Reinventing the firm: The trailblazers building a new kind of business

THE government’s plans for a more diverse banking sector are looking increasingly threadbare, a reminder that politicians just aren’t very good at discovering or implementing solutions of this kind.

A striking example can be seen in the contrast between private sector experimentation with new corporate structures and David Cameron’s championing of the John Lewis mutual model. Cameron’s sudden focus on a long-established alternative, based on the experience of a single retailer, is both too pedestrian and too risky. It stands against the range and originality of experiments proving themselves in the commercial marketplace.

Nowhere is that more clear than in the technology sector. Among the same firms pushing the boundaries of the possible to bring us marvels like Google Glass, 3D printers and self-driving cars, a few are busy trying to remake the firm itself.

Consider the video gaming firm Valve, responsible for the classic first-person shooter Half-Life. Valve claims a per-employee profitability higher than Google, Amazon or Microsoft. It also has no bosses. Google lets you work on your own projects one day a week: at Valve you do that all week long. Employees’ desks are on wheels, and they self-organise to deliver the projects they choose.

It would be easy to dismiss Valve’s vision as impractical, except that it is being tested in the market. It is also not alone. California’s Morning Star, the world’s biggest tomato processor, also runs without managers. If such experiments survive and succeed, they may prove trailblazers for a whole new kind of firm. If they fail, they will have helped to mark the limits of the possible for flat management structures.

There are many more intriguing experiments going on. Social media management company Buffer has a model of total transparency on everything from employee sleep patterns to salaries and employee equity stakes. The company will even pay for any ebook an employee wants to buy, in the interests of boosting the skills of their talent pool. Booming film rental business Netflix has no official holiday allowances, but asks employees to take as much as they need and that their colleagues can cover. The open innovation models at Topcoder and Tongal take advantage of the web’s lowering of transaction costs to reach outside their own walls for talent.

It was always a myth that business was monolithic in its approach to ownership and organisation. The experiment in mutualism at John Lewis exists alongside the partnership model of law firms and the ongoing battle between the benefits of private ownership and listed status we see playing out today at firms like Dell.

Yet command and control models did become dominant in the twentieth century workplace. Perhaps that consensus can be improved upon – but the way to find out is not by having politicians imposing their flavour of the week and leaving the rest of us to deal with the unintended consequences. It is by letting profit-seeking innovators experiment in the open market.

First published: City A.M., 19/4/13

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Filed under Business, Freedom, History, Human nature, Innovation, Technology

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