Decentralising forces interview with charles armstrong, CEO, trampoline systems

Decentralising forces
The future of business organisations lies with fluid
alliances of semi-autonomous units
For the last century or more, the business landscape has been dominated by a small
number of very large corporations. The consensus has been that managing these
organisations in effect meant controlling them tightly from the centre.
These organisations are the product of the historical circumstances in which they
arose. And according to Charles Armstrong, CEO of social technology provider and
consultancy Trampoline Systems, the circumstances have changed.
In today’s fast-changing economic environment, he argues in this interview with
The Economist Intelligence Unit (EIU), flexibility is the most important capability
an organisation can have. The ideal business, therefore, is not a rigidly controlled
monolith, but a decentralised “swarm” of small teams that are empowered to
innovate.
This interview is part of an investigation into the future of work by The
Economist Intelligence Unit, sponsored by Ricoh Europe. For more, visit
/>The EIU: What’s the number one organisation design trend that will affect the way
people work over the next 10-15 years?
Charles Armstrong: The dominant trend is going to be decentralisation. As new technologies
continue to increase market volatility and reduce barriers to entry, speed of adaptation will be
the primary driver for organisation design. Large organisations aren’t going to disappear. But to
remain competitive they will fragment into armadas of small, semi-autonomous units linked by a
synaptic mesh of information systems.

Charles Armstrong
Trampoline Systems
Photo: Joshua Tucker

Small businesses will also begin to organise themselves into fluid alliances. So I believe we will see
this intriguing pattern where large and small businesses are converging towards organisational
structures that are almost identical.

How have the imperatives of organisational design changed?
Through the 19th and 20th centuries the biggest driver for organisation design was the ability
to deploy and control resources efficiently on an enormous scale. Whether you were building
a continental railway or running a global political empire, you needed to be able to mobilise
enormous numbers of people in multiple locations while retaining absolute control of strategy
along with reliable chains of accountability.
In response to these demands new kinds of highly centralised organisations evolved, based
in many cases on military structures. Information technologies such as the telegraph and the
telephone enabled successive waves of expansion and efficiency gains. Now, in the 21st century,
many of these scale challenges have become commoditised to the point where they are no
longer pressing competitive drivers. At the same time technologies such as the Internet, mobile
telecommunications and real-time business systems have opened up one industry after another to
entirely new forms of disruption.

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So what are the priorities now?
In this new landscape, agility and innovation take centre stage. The strength of an established
market position counts for nothing if a company is unable to adapt to new market circumstances
fast enough to combat an aggressive new entrant. The 19th- and 20th-century organisations
were never designed for speed of manoeuvre. They were conceived for a more stable world, where
change took decades. These organisations’ emphasis on central control creates bottlenecks for
decision-making that fundamentally limit the speed of change. Centralisation also propagates
cultures that discourage risk-taking and innovation. So I think it is inevitable that the central
demand for organisation design in the 21st century is about operating at scale in a highly
decentralised fashion.

Centralisation

propagates cultures
that discourage
risk-taking and
innovation.

Who will be most seriously hurt by this?

Charles Armstrong
Trampoline Systems

In the short term, the greatest impact will be felt by established multinationals, since they have
the most at stake. Some will succeed in adapting to maintain leadership in the next generation
of their industry. Others will fail to evolve sufficiently quickly and will find their markets eroded
by fast-rising newcomers. Since the new organisational strategies will be so dependent on
information technologies, it’s very likely that the technology sector will be the first where the new
structures are seen. Google is an early example of a company that grew up with a distinct “startup” mindset and has consequently grown into a large organisation whose structure is strikingly
different from a predecessor like IBM.

What about the long-term impact?
In the long run, the greatest winners could be developing economies. In a world of monolithic,
slow-changing organisations it was possible for a small group of mainly Western economies to
maintain dominance of worldwide markets over an extended period. The new landscape will be very
different. Just as the development of the dreadnought type of battleship levelled naval competition
by rendering all previous warships obsolete, the new kinds of organisation will be so much more
efficient at harnessing opportunities that it will be hard for any traditionally structured business to
compete with them.
All generational shifts create a “last mover” advantage. For instance, many cities in eastern
Germany now have far a better data infrastructure than their counterparts in western Germany,
simply because they started with nothing in 1989. In the same way, the economies with the least
institutional investment in 19th- and 20th-century organisations will face the fewest obstacles to

growing the new kinds of 21st-century organisation.

What sort of timeframe are we looking at?
Even ten years ago the leading companies in any sector could point to the four or five businesses
that posed the most serious competitive risk to their position. They would also have been able
to list the relative strengths and weaknesses of each one. Today, in many industries, CEOs are
painfully aware that the business that might steal half of their market in three years’ time might
today only consist of two people sitting in a co-working space.
So the pressures are already acute, and organisations are responding. Within the next five years I
think we will start to see the first examples of these new kinds of organisational structures. But it
will take another decade before they become pervasive.

How should companies respond now?
This generational shift in organisation design won’t be a period of change leading to a stable
state. It’s a shift to a world of constant change, where innovation is instilled in every cell of an
organisation. That poses long-term challenges for leadership, skills development, administration
and regulation. We need to start grappling with these questions now so we’re ready. The
opportunities are tremendous.

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