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A template for a Digital enterprise in the early 21st century

A template for a Digital enterprise in the early 21st century

Antonio Martins

“Can we create organizations free of the pathologies that show up all too often in the workplace? Free of politics, bureaucracy, and infighting; free of stress and burnout; free of resignation, resentment, and apathy; free of the posturing at the top and the drudgery at the bottom? Is it possible to reinvent organizations, to devise a new model that makes work productive, fulfilling, and meaningful? Can we create soulful workplaces—schools, hospitals, businesses, and nonprofits—where our talents can blossom and our callings can be honored?”

Excerpt from

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Reinventing organizations⁠

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by Frédéric Laloux

Introduction

The early 21st-century has been overwhelmed by successive waves of innovation in various technology fields. This accelerated pace of innovation has moved us inexorably to a new paradigm in how people communicate, how they collaborate in the workplace, and how the skills and resources of human beings are mobilized to achieve a common mission.

The traditional structures by which the work performed by citizens was defined, assigned and controlled, worked well while the world was relatively slow. With the accelerated pace of innovation of today, bureaucratic organizational models of either business, government or other institutions have been proven excessively slow to serve the economic and technological reality of today.

The challenge of today’s digital technologies is that in order to take advantage of the power thereof, the way the capacity of qualified individuals is mobilized has to change completely. I.e., If you insert these modern technologies into old style corporations, the productivity and effectiveness of human work will not change. Not only digital technologies represent a new technology paradigm, they also represent a new human work paradigm.

However, shifting to a digital work paradigm is not a well-known quantity for most people running organizations today. The main-stream models for Teal organizations have emerged in pockets of experiments which converged into what might be considered best practices. These new models are quite recent (around five years) without an abundance of good practical examples. For that reason, when people try to approach the question: “how do we get organized as a Teal Enterprise?”, the answers are not clear.

Múcuaverse is not a technology platform, nor is it focused on technology. It is, rather, a template to get organized in a Teal model - for any type of enterprise: service, manufacturing, government, NGO’s, education, etc.

The components of the template have been evolving for a decade and a half, have been adapted to multiple waves of digitization and have all been implemented in practice, either by ourselves or in other organizations.

To be clear, this is a template for humans to come together and accomplish things together. This is not a technology plan, by any means.

Note: the Outline on the right sidebar is a table of contents of this entire document. Use it to jump to the sections you’re most interested in or simply to give you some idea of where you are. Note that the Outline is scrollable (there may be more sections at the top or bottom than what you are seeing).

The 20th Century Corporation

Since most people in the workforce today have learned about the workplace while working for an old style corporation, it is worth reviewing briefly why companies are organized that way.

Shifting to a Teal model entails abandoning a number of principles that are assumed in classical corporations and have been around for such a long time that most people have lost sight of why those principles came to be and rarely question them.

How did it all start?

The classical functional hierarchical corporation model was invented in 1926. At that time the information system used by people in any economic activity was paper. The world was fundamentally a physical world, and the way information was recorded and shared was in written paper form. There was no digital content.

Keep this in mind, then: everything people did in those days in order to scale and become efficient, was constrained by and influenced by the awareness of the physical world with its constraints of size and distance.

In that first quarter of the 20th century, the modern business corporation came together. Through the consolidation of key industries like automobiles, oil, textile, communications, etc. enterprises became larger and larger. Given that everything was manual, business leaders had to figure out a way of organizing work by large numbers of people.

It was those circumstances that led to the creation of a hierarchical model of departments subdivided into smaller and smaller units of similar work. This subdivision model allowed them to break down the work into small tasks performed repeatedly across many batches of similar transactions.

The Hierarchical Model

This hierarchical model of functionally decomposed tasks brought about two fundamental notions in the operation of these enterprises:

One was the notion of authority. And authority brought with it the inference of power.

The other was the necessity for bureaucracy, i.e., structured procedures.

