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	March 7, 2006

Natural Vs. Monolithic Organizations My book The Natural Enterprise uses the word 'natural' in all its senses: Like nature, unaltered, intuitively suited. Its thesis is that most of the world's current organizations are structured and operate in unnatural ways, and that makes them inherently fragile, unsustainable, and unable to adapt, but that there are models out there, in nature and in more intelligently conceived and operated enterprises, of a better way to make a living and to be of service to others. Since people keep asking, here are twelve ways natural organizations differ from artificial, monolithic ones.  1. Worldview: Natural Organizations: Most systems are complex, most resources are abundant Monolithic Organizations: Most systems are merely complicated, most resources are scarce In today's monolithic companies, there is a belief that if it has enough power and expends enough energy, it can understand its industry, the economy and its customers well enough to weather any storm. Such companies are also preoccupied with cornering sources of scarce supply, limited markets, and intellectual capital. By contrast, natural organizations appreciate that most systems are too vast and complex to fully know or control, and that resources of value, unless they are needlessly squandered, are infinite, as vast as our imaginations. 2. Organization & Structure: Natural Organizations: Networked & egalitarian Monolithic Organizations: Hierarchical Most traditional organizations have employees vying against each other for scarce management positions, and while calling the boss by his/her first name may be encouraged, the reality is that challenging the boss is a career-limiting move, that information flows up and instructions flow down, and that neither good ideas nor bad news permeate the rigid hierarchy. Natural organizations appreciate that networked, egalitarian organizations are more agile, more creative, and more enjoyable places to work -- but that this structure has a size limit that requires such organizations to succeed by being better instead of bigger, and spinning off autonomous organizations when their own gets too big for its own good. 3. Approach to Problem-Solving: Natural Organizations: Enable understanding to emerge, identify adaptive approaches Monolithic Organizations: Analyze, prescribe reality-changing solutions Monolithic organizations are always looking to change reality: the market, customer attitudes, employee motivation. They believe that through analysis you can obtain a complete understanding of the dynamics of a system, enough to be able to prescribe solutions that will change behaviour. Anyone who has worked in any organization for a long period comes to learn that it is people who make the organization and its culture, not policies, systems, practices and 'leaders'. Natural organizations allow an (always incomplete and ever-changing) understanding of the dynamics of the system to emerge over time. They know things are the way they are for a reason, and they pay attention to it and then mutually agree to change themselves to adapt to the system. 4. Relationship with Communities: Natural Organizations: Collaborative Monolithic Organizations: Competitive The relationships of most traditional organizations, both internally and externally, are primarily adversarial. They believe competitiveness brings out the best in people, and that all organizational activities are essentially win-lose propositions -- and they want to win. By contrast, natural organizations appreciate that when people in the organization work together as peers to address problems, identify needs and share information, and take a similar collaborative approach in their activities with customers, suppliers, allies, and the communities in which they operate, everyone wins. Collaborative relationships are deeper, more trusting, and more enduring than adversarial ones. 5. Means of Obtaining Resources: Natural Organizations: Organically Monolithic Organizations: Purchase at lowest possible price An outgrowth of the worldview of scarcity is that monolithic organizations are always looking to buy the best of everything (materials, physical and intellectual property, employees, customers, market share etc.) at the lowest possible price. That means amassing power and wealth, and buying out, bribing or bullying those that stand in the way of monopoly or at least ologopoly over 'critical' resources. Natural organizations have neither the means nor the desire to do this. They appreciate that in nature, when you steward resources sensibly and responsibly, they are self-sustaining, and never run out. They apply the same reasoning to the way they nurture customers, co-workers, supplies and business allies -- and that builds enormous loyalty and encourages great innovation. And when they have to put up with material scarcities created by rapacious monolothic organizations, their answer is to find ways to recycle or repurpose or reinvent resources in a way that is sustainable, so that they never need to get into a price war or race to the bottom. 6. Means of Communicating Offers & Information: Natural Organizations: Virally Monolithic Organizations: Through persuasive propaganda The adversarial relationship of monolithic organizations with customers and everyone else also manifests itself in communication style. Advertising, bullying, shaming, one-upmanship and other propaganda techniques are used to bend the will of customers (and regulators). This inevitably backfires when these techniques are recognized for what they are (and it succeeds temporarily only because of the cleverness of the communications in disguising this propaganda as something else (I've often wondered how advertising and PR reps are able to sleep at night). Without the budget or the stomach for such techniques, natural enterprises must rely on more creative and less manipulative ways to get their messages across. They have learned, for example, that messages from happy customers and happy employees have enormous propagational power and endurance. But since they're satisfying an identified need rather than trying to artificially create one, their communication job is much easier to begin with. 7. Approach to Energy & Resource Use: Natural Organizations: Strive for effectiveness with zero waste Monolithic Organizations: Strive for efficiency, exploit externalizable waste It is an apparent paradox that monolithic organizations are at once more efficient and more wasteful than