of the reflections of R.Sew, what occurred to be known as decrease restrict of Coase, was that:

Actions whose transaction price is increased than the potential incentives merely don’t occur

This contains actions whose separate profit was small, however which wanted to ascertain a “classical administration” construction, that’s, it was “Costlier the collar than the canine”. On this idea we are able to embody the overwhelming majority of at present’s companies that function “The long tail”.

With these two limits, the immovable house wherein a enterprise can function effectively and profitably was established, and that has not modified for greater than 100 years….


… till at present! The query that arises within the new situation is: «What if transaction prices weren’t diminished … however fairly will collapse«?


Because of the arrival of the Web and social platforms, tons of of actions have arisen that have been beforehand not possible to sort out and that we are able to now because of a social expertise that democratizes communication (a component, as we now have seen key in teams) and that enables a brand new world of utterly totally different administration approaches, permitting you to function each under decrease Coase limits in addition to above higher limits:

  • LOWER LIMIT of Coase: The Web makes it doable to largely get rid of “conventional” administration prices, since these are managed by on-line platforms, and to cope with companies that will be not possible to pose in any other case. For instance, novice journalism was a restricted exercise and not possible to handle … and but in latest occasions probably the most detailed, up-to-date and up-to-date data not comes from conventional media, however via social media managed and self-organized via platforms.
  • UPPER Stitching Limits: There are already many “digital” firms that use the Web as a way of organizing themselves, the cloud as a useful resource middle and platforms and insurance policies of self-organization as creed (we’ll discuss them later ..), or crowdsourcing initiatives.

NOTE: If you happen to discovered the subject attention-grabbing, I like to recommend you learn the magnificent “”Here Comes Everybody: The power of organizing without organizations” of Clay Shirky.

UPDATE (14/07/2010): Amalio Rey just a few months in the past a great analysis of those transactional prices, and of how networks, though in addition they endure from them, can probably function above the higher restrict … and I like to recommend their weblog, of which I’ve been a trustworthy follower for a very long time.

UPDATE (16/09/2010): Within the Wallstreet Journal (WSJ) have revealed a fully fantastic article that aligns quite a bit with what’s uncovered right here: “The top of enterprise administration as we all know it” I hope you prefer it.




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