Disrupt, Disintermediate, De-Layer, Dynamize

06/08/2016 02:47 am ET Updated Dec 06, 2017

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by Doug Kirkpatrick, US Partner at NuFocus Strategic Group and Roger Burlton, President of Process Renewal Group

All around us, we are witnessing a rapid disruption of traditional business models. The shift is from fierce individual competitors to those that feature multiple partners playing nicely together in a shared value network for the benefit of customers with fickle loyalties and ready to move to something new, exciting and better. Rapidly disappearing are those companies trying to hang on to control of all the moving parts.

In the new value networks, collaboration among partners is the essence and win-win-win is the payoff. Each player brings optimal capability in its domain of capability and together they develop new operational work streams that can scale fast and earn trust in the marketplace which is essential for the sustainability of their business innovation. Obvious (and oft-cited) examples are Uber and AirBnb, which people may be tired of hearing about but which demonstrate a clear pattern. Such foundational disruptions in any industry will bring both adopters and resistance.

Regulatory and legal challenges threaten to stop them, especially when there are lost or diverted resources involved, but at best these annoyances just slow them down. Like ever-creeping glaciers, resistance ultimately proves futile. There is, of course, collateral damage when these or any economic game changers are introduced. The serious decline of supply and the price escalation of rental housing in many cities because of Airbnb, as well as the taxi revolts and municipal constraints imposed on Uber, are examples. In a short time, however, they get sorted out (even though some will not come out winners).

The hallmark of these disruptions is that operationally single point control of one entity is supplanted by common purpose and shared interest among all participants including the customer. The idea of leveraging unused assets, capability or capacity with the ability to connect interested parties to one another easily is snowballing. For example: in Toronto, there is an Airbnb-style 'Rover' service which uses available household parking spaces which are more convenient and cheaper than municipal parking lots. Vayable allows you to book an informative tour with local experts on the location you are visiting or to also be a local expert. The term 'uberization' has even been coined to describe this trend towards the digital commoditization of services in new electronic marketplaces that connect buyers and sellers without the need for a corporate capital outlay.

Underlying the business disruption in these new value networks is the continuing disintermediation of unnecessary, non-value adding participants. Uber and Airbnb have made a start on the journey to cutting out unnecessary intermediaries and connecting people up with fewer intermediaries than before. Essential to their success is that they provide a commercially central mechanism trusted by those that use their services, just like banks have provide trusted financial clearance services for years. In this model external partners are at one with the company providing value that extends beyond the traditional boundaries of the branded legal entity.

Upon closer examination we can ask whether the Uber and Airbnb models themselves are also ripe for disruption since both organizations themselves could be considered intermediaries. Is there more disintermediation in their futures? Will they become disrupted themselves by new business models now starting to appear that take out even more players deemed non value added and therefore unnecessary? Will the banks be next? It appears that this is not the end of this journey. Many believe that newer direct peer-to-peer relationships with no legal entity in the middle will ultimately take over and make the even today's emerging models obsolete.

Certainly the advocates of 'BlockChain', the technology underlying Bitcoin, is a technological foundation for true peer-to-peer interaction and believe that everything will be disrupted, with this completely secure, eminently traceable and trusted direct technology network capability. Others are not so sure yet. Nonetheless, the pattern of getting closer to directly connecting the players in an end-to-end value-creating arrangement will continue to grow and flat partnership structures will keep emerging to organize the work of all participants. This model, if accepted and trusted in the marketplace, will evolve and ultimately predominate service delivery challenging today's disruptors, with all partners sharing one outcome of value to the marketplace with a shared motivation and no wasted effort in the service provider processes.

Socially, the emerging culture of a sharing economy has democratized the marketplace, putting the power of choice directly into the hands of the recipients of products and services (customers and society). This is adding pressure on companies to participate as one. They are striving to connect work in cross-organization end-to-end processes that deliver results to the external world in a straight through manner. To make this work, we also have to question how we operate internally and seek an aligned operational structure that makes things work simply. We need to avoid unnecessary work, delays, costs and even management overhead (the "management tax").

Internal optimization is increasingly evidenced in many organizations by their adoption of the peer-to-peer partnership style described earlier where all roles are adding value. Employees become partners working together in a flat structure often made possible by delayering management hierarchies. Hierarchy is a form of intermediation that is a relic from the industrial revolution. Eliminating does not mean there is no management activity going on, but it could go as far as eliminating all concocted management positions, with workers assuming management functions and establishing a full, internal peer-to-peer model. If it is good for the outside world, why does it not make sense internally?

