The Internet-based firm

We need management thinking that puts creativity at the center of the wealth-creating process. The knowledge-based, learning-intensive firm does not behave in the way our dominant, industrial management thinking assumes. But we lack an alternative theoretical lens. What if we used the Internet as a lens for sense-making?

Organizations are always assemblies of interacting people. The reason for an organization to exist is to simplify, support, and enrich interaction. That is what the Internet does.

However, not all corporate interaction is the same. There are three types of tasks depending on the amount of communication needed and the alternative mechanisms of coordination. The different task inter-dependencies accordingly place different and increasing burdens on interactive capability.

I call these different tasks (1) independent, (2) dependent and (3) interdependent.

Two tasks are independent if they don’t affect each other. The most important communication exists between the employer and the employee, the manager and the worker, or in craftwork between the customer and the craftsman. The execution of two independent tasks does not require communication between the tasks. The corporate architecture consists of black boxes that are not coupled directly but in an indirect way by managers who coordinate the work.

The factory process is sequential. Being dependent means that the output of one task is the input of another. The reverse cannot normally take place. In sequential dependence, those performing the following task must comply with the constraints imposed by the execution of the preceding task. Since the hierarchy is clear, the coordination is mostly about measuring and controlling whether the execution conforms to the planned requirements. The corporate architecture consists of tightly coupled tasks and predetermined processes. Work as “communication” is one-way.

Two tasks are interdependent if they affect each another mutually and in parallel. Interdependent tasks call for responsiveness and coordination by mutual adjustments. The circumstances affecting the execution cannot be fully determined and predicted in advance. Most of the information that is relevant to the situation will be discovered and created during the execution of the task. As a result it is not possible to agree on a coherent approach in advance. Work is learning.

Individuals and tasks must be transparent and must communicate on an ongoing basis to let each other responsively identify feasible approaches. They must communicate information the very moment it is created in order to develop common understanding, an information commons. This makes a fundamental change to our approach to information objects. The basic unit of corporate information is not content in the form of documents but interaction in the form of conversations based on context awareness. Knowledge creation is here understood as an active process of communication. Knowledge is not stored, but is perpetually constructed in interaction.

Knowledge is not transmitted from one individual to another but is the process of relating: one approach in the situation may be optimal from one point of view; another may be preferable from another. Responsive task interdependence always works with and negotiates differences in a creative context. Success is based on emergent and parallel responsiveness.

Architectures differ in the degree to which their components are loosely or tightly coupled. Coupling is a measure of the degree to which communication between the components is predetermined and fixed or not.

The architecture of the Internet is based on loose couplings and modularity. Modularity is the design principle that intentionally makes nodes of the network able to be highly responsive. The Internet-based firm sees work and cognitive capability as networked communication. Any node in the network should be able to communicate with any other node on the basis of contextual interdependence and creative participative engagement. Work takes place in a transparent, wide-area, digital environment.

As organizations want to be more creative and knowledge-based, the focus of management thinking should shift towards understanding participative, self-organizing responsiveness.

The Internet is a viable model for making sense of the value creating constellations of tomorrow.


Thank you Doug Griffin, James Thompson, Yochai Benkler and Barbara van Schewick

About tightly coupled systems. Harvard Business Review post on process improvements and collaboration.