The human work environment that derived from these two basic characteristics of the hierarchical model, acquired the characteristics that we see today:

Employee versus management - reality of two classes of corporate citizens: those that tell others what to do; and those who do the work.

Boss becoming substitute for Leader; and Subordinate for Worker.

A very secretive interpretation of the notion of privacy and confidentiality.

Approval processes with sign-offs at management levels.

HR policies, job descriptions, performance evaluations, MBO’s, etc. - all of which are centred on the command and control culture of these corporations.

The separation of “work life” and “home life”.

The concept that decisions must be made by a few for the many in order to be good decisions.

Does it make sense?

When you look at this classical framework of the workplace, without thinking like someone that works within it, you can see that the economic world has come to accept a “business reality” that is somewhat inhumane. It’s as if, in order to run a “good business”, one needs to remove many aspects that are fundamental to the human condition.

And yet, it is our human condition that makes us capable of achieving great things.

For instance: this idea that you’re one person at work and another person at home; that you can’t bring home issues to work and vice versa - how can that make sense? You’re one person and the same person no matter whether you’re at home or at work. It’s a purely artificial construct imposed by the hierarchical model.

Consider the notion that separates “management” from “employees” where the former do all the thinking and make decisions; and the latter just do the work and follow orders. What this does is cripple the creative capacity of the majority of individuals working in the enterprise - how can that be a good thing?

Think about how departments are groups of like-skill individuals. It’s not obvious how this is detrimental but, if you look closely, you will see how this arrangement is so incredibly expensive and inefficient:

When individuals of similar skills are grouped, they don’t collaborate at all. The need for collaboration emerges when end to end processes are performed (for instance, manufacture a finished product; ship an order; prepare financial statements; develop a new product; etc.) because that’s where people of different skills need to contribute together to achieve an end result.

The greatest capacity of the Human species is the ability to network and to combine multiple skills to achieve one result. That capability leads to a multiplication of skills (rather than a sum of) that transcends what those same individuals do if they work alone. What’s most significant is that this is a capability of the species and doesn’t need to be taught. We all know how to do it.

By isolating humans into groups of like-skill, corporations have stumped this enormous potential of our species.

On the other hand, these end to end processes still need to be done. So, what was the thinking in 1926? Well, procedures are the wireframes by which work moves from functional group to functional group until things get done.

Procedures, however, need supervision, especially when things go wrong. That supervisory role fell on the individuals of authority - i.e., management. And the performance of said role brought about a terrible element of inefficiency of these organizations: meetings.

In conclusion: hierarchical models are expensive because they don’t use the greatest capacity of groups of human beings; and they require this extra overhead of supervisory roles (management) and perpetual meetings.

As mentioned earlier, this state of affairs, while it is covertly inhumane, worked sufficiently well for businesses to grow and prosper, in the decades when the world economic order didn’t change frequently and the progress of business activity was relatively slow.

The Digital Shift

The shift from an economic order where things were stable to a reality where everything changes all the time, began to take shape in the 1990s with the ”customer revolution“. That was the time when the business world realized that change was becoming the norm.

But in the first decade of the new century, digital technologies started to emerge and change the way society functions. What began with Wikipedia, eCommerce, MySpace and Facebook, quickly evolved into a fast paced wave of innovations of technologies that were very different from what was developed in the 80s and the 90s.

Since 2010, not only multiple social media platforms emerged, but so did cloud storage, cloud services, 3-D printing, nano technology, neuroscience, genetic engineering, electric vehicles, big data, AI, etc.

These technologies have rendered the old business models completely obsolete.

A rapid pace of innovation demands that enterprises be faster, much faster:

At innovating and commercializing new products and services;

At adapting to new conditions in the marketplace;

At leveraging emerging new technologies.

Now: think about a functional hierarchy where decisions are made by the few at the top and where work life is governed by bureaucracy - how long does it take to make changes? Try to remember the last reorg you saw; how long did it take to change the org chart? to change roles or titles? how long to change the HR framework; to introduce new processes or new capabilities; to adapt IT systems?

