Disruption and Organizational Structure

An organization's behavior is necessarily emergent to some degree, because the organization is made up of many small actors. The decisions those actors make are based on the facts and biases present in the location, and in the moment, they are made. The only way an organization's overall behavior can be coherent or constructive toward some ends, is to facilitate it by the organization's structure. That means things like: the availability of information to local actors, the incentives they face when making decisions, the resources at their disposal, and their latitude for action - _i.e._ the set of parameters that define each actor's sphere of authority/influence, both formal and informal.

Superficially there might seem to be a tension here - the best organizations are those that facilitate high-quality local decision-making; but to make that local decision-making add up to desirable outcomes for the whole organization, the organizational structure needs to be _designed_ to facilitate it.

Too much top-down structure places pressure on local decision-making, which constrains the decisions that can be made - this ends up choking off learning and information-gathering in an organization. But too little or too weak a structure leads to loose connections among the various actors and groups of actors in an organization.

The structure of an organization must be matched to its purpose. Designing that structure requires insight and strategic thinking. It is as important as choosing the right technology or product strategy, or the right market to enter. In any given organization, opinions can differ as to which structure is appropriate or best. It's one of the dimensions along which companies compete - not just features and pricing, but the processes by which they decide on features and pricing.

This leads to an interesting insight: just as competitors can end up looking a lot like one another on features/pricing, so can they in terms of structure. A market made up of firms offering manifestly similar products is often considered stagnant, and thus a potential opportunity for disruption. I think the same is true when those firms have very similar structures - they probably all have similar biases, blindspots, and weaknesses - thus there's likely to be unexplored avenues for them to improve or be disrupted.

In fact, I believe that a market filled with firms that all offer more or less the same product, is likely to be one where the firms have all settled into more or less the same organizational structure.

If the competitors in a given industry all have the same structure, then they all have the same weaknesses (they may be good at competing with one another at the current margin, but not necessarily at exploiting all possible avenues for creating value). You can innovate in this industry in two ways:

1. Deep knowledge/insight - discover one of those possible avenues for creating value, and exploit it. This is the usual approach to 'disruption'.

2. Recognize that these firms behave this way because of their common structure, and reform or modify the structure to give other parts of the firm more influence, or different incentives. This risks disrupting the current cash cow, but it can also allow the org to discover and exploit a new avenue for creating value, which its competitors almost certainly have not foreseen.