How should large organizations adapt to a changing world?
We are on the verge of one of the most exciting decades in economic history. The Internet of Things (IoT) will change industries, business models, and value chains. It will usher in new winners and cast old heroes down. Speed will be important, but will size matter? And it’s not only the IoT that is changing the world. Demography is changing the balance of power internationally and the structure of consumer demand nationally. Our consumers in the advanced countries are getting older. Do we still have the right products for them? Values are also shifting, and present another challenge. Today’s large companies are often managed by baby boomers. Do they understand the expectations of Generation Y, and what they will mean for organization and collaboration?
Especially for large companies, these are exciting questions. Clearly, transformation is needed. But unfortunately, there are no blueprints for us to follow. We will have to find our own way, sometimes by trial and error.
How can we become agile? What does becoming agile involve? If we look at successful companies, especially those in the digital world, and if we understand how the start-ups that attract masses of talented young people work, we can get an idea of the direction our future organization must take. In particular, I can see five principles we need to follow when reorganizing large companies to make them fit for this new environment.
First, our businesses have to be based on a strong purpose. What really motivates people are solutions which have a concrete, positive impact on their lives. Bosch’s slogan ‘Invented for life’ can be translated into a substantial number of very concrete purposes, each of which give our daily work a lot of sense. It is especially important for the younger generation to understand the true sense of what they do. By this, they don’t mean increasing profit and market share − though this can by all means result from excellent solutions – but meaningfulness and improving people’s lives worldwide.
Second, design thinking teaches us that the best solutions are generated by diverse teams. Diverse not only in terms of gender, nationality, and age, but in particular also in terms of functional background and education. So creating permanent cross-functional teams could well be an important way of creating a continuous flow of innovative solutions, with the user as the constant ‘center of gravity.’ We are still very often organized in functional silos, where engineers sit together with engineers, marketeers with marketeers, controllers with controllers, and so on. The result can be that beautiful marketing ideas are impractical, sophisticated technology solutions are unwanted, or excellent ideas are far too expensive. Sometimes, we notice this too late. Why? Because we don’t focus our activities on the potential users of our solutions right from the start. Cross-functional organizational set-ups change this. In such a set-up, functional excellence is not the most important issue. All that matters is solutions.
That’s not to say we don’t need functional excellence. Of course we do. But this needs to be organized in such a way that dedicated people are constantly on the lookout for state-of-the-art knowledge – both within the company and in the outside world − and transfer this continuously to the operating units.
Especially in a cross-functional organization, team-building is a very critical process. The individual members’ professional DNA – background and education – sometimes means that their characters are very different. Interdisciplinary teams with different languages, expertise, goals, viewpoints, and mindsets, are also the source of potential culture clashes. Diversity leads to better solutions, but forming effective, long-term teams is a challenging task.
Third, we have to think about hierarchy. Large companies sometimes have six or more hierarchical levels. But what is their task in future? How much hierarchy do we really need? I strongly believe less could be more. But this also requires a new understanding of leadership.
This brings me to my fourth point. The leaders of tomorrow have to put things in context, be good strategists, enjoy coaching and communicating, and know exactly how they can use their own specific expertise to help their teams fulfill their tasks. They have to give their people leeway and empower them. Control has to be minimized, and reserved for emergencies, non-performing staff, or new associates. If we understand leadership like this, we will need fewer leaders, though possibly also better ones as well.
Finally, and this brings me to my fifth principle, it is important to change the way we communicate. Most of the things top executives talk about today are not confidential. We should openly inform our associates in real time about the things that are important to us. We should share both success stories and failures, be honest when we don’t have a solution, and make it clear to everybody what they can contribute. Communication like this is no longer something to be cascaded, but has to be fast and authentic, and to flow directly to everybody. Communication is one of the big motivators. It can give associates the good feeling that they are acting as entrepreneurs, with a proper understanding of strategies, pain points, open questions, and what they can contribute.