Think of how long it takes to introduce new digital technologies when you have a classical IT department governing things. Or how long it takes to design and activate a new business plan that diverges from the approved annual budget or even the most recent LE. Does any of that spell speed?

The pace of change in technological advances is so brutal that we don’t just need to improve or even “transform” the enterprise model that so many are accustomed to. The very foundations of that model - hierarchy, power and bureaucracy - are the enemy of perpetual change, innovation and speed.

The fact that the traditional workplace is a physical space with all the constraints of physical reality is, in and of itself, a huge impediment of speed. The fact that entire industries have been around a long time and have been structured over many decades around the constraints of distance and geography, however common or ubiquitous they may be, is itself a problem.

To move to a model of organization of human capabilities that is compatible with the technological and innovative reality of today, one has to do 3 things:

Abandon the basic pillars of yesterday’s organizations and look in the opposite direction;

Move away from a paradigm governed by physical constraints;

Learn to adopt a completely different new model, grounded on the unconstrained world of Cyberspace.

Only by doing these things can an enterprise - of any kind - succeed in the 21st century.

The Culture of Teal

Today’s reality

Before we look at the structures of a Teal Organization, we first need to acknowledge the conditions under which this model has emerged, i.e., today’s reality. So, let’s review the circumstances of today’s world:

Cyberspace

The period that we are going through today is perhaps the first time in the history of humanity where we can bring together, organize and focus the talents and the energy of human beings without being constrained by physical reality. Particularly since the Covid crisis, it is now universally understood that people don’t have to operate in specific locations in order to combine their capabilities.

Cyberspace is finally understood by all our generations (not just digital natives) as a space where people can come together, communicate and produce.

The most important characteristic of cyberspace is that physical space, distance, physical barriers - don’t exist. As a result, not only can we collaborate irrespective of geographic location, we are not limited by scale or the perception of scale. To put it in other words, it is just as easy to have a virtual team of 10 people as a virtual team of 400 people. The size of social groups is immaterial within cyberspace.

Digital Technologies

A very important element in today’s reality is the nature of digital technologies. Perhaps because digital technologies are inherently used in cyberspace, they are very different from the standard information systems that evolved since the 1980s. Whereas said information systems were accessories to the human world, digital technologies are intimate to our world.

This is because when people operate inside Cyberspace it is the world of humans that moves into the world of computers – the exact opposite of what was happening with yesterday’s systems.

Hence, whereas in the past people would do their work, then go to the computer and insert or extract information and then go back to doing their work, with digital technologies and with people operating in cyberspace, humans and computers are essentially working together on the same things. In the past, systems assisted humans in performing their tasks; today, computers, through AI and other elements, actually work together with human beings.

Examples of Digital Technologies

Social Media

Machine Learning

BIG Data Analytics

AI Drug Discovery and Drug Development

Cryptocurrencies

Blockchain

Smart Wearables

Neuroscience

Cell gene therapies (e.g. CRISPR)

Synthetic Biology

Computational Biology

Precision Medicine

Nanotechnology

CAD + 3D Printing

Continuous Manufacturing

Robotics

Robotic Process Automation and Hyperautomation

Augmented Reality and Virtual Reality

In everyone of these cases, the basis of the technology is that the world of humans moves to and operates in Cyberspace - the world of computers intergrated by the internet.

A new organizational strategy

The ability for people to operate in Cyberspace has a strategic significance that can’t be overstated. The challenge of organizing the work of large groups of people in the pre-cyberspace age is the main reason why the hierarchical model of subdivision of work was created. But the immunity to scale that Cyberspace provides, destroys that reason.

If we think for a moment that we don’t have to subdivide work functionally into simple small tasks, we now gain an enormous advantage relative to the 20th century situation - and that is the fact that we can choose to bring together - i.e., organize - human beings with mixed skills to accomplish an end result.

When we can organize human beings in combinations of skills, we can directly point the right combinations to the desired results and therefore eliminate all the overhead needed by the old model to make end to end processes work.

