4. FUNKY INC.

Richard Pascale, the author of Managing on the edge, says that Corporations are the dominant social institutions of our age. Who run the world? Firms a company or business basically consists of four different things: -Capital, dollars, nickels and dimes -machinery and buildings, the dirty and expensive hardware -people, the problematic software -a basic idea, the most elusive element

Funky organizations build mirrors that reflect images people have never seen before. Paraphrasing George Bernard Shaws play, Man and Superman: the reasonable organization adapts itself to the world: the unreasonable one persists in trying to adapt the world to itself. Ken Olsen, founder of Digital Equipment Corp. phrased it differently: the best assumpti on to have is that any commonly held belief is wrong. Success comes from shaping the future. Success is about creation, not adaption. Funky Inc. isnt like any other company. It is not a dull, old conglomerate and it thrives on the changing circumstances and unpredictability of our times. Funky Inc. is: focused, leveraged, innovative and heterarchical.

Funky Inc. is focused Entering the age of abundance, we have to stop believing that organizations can master all things and situations. Funky organizations do not aspire to be everything for everyone. Instead, they try to become something for someone. This focus has three elements: There is narrow, hollow and targeted focus. Narrow Focus This means Funky Inc. is focused on one or just a handful of core businesses.

Conglomerates became popular because of the idea of synergy; which was proposed by Igor Ansoff in the 1960s. Synergy is an expression of the managerial belief that it is much more fun to manage a large company than a small one. The other classical argument for diversification was that of spreading risk not placing your eggs in one basket; but in a world characterized by genuine uncertainty and total unpredictability, we can no longer believe in minimizing risk. The Swedish packaging giant TetraPak bet its future on one product; we minimize risk by maximizing risk. The message is that the days of the large and diversified firm are over. In an age of abundance, sharp is beautiful. The antidote to mindless pursuit of synergies is to become intensely focused on those businesses where you clearly have a global competitive edge.

Hollow focus Focusing on only a few businesses just isnt enough. Strategy guru Gary Hamel says that you can take a fat man and cut off one of his legs, but that wont really make him any thinner. Every activity in the firm must be exposed to the question: are we really world class? If not, outsource it. Buy it from someone else someone who is better. Funky Inc. competes on the basis of its core competence and competents; the people who make competencies happen. Indentifying core competencies is soul searching. Funky Inc. looks like the facades from an old Hollywood motion picture, nice on the outside, virtually empty on the inside save for one thing: brains. There always are exceptions: the successful Spanish fashion company Zara manufactures its own clothes. Call these firms hollow, but not empty. An organization may hollow itself in a number of different ways. Quite often people only think about leaving more stuff to the suppliers backward disintegration. But hollowing out can also mean handing over activities to the customers (like IKEA). It used to be a question of adding stuff integration. Now we focus on subtracting activities disintegration and co-creation.

However, beyond core competencies we also have core competent. These people embody the skills which make products and services unique Mr. and Mrs. indispensable. Today, research indicates that your psychological capital is more important then your intellectual capital.

Targeted focus In an excess economy, we find riches and niches. An example is Legshow a magazine for leg fetishists. A more interesting one is Progressive Corp. a car insurance company for alcoholics, junkies and criminals. It is the third largest car insurance company in North America.

Funky Inc. is leveraged In recent years, management and corporations have sought to solve the corporate puzzle trough an obsession with minimization. Now we need to maximize we cannot shrink to greatness. Once an organization has indentified its basic businesses, the core capabilities and the target tribe, it needs to leverage its key resources. Funky Inc. needs to move on from corporate liposuction and anorexia to corporate bodybuilding getting rid of the fat and letting the muscles grow. Leverage in a brain-based world can mean that the same competence can be used to enter an array of industries, without being involved in the actual production of stuff as such. Leveraging is also a three-stage process: internal, industrial and international.

Internal leverage To thrive, we must create a learning organization. Building such an organization is about increasing the rate of knowledge transfer and transformation. We must move knowledge from individual levels to group and organizational levels. Jack Welch said: an organizations ability to learn, and translate that learning into action rapidly is the ultimate competitive business advantage.

Leveraging is not only a question of transferring skills across levels and transforming competents into competence, it also concerns transforming knowledge into forms which allow the organization to profit more effectively from it. Any type of knowledge basically comes in three forms: gas, fluid and solid. We get an idea (gas); start discussing it with others (fluid); and finally develop a customer offering (solid). As we begin to freeze creativity, we also create opportunities for greater economies of scale. But the problem with frozen creativity is that it is easy for our competitors to pick up a copy, take it to pieces and copy it. The alternative is to bundle our frozen knowledge with more fluid or gas-like stuff, to sell provices and serducts. Increasing internal leverage does not mean creating a department for learning or knowledge management. Instead, these responsibilities should be an integral part of everyones job. Rather than knowledge management, the key to increasing internal leverage is knowledgeable management.

Industrial leverage Funky organizations also use their core competencies and competent to enter new industries. But they do so without trying to control all processes internally. The new logic means sticking to your competence, but utilizing these skills in more than one industry. Today, there are at least three types of industrial leverage: attitude based leverage, brandbased leverage and competence-based leverage.

