To Master Interdependence, Stay Independent
On January 15, 1990, we lost our innocence. AT&T, everyone's Ma Bell even after the phone company break-up, crashed.
This is the era of just-in-time (JIT) schemes, time-based competition, electronic-data interchange (EDI), electronic-funds transfer, and the global village. To compete, big or small, you must be wired up to and partners with the world. But an age of interdependence is not without costs. Complexity and interdependence—as AT&T's fiasco illustrated so aptly—beget brittleness and breakdowns. The problem: We have few if any time-tested tools for managing in a connected world.
The AT&T mess was not catastrophic. On a holiday (Martin Luther King's birthday), about half the long-distance calls were delayed or not completed. But businesses still lost millions and any number had to shut down. The tip of a worrisome iceberg was revealed.
One strategy for coping with this staggering increase in interdependence, which is still in its infancy, is to introduce redundant systems. As MCI and US Sprint said to potential customers after January 15th, "We don't ask for all your business, but you're foolish to put all your communications eggs in AT&T's one brittle basket."
But redundancy is just the start. Pathbreaking research in managing interdependence is taking place at the University of California at Berkeley. A recent article, "The Secret of Life at the Limits" by John Pfeiffer in Smithsonian magazine, described the Berkeley studies of tightly coupled systems—U.S. aircraft carrier operations, Pacific Gas and Electric network management, and air traffic control activities. "Interdependence is new for our genus," Pfeiffer asserts. And dangerous: "The mark of the times is the network, a declaration of interdependence like a spider web: Disturb it anywhere and it vibrates all over."
Managing effectively amid vibrating spider webs means less reliance on hierarchies and autocratic bosses, more attention to front-line people and teamwork. There will still be "some kind of formal hierarchy," Pfeiffer writes, "but not rigid and not under all circumstances, and probably not most of the time." Instead, at times of stress "cogs can become big wheels. ... they can take complete command ..."
"Constant training ... easy communication [and] leaders who are prepared to listen and learn from their subordinates" underpin the reduced emphasis on hierarchy. "Performance as a member of a group is [all] important." The Lone Ranger need not apply, says Pfeiffer: "The 'right stuff' is the wrong stuff ..." The transition will be tough. In the new organization, "The talking never stops [and there's not] a hint of blame or accusation." Forget cover-your-tail memos, committee meetings, and petty politicking in the linked-up company.
Will such a profound shift in management practice counter the perils that increasing connectivity brings? Not entirely. I think we need to go beyond the lessons of the new research and learn to create resilient, autonomous islands throughout our enterprises—despite growing interdependence.
For example, alliances and networks are increasingly used to launch new market attacks. Yet most product innovation will continue to emerge from the unexpected nook or cranny in the company (e.g., IBM's PC group) or economy (the arrival of an Apple, a Federal Express, a
Walmart). 3M, the Fortune 500 company I most admire, remains remarkably disorganized—that is, "unhooked." Individual divisions have mastered the use of JIT, EDI, etc. Nonetheless, scores of largely autonomous units burrow away, with few strings attached, in relatively isolated markets. Via numbers—lots of independent units, lots of independent tries—3M maintains a peerless product-introduction record. Likewise, a study of the Fortune 200 by consultants A.T. Kearney singled out 12 long-term, top profit-makers. Just a handful of common factors explained their success. Near the head of the list: Division general manager spending authority among the standouts ran 10 times higher than among the "also rans." Such spending authority is indicative of high independence per se, even though each division in the big company must master the increasing connectedness in its world.
Stanford University President Donald Kennedy provides fascinating corroboration for this idea. Some 275 institutions, he says, have survived continuously for over 1,000 years—the Catholic Church, the government of Iceland and 273 universities. The abiding characteristics of the university, ancient and modern, are tenure and academic freedom at the individual and departmental level—that is, independence, not interdependence. Stanford Professor Jim March calls universities "organized anarchies," perhaps a robust if frustrating recipe for survival in any era.
AT&T's memorable day in January jerked the management of tightly linked systems toward the top of our corporate agenda. Redundancy (call MCI, too) and a new management style (no hierarchy) are parts of the answer. But the larger lesson I draw is that learning how to stay somewhat unhooked will be just as important as learning how to deal with being hooked-up. Winners must simultaneously master both disciplines.
(c) 1990 TPG Communications.
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