The Friction of Bureaucracy

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Man looking at many pages of paperWhat would your organization look like and how would it operate if you had no recourse to a legal system? For one, it would mean no enforceable contracts with customers, suppliers or even employees. It would likely mean little if any paper or data trail with all deals and agreements being verbal and totally based upon your reputation and the trust it carried.  Your future is totally dependent upon the trust you have with customers, suppliers and their reputations. Could it even succeed?

The answer is a resounding “Yes!” For example, there are the Chinese Shanzai which are the small specialty manufacturers that will produce anything you ask and do so by coordinating (dynamically based upon capacity, capability and availability) among themselves all of the components and final assembly – without any contractual relationships and totally based upon reputation and verbal commitments. The prime reason is that they have no recourse to the legal system (being somewhat loose with IP issues) but also because it has given them competitive advantage against traditional manufacturing ecosystems.

The Tooth to Tail Ratio is a military term that refers to the amount of military personnel ("tail") it takes to supply and support each combat soldier ("tooth"). While both "tooth" and "tail" soldiers may find themselves in combat or other life threatening situations "tooth" soldiers are those whose primary function is to neutralize the enemy. The ratio is not a specific measure but rather a general indication of an army's actual military might in relation to the resources it devotes to supply, upkeep, and logistics. In business terms – value creation versus bureaucracy. A recent variation of this is the introduction of non-military service providers. One of the stated goals of DARPA is increasing the tooth to tail ratio (reducing the amount of logistics and support personnel necessary in proportion to combat personnel without reducing combat effectiveness)

But even the Shanzai operate with somewhat traditional business models, just with a lot less bureaucratic friction. But what happens when friction itself begins to disappear? What happens when the tooth to tail ratio approaches infinity (i.e., no tail) in a business?

Flexibility happens, adaptability happens, agility happens, the Darwinian crucible of competition heats up and change happens. Transformative change happens when industries democratize, when they’re ripped from the sole domain of companies, governments, and other institutions and handed over to regular people to operate collaboratively and cooperatively.  We have seen this with the intangible world of content and the associated disruption of media as well as the whole open source software movement and the resulting software like Linux, Apache and others which basically run the internet, now we are beginning to see it with the tangible world of things.

For example, the makers movement which behaves in a similar manner simply by choice and yet is able to produce sophisticated products like those from Local Motors.

Think about it, two guys go fishing on Sunday, notice a slight improvement in their reel would significantly improve their experience, they get back home get on a SaaS CAD program, draw up the idea, ship the file to FedEx Kinkos (who is installing 3D printers in their locations) to be “print/built” show it to their friends who suggest improvements and give recommendations that they then put up on kickstarter, whose funding they use to send to a right shore job shop manufacturer, after signing UPS to handle logistics and distribution and opening up an Amazon storefront. They christen their yacht on their next fishing trip.

This (and other issues like loss of buyer / seller information differentials) means that supply immediately rises to meet demand (even for something that people do not yet know they need) almost instantly (eliminating time friction from the economy) and the economy comes to equilibrium. The interesting thing about equilibrium economies is that they offer no opportunity for profit. The only form of profit left is monopoly profits – those profits that come from that short period of time where you have a value proposition that no one else has. In other words, innovation.

As we have argued before, bureaucracy is the antithesis of innovation. Bureaucracy drives conformance to standards, reduction of variability, efficiency through repeatability, scale, and predictability. Innovation comes from breaking all of bureaucracy’s rules appropriately.

Simply compare Tesla motors to GM. One takes 10 years to figure out a safety issue resulting in fires and then needs tons of physical activities to correct when a decision is finally reached, the other instantly responds to a fire safety issue and corrects the problem instantaneously. The big difference – bureaucracy. One created to make no mistakes, not recognizing that is impossible, another recognizing mistakes are a part of life and is organized to respond and correct quickly. This bureaucratic mindset, or lack thereof, extends even into the designs of the cars themselves enabling the actual products to behave agilely or not.

We know the tax of bureaucracy – be it in constricting the organization with standards and invariability, to resources not applied to creating value (or winning the battle). We know that organizations can be successful without bureaucracy as pointed out in some of the blogs on our hackathon and demonstrated by the Shanzai.

So the next question is how – We’ll be exploring these ideas and more in the Dell – MIX Busting Bureaucracy Hackathon, where progressive thinkers, management practitioners, and technologists from around the world lay the groundwork for the post-bureaucratic organization.

We invite you to join us and help kickstart the hackathon by sharing your take on how bureaucracy (i.e., top-down command structures and formal rules and procedures focused on conformance) is stifling your organization’s ability to adapt, innovate, or truly engage its people. Log in or create a MIX account to get started. To get some context and inspiration, read Gary’s Hamel introductory blog.

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