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Chapter 2 part 3

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The End of the Value Chain Edit

How different from the main way we imagine traditional organisations as “value chains” made up of iron links. That image tells us all we need to know about what organisations were for and how they had to be set up to do their job. Each step of an activity, from conceiving a product through to its manufacture and distribution, was a link in the chain. The final link was the transfer to the consumer. By that stage the product – a fridge, washing machine, Apple iPod – embodied all the value that had been invested in it – labour, raw materials, design and software. Each link in the chain represented a transaction: people, machines and raw materials to be added had to be paid for. The goal of management was to organise the links in the chain as efficiently as possible, to know where in the chain your link fitted. It was assumed – at least until the late 20th century – that value chain organisations worked best when most of the links were vertically integrated, with a company controlling most of its supply chain, with jobs and tasks, organised hierarchically. Working in one of these organisations was simple: if you want to know what to do next you followed your detailed job description and if that did not give you the answer, you turned to someone in authority to ask for directions.

We should not sniff at value chain organisations. They have achieved a huge amount in the last century. They organised a complex range of activities, often within a single organisation, sometimes under the same roof, to produce goods and services at prices that many people could afford. The car, television, fridge, telephone, cataract operations, maths lessons - all might be the preserve of the rich had we not invented ways to make them on a mass scale and at low cost. In the past three decades it has sometimes not been clear whether these value chain organisations have been falling to bits with the growth of networked production, outsourcing and constant restructuring, or whether on the contrary they have been tightening their grip through business process re-engineering and downsizing. Hierarchies are flatter, job descriptions for some skilled workers are vaguer, the working day is more flexible and the boundaries of organisations have become more porous. Organisations are interacting with one another in new ways as partners and suppliers. As products become more technologically complex, so firms have had to look outside for new sources of specialist knowledge. Good companies recognise they make better products if they engage with their users earlier in the design process. Consumers increasingly want products that look and feel distinctive. We will continue to rely on value chain organisations in many walks of life.

Yet our modern, networked, versions of value chains organisations – Toyota, Wal Mart, Nike, Cisco – are value chains nevertheless and they are haunted by the same questions. They say they want to give workers more autonomy, yet more people seem to feel more insecure and frustrated at work and less committed to their employers. Management jargon about empowerment and alignment washes over people as a form of double-speak. In an increasingly democratic age, the unaccountable power of many chief executives is an anachronism. For all the talk of corporate social responsibility, company life seems hollow, little more than a race to deliver the numbers on time. True these organisations now give consumers a vast array of apparent choices but even that can be bewildering, especially when what you really want is a bit of support or advice. More choice does not necessarily mean better customer experience. Many consumers now find companies more unyielding and less personal.

Wikipedia, Linux, eBay and the host of other non-organisations are more like barefoot communities than value chains. They are more like self-organising collaboratives (co-operatives?). They are a quite different way of organising ourselves, often without the heavy hand of an organisation. Others are following where these pioneers have led. In industry after industry workers, entrepreneurs and investors will be asking whether there are open, collaborative alternatives to the standard corporate model: could you do in your industry what Wikipedia has managed to do for the encyclopedia business? There is a viable alternative to corporate organisation and the market. It is not centrally planned communism, but new forms of barefoot, cooperative endeavour emerging from within knowledge rich global capitalism. It is proving particularly effective as a way to share and create new ideas. There is an alternative. It works. Pigs can fly.


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