natural organizations. The problem with efficiency is that it is fragile: When you're doing just enough of everything, an unforseen change can be catastrophic. It's a delicate balancing act, and eventually some disruptive innovation or economic crisis will knock this careful balance out of whack, potentially bringing down the entire organization. And the search for efficiency also requires the exploitation of all possible 'externalities': Taking advantage of low labour and environmental standards in struggling nations, cheap natural resources you are not required to replace, unenforced regulations, and the permission to pollute and to produce garbage without having to pay for it (as long as you're creating jobs or greasing the right palms). Natural organizations do what nature does: They focus on effectiveness rather than efficiency. Trees produce far more seeds than they need to propagate their species, so they're effective (even in periods of climate change) and inefficient, but their inefficiency is not wasteful: The unused seeds provide nutrition for other creatures who in turn help provide for the tree (by eating insects that might otherwise feast on its leaves). Natural enterprises can afford to do lots of small experiments with new product ideas, in collaboration with customers, because that's how they learn, and because they fail inexpensively and early. They can afford to create lots of niche products with very small markets, and to customize products to each customer's precise needs. This is far too inefficient for most traditional enterprises to copy. 8. Approach to Achieving Economy: Natural Organizations: Innovation Monolithic Organizations: Standardization and scale Monolithic organizations have to acquire size and scale to operate economically. And they need to standardize products and processes because they cannot tolerate the inefficiency of diversity. They are constantly striving for elusive 'best practices'. By contrast, natural organizations operate economically by continuous innovation. They appreciate that the market for most of what they produce is finite, so rather than trying to squeeze more profit out of a product that is nearing the end of its life cycle by slashing costs, they instead identify new untapped needs of customers and innovate to satisfy those needs. 9. Approach to Learning: Natural Organizations: Observe & practice (learn by watching & doing) Monolithic Organizations: Training (learn by receiving instruction) Our education system is based on the theory that standardized learning is the most efficient learning and that it is possible to impart knowledge and influence behaviour by telling people what to do, what is the 'right' and 'wrong' answer to any problem. This theory is reflected as well in monolithic organizations' approach to learning, and, like all approaches that favour efficiency and standardization over effectiveness, it doesn't work. Natural organizations understand that people learn best by watching and doing, and eschew 'formal' training programs in favour of more diverse and continuous learning methods such as apprenticeships, cooperative programs, and 'cultural anthropology' (the study of customers first-hand to see what their unmet needs are, rather than using formal 'surveys'). 10. Approach to Making a Living: Natural Organizations: Identify & satisfy needs Monolithic Organizations: Create & satisfy needs If you're a large, monolithic organization, you have huge fixed costs to cover, and may well feel that you don't have the luxury of waiting for new customer needs to be identified. Such organizations tend to try to 'create' needs by appealing to the vanity or status-seeking of customers. Such needs are generally incremental to already proven products -- new styles, colours, additional features added, but no real new needs met. By contrast, natural organizations start by doing their homework to identify, on a continuous basis, real untapped needs as they evolve and emerge, that they have the competencies and passion to satisfy. In many cases the customers don't know exactly what they need -- it takes imagination, creativity, foresight and collaboration to come up with bold new ideas that can satisfy a need that, while very real, may not yet be well articulated. That's real innovation. 11. Approach to Operating and Managing Risks: Natural Organizations: Improvisational Monolithic Organizations: Pre-emptive The size and rigid structure of monolithic organizations makes them hugely risk-averse. Because they are inflexible, they try to anticipate risks and operational problems before they happen. This is largely futile despite the massive amounts many such organizations spend trying to do this, because this pre-emptive effort is necessarily focus on identified types of risk. As we keep learning, from Enron, asymmetric 'warfare' of all kinds, and unforseen natural disasters and diseases, many risks simply cannot be anticipated or prevented. Natural enterprises have learned to take a more improvisational approach to risks and operational problems, learning how and with whom to collaborate and ideate to respond quickly and effectively when such problems arise. 12. Measure of 'Success': Natural Organizations: Sustainability Monolithic Organizations: Growth The average public company that is trading at 15-20 times earnings is discounting customer expectations of a 10-15% annual growth in profits; those trading at 30 times earnings are discounting a 20-25% expected annual growth in profits -- for the indefinite future. Such expectations are unrealistic and tyrannical, but many monolithic organizations are beholden to their shareholders (without which they would be unable to afford huge management salaries, armies of corporate lawyers, acquisition of competitors and other costs of risk minimization), so they are addicted to growth without innovation. I wouldn't want to be in their shoes when the growth inevitably stops. Natural enterprises strive instead for sustainability -- through innovation without the expectation of or need for growth. They are beholden to no one except their own members and the communities they draw upon, so they do not have to grow in order to thrive. I know many people are skeptical of the possibility of starting and running their own natural enterprise -- that it could be that easy, joyous, responsible and stress-free. They wouldn't dream of trying. My book will include lots of examples of organizations that are living that dream. 2:59:51 PM  trackback []  comment []

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