The sharing culture and the collaboration and trust seen among business partners is a model for internal management. This form of management is a much leaner way of operating, making decisions and choosing priorities. It keeps everyone centered on the optimization of the customer experience as well as the staff experience. Everyone has an eye on the same result in the work they do together. There is a bigger focus on choosing and adjusting all capabilities, including technology and physical assets, to support straight through end-to-end process work without intermediation of management structures.

This trend is dawning on enterprise leaders. They are more aware that the bureaucratic organizational model has serious, even existential deficiencies. The dehumanizing assumptions behind hierarchical rigidity, the worst form of intermediation, are crumbling as never before. A growing number of leaders and entrepreneurs now see what many have seen for years: that the business command-and-control emperor has no clothes.

Disruptive models of organizational governance are blooming everywhere, like desert flowers after a spring rain. The benefits are compelling, even when viewed in the narrowest economic terms. Driving employee engagement (with most surveys showing two-thirds of employees being disengaged) even a few percentage points higher can have tremendous effects on the bottom line (i.e., retention). Slashing the "management tax" inherent in bureaucratic intermediation (since management is the least efficient activity of any organization) allows a company to focus resources on the processes that actually deliver value to customers. Focusing managers on innovation and execution rather than solving employee gripes and absorbing the commensurate opportunity cost is highly productive.

The human benefits are also compelling. When people are able to bring their entire selves to work, and are free to lead and to innovate, something magical is created. Challenges become easier to confront. Teams experience flow. Individuals have a voice. Work becomes fun.

When it comes to new organizational models, vanguard companies are already introducing radical, effective change in the workplace. Vehicles include holacracy, teleocracy, sociocracy, workplace democracy, ROWE, agile management, horizontal management, self-management, wiki management, radical management, lattice management and many other approaches. Internal disruption is happening at an accelerating rate. Drivers include technology, the rising power of millennials (now the largest living generation), philosophy, economics and more.

Some of the companies leading the charge include Zappos (holacracy), W.L. Gore & Associates, Inc. (lattice management), Menlo Innovations (culture of joy), Valve Software (freedom to create without fear of failure), and Buurtzorg (empowered nursing care).

A recent Wall Street Journal article, Millennial Employees Confound Big Banks, by Daniel Huang and Lindsay Gellman, demonstrates the disruptive nature of today's workplace. Apparently, grinding it out for years performing menial tasks while waiting for a shot at a big score is no longer appealing, if it ever was. Young, talented investment bankers want to see the immediate results of their work (exactly how did my work benefit the customer?), they want their work to be meaningful, and they have options. Hierarchy does not meet the need. And they are forcing the investment banking industry to change. Limited office hours, extended sabbatical programs, and coaching senior executives on how to communicate are all part of the mix.

Companies must adapt to survive in a disruptive economy with their disintermediated business models and their delivered internal operations. Dynamic, vanguard companies are showing the way.

Co-author: Doug Kirkpatrick is the author of Beyond Empowerment, The Age of the Self-Managed Organization. He is an organizational change consultant, TEDx and keynote speaker, executive coach, writer, educator and SPHR. He played the first season of his business career in the manufacturing sector, principally with The Morning Star Company of Sacramento, California, a world leader in the food industry, as a financial controller and administrator. He now engages with the Morning Star Self-Management Institute, Great Work Cultures, The Center for Innovative Cultures and other vibrant organizations and leaders to co-create the future of management. Contact Doug at Twitter @Redshifter3.
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Co-author: Roger T. Burlton P.Eng., CMC Roger is the President of Process Renewal Group and co-founder of BPTrends Associates. He is the author of the pioneering book 'Business Process Management: Profiting from Process' and the 'Business Process Manifesto'. He developed and delivered the first Business Process and Business Architecture management workshops in the world in 1991, certified today by universities around the world. He is recognized as a global leader in transforming companies from traditional hierarchical organizations to process managed ones based on a Business Architecture model. He has led numerous initiatives to implement new business models, governance frameworks and process management capabilities for global corporations and government agencies. He continues to chair the most prominent business process conferences around the world.
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