International leverage Funky Inc. is a global corporation. But global does not necessarily mean big. Midget multinationals are already all around us. While globalization is here, it is often not readily recognized in the organizations of firms. Few have managed to build global administrative structures and systems.

FUNKY INC. IS INNOVATIVE By innovative we do not mean a dedicated department. We mean total innovation a frame of mind that applies to everyone at the company. It turns the company into an idea and dream factory that competes on imagination, inspiration, ingenuity and initiative. Innovation is not only a matter of technology, it concerns every aspect of how an organization operates. Total innovation requires ignoring and listening to the customers, as well as promoting internal heterogeneity and homogeneity - trying to achieve both simultaneously.

Innovative trough reinventing strategy In a world where technology, institutions and values are in a state of turmoil, innovation is about rethinking what we are doing and about reinventing our industry. Redefine your industry so that your market share is cut to half of what it is today: then start to think about how to grow.

Innovative trough speed Not only does a larger geographical market necessitate a sharper focus, it also decreases the time available to exploit our capabilities. If your organization has already de massified by means of outsourcing, take the next step to speed things up by re-energising the corporation.

Innovate trough smartness Working is a matter of working smarter. To be creative we need resources and time. In Japan they refer to communication as nommunication it concerns time spent together in a bar after office hours which can be critical to the development of new ideas.

Ignoring and Listening to Customers Radical innovation in a discontinuous world means forgetting about forecasting and listening to marketing studies. Of course, history is littered with people who ignored customers and paid the price. Still, listening to the wrong customers, or listening without thinking, can be killers as well.

If you are really innovative, you are also in a position to fire some of your customers. In a fragmenting world, niches are becoming ever smaller. Increasing individualization combined with changes in technologies and values mean that micro markets have overtaken mass markets. We are entering a one-to-one society.

Combining Heterogeneity and Homogenity Consistency is the last refuge of the unimaginative. Funky Inc. thrives on variation, difference and diversity. There are three solid reasons why heterogeneity pays: 1) Because C=D squared where c stands for creativity and d for diversity 2) More diversity generally decreases the average performance of a system but it also increases the standard deviation 3) To insure success, the complexity of our environment must be reflected in the composition of the firm.

Funky Inc. is neither homogeneous nor heterogeneous; it is both. Successful companies will evolve into organizational tribes biographical organizational tribes. The Zulus have a word for it ubuntu. This can be translated; a person is a person because of other persons.

Funky Inc. is Heterarchical A Greek called Dionysius the Aeropagite introduced the concept of hierarchy some 1,500 years ago. The word literally means to rule trough the sacred. Hierarchy builds on three key assumptions: your environment is stable, your processes are predictable, and your output is given. The enemies of hierarchy: internationalization causes dispersion of corporate competencies. Hyphenation leads to diversity. Education increases depth. Innovation diminishes durability. In an age of abundance, with total global competition, overcapacity in more and more industries and increasingly powerful customers, we need to be different. We need innovation and renewal of our recipe. We need structures that support experimentation and the creation of novelty.

Funky Inc. applies organizational solutions capable of combining and recombining knowledge across any type of border at the speed of light. And hierarchy simply is not for hyphenation and combination, it is for separation and division.

The Funky Model In reality, all firms have three overlapping systems of positions, professions and processes. Historically, we have made the mistake of only recognizing the positional structure. Today, we need to transform complexity into simplicity. Jack Welch goes as far as to call bureaucracy the Dracula of organizational design; it always comes back to haunt us.

Seven Features of the Funky Firm 1) Smaller Throughout the twentieth century the predominant corporate myth was that big was good. We may accept that quantity is not quality in virtually every other area of life, but in business organizations the two remain hopelessly intertwined and confused. Now, those that are large are no longer in charge. 2) Flatter Flatter so that the time from problem detection to solution implementation is reduced. There are two different ways. The first is to take a sledgehammer and hit the organization on the top while simultaneously raising the lower levels by means of training and education. The second way is to get rid of the middle. 3) Temporary By this we refer to working in projects and groups. They are high performance, but also high maintenance and incredibly expensive. 4) Horizontal In reality, most opportunities and problems in a company occur horizontally across functions, business areas, divisions and countries. 5) Circular All really fast systems, like our brain, use circular design.

Circularity is about organizational democracy. 6) Open Changing internal structures wont suffice. Given that the firm is narrower and hollower, we also need to develop abilities to become increasingly networked. 7) Measured How many firms really measure not only their own but also their customers market and mindshare? Are these guys the fastest growing in their industries? How many companies measure their return on knowledge (ROK)? Who is responsible for measuring these new things?

A Recipe for Success The dirty little secret of market capitalism in all its many forms is that successful companies have become so by killing the spirit of free enterprise. They all succeeded in creating monopolies, at least for a short moment in time. Competitiveness comes about by not competing. Success arises from being different, from not participating in the karaoke bar. And then being prepared to change again.