Thus, at the core of the Teal model is a group of individuals with mixed skills, as required to accomplish an end result. Teal structures are not made of functional departments; they are made of multi-skilled, end-result-focused teams.

Teal Culture

Let’s see what derives from this new strategy of organizing human beings around end results:

Since here we don’t follow an approach of subdividing the work functionally, we no longer need hierarchy, and we no longer need the traditional middle management layer of directors and managers.

Thus, we are now abandoning the two-class system of yesterday‘s organization and we are abandoning as well the notion of leadership as authority and power.

Because groups of qualified individuals are associated directly with the end results that the organization needs to deliver, there is much less need to define how the work is done and therefore no need for detailed procedures. In other words, by going in this direction we are eliminating bureaucracy.

Because we eliminate the notion that Leadership equals Power, Teal structures are less prone to politics. The Teal culture is one of focusing on the work and on customers, rather than drifting towards mercenary values. It is, indeed, very humane and more likely to answer with a “Yes” the question asked by Frédéric Laloux, as quoted at the very beginning of this document:

“Can we create organizations free of the pathologies that show up all too often in the workplace? Free of politics, bureaucracy, and infighting; free of stress and burnout; free of resignation, resentment, and apathy; free of the posturing at the top and the drudgery at the bottom? Is it possible to reinvent organizations, to devise a new model that makes work productive, fulfilling, and meaningful? Can we create soulful workplaces—schools, hospitals, businesses, and nonprofits—where our talents can blossom and our callings can be honored?”

Above all, a Teal organization wants to be a place where work is an activity that provides human beings a sense of accomplishment, where human dignity is preserved, where people are seen as people with a full life and treated as such and where the work people do is valued for what it is: the essence of, the soul of and the reason for the organization to exist.

The Teal model opens the door for that most enviable goal never achieved in the 20th century (or any other century): that work is a fully integral part of life (not separate from) and consitutes the essence of the human condition: that humans use their talents to help other humans.

Principles of Teal

In summary, the pillars of the Teal culture are the following:

Customers - A Teal organization is primarily focused on customers, as opposed to shareholders.

End-result-focused Teams - The building block of a Teal organization is a team of qualified individuals of multiple skills working autonomously together - making decisions, resolving problems - as needed to deliver a specific end-result promised to customers.

Collaboration - nothing is private and confidential to a privileged few. All issues - whether operational or tactical or strategic - are discussed and decided through spontaneous association, whereby issues are public and conversations involve anyone that can contribute. Different roles have different points of focus but everyone can participate.

Cyberspace - People in a Teal Organization work in Cyberspace. They are organized and they are equipped to take full advantage of all the tools and the freedom that is afforded by that medium.

Learning - in Múcua, work is laced with learning. People are guided and sponsored to increase their level of expertise as time passes and they move down the journey of becoming the best.

Innovation - These organizations take advantage of the convergence of human talent to inculcate a culture of perpetual innovation. It is therefore a culture that not only accepts constant change but embraces and invites change that is fuelled through new ideas, creativity and the desire to put something new in the world.

Leadership - Leadership is not associated with power. Instead, leadership equates to helping teams of qualified individuals accomplish results promised to customers. Thus, teams don’t work for leaders; leaders work for teams.

Now Mode

Since forever that the activities of any organization are consistently synchronized or aligned via the timeline, by using standard frequencies as a ubiquitous technique. It's the most common thing for meetings to occur on a weekly, monthly or quarterly basis.

Unfortunately, working in frequencies is a major handicap in the fast, volatile world of today.

Think about this for a second: the adoption of frequencies for certain events implies that the world will be put on hold until those events occur, presumably because out of these events, there will be decisions or actions that will affect the world.

How can we go around thinking that a problematic situation in reality will just sit there and wait for weeks or months before we intervene and resolve it.

What ends up happening is that either issues becomes obsolete, or opportunities disappear, or people in the organization improvise, scramble and resolve issues, irrespective of periodic meetings.

