Podular Organization and Edge Businesses


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Podulation -- From Dave Gray's Connected Company

Podular Design — From Dave Gray’s Connected Company

In Institutional Innovation and Podular Design I noted a number of insights from the Aspen Institute’s report, Institutional Innovation: Oxymoron or Imperative?, especially that “the most important innovation challenges are now in fact institutional in nature.” As an aside, let me just note that institutions typically change in dramatic ways only over long periods of time. Think of institutions such as religion, government, the economy, and then consider the various organizational forms in which these institutions took shape across cultures over time.

One insight I have not discussed in previous posts is relevant to understanding the changing way teams work together in organizations and, by implication, in a Connected Company – as outlined by Dave Gray. Richard Adler the Rapporteur for the Aspen sessions, noted that,

“New findings about the power of collective intelligence and about the most effective ways of organizing teams are providing practical insights about how to accelerate innovation.”

To start, let’s consider many companies organize teams and then turn to the “power of collective intelligence” mentioned by Adler to see how the two relate to podular organization. Several research projects in recent years noted the fuzzy boundaries of teams in large organizations. Skilful Minds first noted this phenomena in Who’s on Your Team? Enterprise 2.0 and Team Boundaries , and then a couple of years later in Social Learning, Collaboration, and Team Identity.

In fact, the phenomena of transitory team membership is so pervasive that some people propose we analyze “teaming” rather than teams when talking about how groups organize for cross-functional purposes within, or between, companies. Consider, for example the way, Mark Mortensen summarizes this trend in team dynamics,

First, organizations increasingly require collaborations to be fluid in their organization and composition, able to adapt to the rapid changes of the external environment. Second, collaborations increasingly overlap with one another, sharing resources — including people — as those resources become more limited due to increased competition. Third, collaborations must increasingly take into consideration the different contexts within which collaborators are embedded, including locations, time zones, cultures, and languages, structures, or organizations.

The liminality of such transitory teams results from several institutional challenges including the high degree of misunderstandings that initially occur due to team members rarely having the time to translate the different ways of thinking that people bring from their professional specializations into a mutual understanding of their shared business purpose. Developing mutual understanding requires shared experiences, getting to know who you are collaborating with, not just what they do or their skills profile. In addition, conflicting functional priorities, and often a lack of clear accountability, make it difficult for such teams to remain focused on the business purpose of their collaboration.

Teams were not always organized this way. As Mortensen notes, teams in multi-divisional companies were, at one time, defined by bounded and stable team membership and common goals that interdependent work was required to meet. Cross-functional teams in such companies today are not typically defined by bounded and stable membership, and common goals are still too often related to divisional performance driven by scalable efficiency rather than a connection to the purpose of the business the team is serving.

As Brown and Hagel recently observed:

Over the last 40 years, the emergence of new digital infrastructures and a global liberalization of economic policy have increased the pace of change exponentially. Many companies that were extremely successful in earlier times of relative stability are now finding that their relationship architectures are fundamentally misaligned with the needs of their business today. As the pace of change increases, many executives focus on product and service innovations to stay afloat. However, there is a deeper and more fundamental opportunity for institutional innovation—redefining the rationale for institutions and developing new relationship architectures within and across institutions to break existing performance trade-offs and expand the realm of what is possible.

Institutional innovation requires embracing a new rationale of “scalable learning” with the goal of creating smarter institutions that can thrive in a world of exponential change.

The challenge then remains how to enable organizations to adapt to their ecosystems by enhancing access to flows of knowledge that are likely to result in learning. Leinwand and Mainardi recently observed that permanent cross-functional teams tend to fare better than transitory teams in engaging organizational ecosystems. As they note:

We’ve recently seen a more robust cross-functional construct emerge, one with an overarching organizational structure, based on building and maintaining a distinctive capability. Members of these capabilities teams are assigned permanently to them, reporting there rather than through a functional hierarchy.

Permanent cross-functional teams provide an institutional basis for what Hagel and Brown refer to as edge businesses that develop within large-scale enterprises, noting that such companies “should resist the temptation to confront the core, and instead focus on opportunities on the periphery or at the ‘edge’ of their businesses that can scale rapidly.” I suggest below that Dave Gray’s conception of podular organization affords an important insight regarding how the institutional innovation of edge case businesses can develop and organize.

Connected Company Experiments in Edge Business

The Connected Company offers the pod as an alternative unit for organizing self-managing teams. Dave defines a pod as a “small, autonomous unit that is enabled and empowered to deliver the things that customers value” (p. 148). The key differences I see between pods and traditional multi-functional teams relates to issues of self-management and mutual understanding of business purpose. As Dave explains it:

Podular organizations need to do a few things in radically different ways: First, they require information to be transparent and readable by everyone; second, they require principles, platforms and culture to guide individual decisions and give cohesion to the company as a whole; third, they require people who are not territorial, who are capable of open discussion and who will hold themselves and others accountable; and fourth; they require owners and managers who are capable of trusting people and teams to make good decisions and manage their “business within the business.”

