Enterprise2.0EntrepreneursVenture Capital

Devolving decision making improves productivity – great for Enterprise2.0

By November 26, 2007 10 Comments

Carlotta Perez has long had a strong influence on my thinking, and a key part of that is the belief that the organisational structures and cultures that were optimal in the past may not be best going forward.  She argues persuasively that the command and control mode of organisation that characterised the most successful firms during the era of mass production will most likely not be appropriate for the age of the internet.

The biggest influence of the internet is probably that it enables switched on firms to do things at a speed that simply wasn’t possible before.  Product design times are decreasing every year, supply chain efficiencies are compressing the time from raw material to delivered product and, as I’ve blogged about a lot recently, the internet is increasing the pace of dialogue between customers and suppliers.

To take advantage of this companies need to make themselves more agile.  Not many people would disagree with that.  More controversially, it has seemed self-evident to me for a while that devolving decision making has the potential to unleash an agility that will always be impossible if decisions have to travel up and down a corporate hierarchy.

It is this belief that has inspired my interest in Enterprise2.0 technologies, and edge-in adoption models.
If decision making is to be devolved there will be a requirement for new forms of collaboration – but, for a while at least, these will be varied across the enterprise, hard to predict and may change rapidly.  Lightweight collaboration tools that are chosen and configured by the end user are the obvious solution.

As with most things in venture capital this has been more hypothesis than proven theory, so it was with pleasure this morning that I read an FT article which provided supporting evidence to the central element of this theory – that companies with devolved decision making are more efficient.

The article reports on the results of interviews conducted by the University of Sheffield with almost 600 companies.  Unfortunately they don’t share the underlying data, but a couple of quotes make the point quite nicely:

handing more power to shop-floor workers to decide how to boost output has worked wonders for parts of the manufacturing sector


“We found that companies which devolved more decision-making responsibility to front-line employees showed an average 7 per cent increase in value added per employee [a year],” said Prof Wood.

This survey provides welcome evidence that there is a good opportunity to build new companies in the Enterprise2.0 space.