Today, problems and opportunities surface and disappear with such high frequency and high velocity that unless you can react in real time, you will invariably be passed by current events.

Now Mode is the direct opposite of functioning in frequencies. Now Mode is not frequency driven - it is event driven. Specifically, what this means is that when something happens you act upon it immediately. It's that simple.

It's quite remarkable to do a tour of all the frequency-based activities that occur in most organizations and realize how much better - and simpler - the work environment would be if everything was done in Now Mode.

In Múcua, if an issue surfaces - say, a quality issue with the material in the manufacturing line - that issue gets addressed and resolved right away, because all the skills necessary to resolve the issue are inside the Team where it surfaces.

Do you want to know the profitability of the company, a product, a customer? - just look at the screen and it's right there. Because in Múcua data flows in real time and visualization of that data is done anytime.

In a construction site, a Foreman is running out of two by fours and needs to have some more delivered. When the shortage is noticed, it is immediately ordered, the order is received by the supplier or the distribution centre and shipped to that construction site - all in real time.

Financial systems are structured in such a way that one can obtain reliable and auditable financial statements at any point in the year, not just and not necessarily once a month.

The state of knowledge and skill of an employee evolves every day. That employee may meet the threshold of her current situation any time. In Now Mode that situation is revisited as soon as those thresholds are met - when (and as often as) that happens.

Demand forecasts are not updated once a month. They are re-evaluated anytime that events and information warrant changes in predictions made previously.

Now Mode is and inherent characteristic of the Múcuaverse - it’s how things function. It’s not something that is used or setup or triggered. It just is - always.

Múcua Architecture

Spontaneous Association

At the core of the Múcua Model is the principle of spontaneous association.

When multiple people with diverse skills are confronted with a common challenge, they will spontaneously figure out how to combine their skills to draw a path to overcome the challenge. This ability that human beings have of working together spontaneously to find a solution pathway to a common problem is not something that we need to be trained on. We are born with that capability. It’s an innate instinct.

If you think about the social networking phenomena of the past 20 years, you will remember that Facebook, for instance, now has 3 billion active users any given day. Facebook and many other social networks are the most compelling example of the impulse that human beings have to network with each other.

We see this happening, for instance, in natural disaster situations. If you were to examine how people reacted to the Haiti earthquake, the Katrina hurricane or the earthquake in Nepal, you will witness spontaneous association at a very large scale.

In the workplace, we see this happening when people react to handle an unexpected problem. We have all experienced how students that make up a group to carry out a project in college or university, how they define an action pathway and assign work to each other without any direction.

This networking of people meeting goals or resolving problems by Spontaneous Association, and without being directed by any management power, is the foundation of the economy, flexibility and speed of the structures of a Teal organization.

Múcua is a network

The Múcua Model, then, is an Agile Model, based on networking individuals to meet specific goals without managerial direction.

When we mention this definition, the first question we often get is “well, who defines those goals?” The question is actually somewhat naïve, in the face of the economic reality of today.

By and large, most people in the workplace, on a daily basis, are reacting to impulses from the marketpalce (in the form of customer behaviour and/or competitor behaviour) or from operations and supply chains. The vast majority of the time, goals and problems that need to be resolved are not established by management direction. They just happen.

We will address later the approaches to be considered in an Teal environment to define strategy and to shape the groupings of people. What we want to dismiss up front is the notion (a legacy from hierarchical models) that it takes individuals in positions of authority to create cohesion, harmony and strategic alignment in how people are structured.

Network Nesting

If you were to tell 1,500 people with the necessary skills to operate the various aspects of, for instance, pharmaceutical manufacturing, eventually they would figure out how to get the work distributed and organized, without any help from a central authority. Spontaneous Association has no scale limit.

However, it would be a very slow process. Then, as soon as market conditions changed, it would again take a long time for the network to adjust to a new reality - which would defeat the purpose of the model in the first palce.

