New Paradigms : Innovative Forms of Organization

Number 25
Summer 2002
New Paradigms:
Innovative Forms of Organization
Interview with Liisa Valikangas
Forms of Organization
Mention innovation today, Välikangas has explored a wide range training sessions do more than offer
and most people think of the hot
of emerging organizational forms, and
inexpensive training. Välikangas re-
new products that come out of an
identifies three in particular that have
ports, “Companies using these peer-
organization’s R&D labs: new tech-
the potential to alter the competitive
to peer approaches to training find
nology, new software, new manufac-
landscape in significant ways.
that they lead to more open com-
turing methods. Things that are
munication among employees and
faster, better, cheaper. But the focus
across different departments.”
on products, services, and methods
Peer-to-Peer Organization
that R&D labs turn out can be short
In telecommunications an increasing
sighted, according to Liisa
Peer to peer (P2P) is much more
number of P2P-based community
Välikangas, Director of Research at
than architecture for downloading
the Strategos Institute, a Menlo Park,
free music from the Internet. “It’s
v
California firm specializing in inno-
also a socioeconomic philosophy
vation. “Companies that seek to lead
that says, ‘what’s yours is mine,’”
Organizational forms can alter
in innovation need to look beyond
Välikangas says. “The P2P form of
the competitive landscape.
the R&D lab to identify innovative
organization is quickly spreading
organizational structures and forms
from applications such as distributed
v
that can help them identify and ex-
computing and MP3 file sharing to
ploit opportunities ahead of their
corporate training and telecommu-
wireless networks are starting to ap-
competitors.”
nications.”
pear. Guerrilla.net, for example, is a
network in the Boston area that al-
Novel organizational forms can shape
Välikangas points to companies that
lows enthusiasts to talk to each other
how knowledge is controlled—or re-
have started holding peer-to-peer
and share computer files via a wire-
leased, how ideas are shared and de-
brown-bag internal training sessions
less Internet. “These pioneers would
veloped, how people are motivated,
as a way of reducing costs during a
rather build their own network than
how resources are allocated, and more.
weak economy. The peer-to peer
continue to use traditional modes of

---

communication,” Välikangas says. “They
ity by using existing social networks in
cording to Champy, the future belongs
are advancing wireless networking in the
a new way. Churches and other religious
to the company that “can tap the full sum
way that mavericks in the 1980s
organizations also make use of existing
of the intelligence and experience of all
smuggled PCs into businesses behind the
social networks to acquire new members.
the people in its network of customers,
backs of the people running the main-
And some companies have long used
suppliers, and partners.”
frames.”
social networks as a powerful sales tool,
as exemplified by, the Tupperware Cor-
Välikangas believes that the success of
Välikangas argues that the P2P model may
poration, the $1.1 billion company that
open-source organization may lie in its
present opportunities and threats across
uses it’s famous Tupperware Parties as a
adaptive nature. Adaptive systems are
several industries, as its use in corporate
major marketing device.
characterized by components with the ca-
training indicates. She predicts those who
pacity for autonomous action. The strat-
figure out how to capitalize on P2P or-
egies of these components change over
ganization will find new opportunities
Open Source
time as they search for improved perfor-
and new markets.
mance of the system.
Välikangas’ third example of a new orga-
nizational form is the open-source orga-
These are just three of the novel ap-
Social Network–Supported Or-
nization. Open-source organization ex-
proaches to organizing work that
ganization
ploits an open development process to
Välikangas has identified. She says, “We
harness the distributed resources of a
would do well as a society and as manag-
Organizations are also finding ways to
community. The Linux operating sys-
ers to learn from these emerging organi-
incorporate separate social networks in
tem is the prime example of the power
zational forms that exploit the dynam-
new ways, Välikangas says, citing the well-
of an open source organization. “Linux,
ics of self-governance, adaptive network
known Grameen Bank. Founded in
a highly complicated piece of code, is
interaction, and openness to anyone with
Bangladesh, The Grameen banking sys-
more reliable and faster than rival oper-
something to contribute.”
tem helps poor people obtain small
ating systems from hierarchically orga-
loans, and now boasts two million bor-
nized corporations such as Microsoft,
# # # #
rowers. Everyone who takes a loan must
Apple, and IBM,” she says. “Evidently,
become a member of a five-person bor-
the thousands of scattered volunteers
rowers’ group. Members of the group
who collaborated to create the Linux
share responsibility for loan repayments.
code are able to organize very effec-
Only if a loan is repaid can another mem-
tively.”
ber of the group obtain a loan.
Open-source initiatives are now emerg-
The system was hugely successful in de-
ing in a number of other areas, accord-
veloping nations worldwide as well as in
ing to Välikangas. For instance, the
under-developed regions of the United
Openlaw project of Harvard University
States. Indeed, just 3% of borrowers de-
is an experiment in crafting legal argu-
faulted on their loans — a rate that com-
ments in an open forum. And
pares with Chase Manhattan’s. (How-
Innocentive, an Eli Lilly company, is try-
ever, Grameen Bank has recently encoun-
ing to change the process of scientific re-
tered difficulties: it may have overex-
search by using open-source principles
tended its activities, making the crucial
to break barriers to intellect.
social controls on which it relies on less
effective.) The Bank nevertheless remains
v
an example of complex adaptive systems
Innovators need to look beyond
in action. When five potential borrow-
ers get together, they engage in a new
the R&D lab.
kind of interaction that involves obtain-
ing and repaying loans. These interac-
v
tions are far more intense than any
banker could possibly have with a tradi-
tional small borrower. They also provide
The principles of the open source orga-
better monitoring and support among
nization, specifically transparency and
the borrowers.
openness, are also key to many new ap-
proaches to supply chain management,
Social network–supported organizations
according to James Champy, author of
like the Grameen Bank harness complex-
X-Engineering the Corporation. Ac-

---