BY LIISA VALIKANGAS AND GARY HAMEL

Toward a Post-Industrial Organization: Implications for Organizational Design and Management

n this paper, we have begun to explore how markets might remedy some of the hierarchical failures in innovation.

Our conclusion, overall, is that hierarchies alone are inappropriate governance structures for innovation because they exhibit a systemic bias against the exploration of the new. Failure of a hierarchy is one reason to consider hybrid organizational forms.

Another reason is to understand what logics of organizing are best suited to value creation conditional not just on knowledge but on passion. Such passionate organizations can categorically be called "post-industrial". Hierarchical instincts will inform their design in creating routines that exploit incumbency. Markets need to inform the organizational design so that such incumbency becomes continuously challenged — not just in the external market place but inside the organization itself. This dialogue about the use of corporate resources needs rebalancing through mechanisms that raise the creative energy of an enterprise to much higher levels than is possible in a command-and-control organization. Only then can emerging opportunities be explored for their true worth. And, as part of the market-driven exploration, people will learn entrepreneurship — a skill that most large organizations lack today.

Testing one's ideas on the corporate marketplace, learning one's strengths and weaknesses through one's ability to attract peers and colleagues and have them follow on an innovation journey, is likely to be more effective and more immediate than any feedback from an annual performance review.

Such entrepreneurship solves one of the managerial headaches: shifting through ideas and deciding which to invest in. It is likely that 100 people collectively will know more than one manager, and make a more informed decision. Faced with this possibility, managers, now fearing they are out of a job, typically protest that such a revolution might result into a chaos. But honestly, do you believe that 100 people with $1000 to invest independently would go more astray than a manager with a million dollar budget and an onetime decision to make?

The further objection that corporate strategy does not become executed is a red herring. Many corporate strategies are empty visions with not much to show for in terms of future growth opportunities. A much more interesting question is: where are the opportunities the employees are already exploring? What kind of business plans are they writing in their spare time? Where would they invest their time, enthusiasm, and attention should they have a chance?

Markets — whether they result in a corporate democracy or not — offer a chance to create another information system to complement the hierarchical opinioning: hierarchies, simply, give an arbitrary and presumptive overweighting on the hurried statements of senior management. Such statements gain their credibility from past success. But the same people are unlikely to have it right the second time in a row. Particularly as far as the future is concerned.

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