Of necessity, then, it is better to setup ‘cells’ with a few people each and then combine cells with cells and so on.

Network Cells are not Silos

It’s very important, though, to understand that the way the contributions of multiple cells are combined to achieve broad goals, is not the same as the subdivsion of departments in the hierarchical model.

Here’s the big distinction:

In the Hierarchical Model, the minute you subdivide a functional domain into departments, those departments are immediately separated. A and B are different and they work separately.

In the networking model, when two ‘cells’ are identified, they are not separated; the are always connected, i.e., they are networked.

We can take 5 individuals and define cell A; then another 7 and define cell B. Cell A will be connected to Cell B and, therefore, they can associate spontaneously to combine their forces.

The reason why this is so is that each Cell is associated to an end result which is part of a broad end result for customers. Hence, from a broad end result G, we create cell A and cell B as ‘zones’ in the overall network needed to achieve G.

Hence, the identification of multiple cells within a broad goal is called Nesting and not subdivision.

How Nesting works

Nesting goes like this (see the below picture of a network of people; each node is a person).

When individuals in an organization go through their daily work, they communicate amongst themselves, right?

Assume that when someone posts an issue and another person replies with a comment - that is one line in the network.

If someone draws the map of all these lines occurring between individuals, the map will look like a network. The nodes of the network are individuals. The lines are exchanges between individuals.

Then, when you look at the network you notice individuals clustered in small groups. That’s because when individuals respond to real life issues, they often speak and interact with a limited number of competencies - the same ones, most of the time.

If you zoom out, you will see that several of these small clusters are gravitating into bigger clusters. Again, that’s because in an organization with a complex operation, multiple individuals of many different skills find themselves operating in a broad space of problems but not all the problems everywhere.

So, one small cluster equates to a cell of a few people. In this cell, a few individuals are working together through spontaneous association.

Many cells clustered in a broad area represent a zone of influence.

In the image below, the red lines refer to small clusters (i.e., Cells) and the blue lines to larger clusters.

So: a cell is a nest of a few people; a broad cluster of cells is a nest of those cells.

In a nest, everything is connected.

Thus, what we’re doing when we identify cells and broader areas of activity, we are simply zoning the network. We’re not breaking the network into enclosed components (which is what the hierarchical model would do); we’re never ‘amputating’ the communication lines between individuals.

Thus, the standard components of the Múcua Model cannot be seen as a hierarchy and each component can’t be seen as a silo.

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Communication and Messaging

Something interesting to note is how cells communicate with other cells. For people used to hierarchical models, the immediate thought will be that there has to be some sort of protocol that defines how a cell goes to another; perhaps a procedure or a structured process for that to happen. Some may think that each Cell has a “single point of contact” or maybe a Leader (”Team Leader”, “Cell Leader”,...) that talks to the Leader of the other Cell.

That’s not at all how it happens. Individuals from one Cell spontaneously associate with individuals in the other Cell. There are no protocols or rules of engagement because they are not needed.

Do individuals of one Cell identify as being part of that Cell? Yes, of course. But they are not locked in the Cell. The line ‘zoning’ a Cell is not a wall. It’s just an outline.

If this concept of ‘free association’ bothers you, consider this: the human body is the most complex system in Nature. No human being has ever designed a system nearly as complex as the human body.

Wthin our bodies, cells communicate with cells, in extremely complex arrangements. Cells use mRNA messaging to send instructions to other cells.

Now... drum role... tell us: who is in control of all the messaging? Where is the command and control centre? Who’s coordinating things so that the body doesn’t fall apart? The brain? Nope! Absolutely no one.

So, if our bodies function just fine, why would something as relatively simple as people working together need coordination and protocols for messaging between work Cells?

The Freedom and Power of the Teal Organization

Let’s take stock of what’s been said so far:

What happens when we leave competent human beings free to associate their skills to achieve common goals? We let humans be human. We allow the biggest capacity of the human species do its thing: to combine skills and talents to get to an end result faster and better.

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