The organizing principles, platforms, and cultural patterns Dave refers to are also tied to incentive systems that support meaningful connections between people working together and the business purposes of their actions. As Drake Baer summarized in his article The Motivational Power Of Working In Pods in Fast Company:

  • Incentives need to breed visible impacts on the business as whole
  • Incentives need to balance short- and long-term thinking
  • Incentives need to reward people for doing what makes the business as a whole more successful and healthier

By the phrase “business as a whole” Dave means the business purpose defined by the customer’s job to be done. One of the most curious criticisms I’ve heard to the concept of podular design is that its principles do not scale. Admittedly, imagining podular organizing principles for companies that are getting off the ground as startups or, at least, relatively small in size is more straightforward as Kashen observes in a recent post, Flat is the New Up.

However, aside from the fact that many of the examples of podular design in The Connected Company are rather large organizations, the real insights needing attention relate to the way Dave conceptualizes a podular organization. Regardless of the scale of a podular design, the point is to organize for innovation rather than efficiency. So, let’s consider the hard case for podular organization, i.e. how it applies to large-scale enterprises.

As Dave notes, “The answer is to supplement divisional thinking with another approach: podular organization.”

Drawing insight from a recent observation of John Hagel from an interview with Stowe Boyd, I would add:

if you can find an edge that has the potential to scale extremely rapidly — and given the world we live in scaling happens much more rapidly than ever before — you can actually pull more and more of the core out to the edge, to the point where the new edge over time becomes the core of the business. In our viewpoint thats a much promising approach to change than the original approaches of trying to transform the core.

For those needing a visual rendition of how this process works I suggest studying the graphic at the top of this post.

Consider an edge business in manufacturing: Recent moves by General Electric and other manufacturers to implement agile manufacturing techniques, what some refer to as the insourcing boom in manufacturing, explicitly recognize the importance of shared experience and collaboration among designers, marketers, engineers, and assembly workers to innovation in products and services. These new factory experiments result from recognition that separating the manufacture of any product, especially durable goods, with electronic components involved makes it more difficult to innovate the product line and adds substantial overhead costs in logistics when producing the product offshore. Shorter product cycles require teams involved in manufacturing to experiment together in designing both the product and the manufacturing process while staying aligned with the business purpose of the organization.

Another instance of an edge business at GE originates from an entirely different set of organizational and design insights. Enterprise social networks, such as GE Colab, designed “by GE employees for GE employees” to facilitate global teamwork and collaboration, offer digital platforms for connected companies. As Roland Deiser and Sylvain Newton recently observed in a McKinsey Quarterly article Six social-media skills every leader needs, “GE Colab combines the capabilities of Facebook, Twitter, and other social applications, allowing easy networking, information sharing, instant communication, advanced search, blogging, videoblogs, and more.”

Ron Utterbeck, the CIO for GE Corporate and the Advanced Manufacturing Software Technology Center in Michigan characterizes the approach Colab takes to collective intelligence as follows.

We can tell that we know Deia’s a communicator because she works in this function. We know that Deia is on this distribution list with Michelle and Mary and Sam, which means a good possibility that Michelle, Mary and Sam have something to do with communications as well. We know who they interact with, and we use that to recommend to people who they should be friends with or follow, if you will…if Mary’s in compliance and she posts something, when I search for documents, for information, on a particular compliance topic, if she posted it and I have access to it and it’s relevant, it’ll come up even though I have no connection to Mary whatsoever.

As an example of how such a platform can enable podular organization, consider the way a collaboration network within GE grew, from an experiment in using social software to span geographical boundaries, into a standalone business within GE, a business within a business, or edge business as Hagel and Brown call it.

Over the past five years, as proof of concept, Sargent [Steve Sargent, president and CEO of GE Australia and New Zealand] has established a mining-industry network that cuts across GE’s businesses and regions, linking informal teams that use social platforms to collaborate on solving customer needs. GE employees in Brazil, for instance, now work with colleagues in Australia to develop products and services for customers doing business in both countries. The network’s success led the company to elevate it to the status of a full-fledged GE mining business.

The one caveat I’d make to Dave’s concept of podular organization is that it would benefit from a more explicit focus on the importance of institutions to the way people in companies approach their work. Dave says companies can design for connection and suggests that doing so increases the organization’s ability to learn and innovate.

“Design for connection is design for companies that are made out of people. It’s design for complexity, for productivity, and for longevity…A connected company is a learning company.”

My main assumption is that collaboration produces better results when the work underlying it includes more than the formal organizational goals, methods, processes, and procedures (guided by the functional rationality of efficiency) that people who work together adhere to in meeting official company goals. Some people might say that this is just a discussion of informal organization. However, conceiving workarounds and exception handling as examples of informal organization doesn’t explain the resource capabilities leveraged by participants to the, essentially institutional, connections that span organizations, such as professional associations, grass-roots activists, business partnerships, governmental regulations, and customer experience.

The whole concept of informal organization doesn’t get us very far in understanding what is increasingly becoming a connected ecosystem. I’m simply suggesting that the work practices that afford meaningful, i.e. substantively rational, connections to the business purpose of teams are as much networked and institutional as formally, or informally, organizational in nature at this point.

I think Dave’s concept of podular organization brings into focus the importance of substantive rationality. It affords a different perspective on organizational culture when so much of what companies do these days depends on understanding the actions of employees, customers, governments, advocacy groups, and business partners — all with their own take on values, norms, and behavior.

Republished with author's permission from original post.

Larry Irons
Larry Irons, PhD, is the Principal of Customer Clues. Customer Clues provides consulting services to design manageable product and service experiences across your marketing, learning, and organizational performance initiatives.


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