The New York Times today has an article about an incubator company Betaworks . It "has guided some entrepreneurs to lucrative sales and helped others raise cash from notable New York and Silicon Valley investment firms".
What's notable about Betaworks is that it has an unconventional business model. The founders, John Borthwick and Andrew Weissman, "spent nine months deliberating over how to structure their company before settling on a hybrid of an investment firm and an incubator. " Borthwick says that "our goal is to create a network of companies with lots of connections between them that increases the likelihood of success between all of them."
The author of the article writes: "It's not hard to see that spirit at work. The two dozen companies under Betaworks' umbrella make a point of using one another's creations and often incorporate them into their own services. At a recent meeting at Betaworks, about three dozen employees of Betaworks and its portfolio of companies crowded into a room, trading feedback, updates and the occasional good-natured zinger about their various products. "
So here is one example of a thought-through organization design that is focused on collaboration, for mutual benefit, amongst a number of companies. The 'hub' being Betaworks. (Side note: I noticed that no people with traditionally female names are listed as Betaworks' team members or advisors. Possibly Alex? It seems to be a male dominated organization – where does richness from diversity fit in the business model, I wonder?).
Anyway, the article caught my eye because yesterday I'd been reading an article Interdependence, coordination, and structure in complex organizations: implications for organization design, by Prescott C Ensign, in the The Mid – Atlantic Journal of Business; Mar 1998; 34, 1. In it Ensign argues that 'to achieve competitive advantage, the firm needs structural mechanisms and processes that emphasis lateral rather than vertical relationships.' Clearly, he was writing before the advent of social media and the internet which both work on lateral relationships. But the parallels between the unitary organization he had in mind and the hub organization that is Betworks are striking.
In the paper interdependence is examined and "it is proposed: 1) that an organization needs to develop potential interdependence as well as manage existing interdependence 2) structural barriers must be overcome in order to manage interdependence more efficiently and effectively. He defines structural barriers as 1) part-whole or sub system-system relationships – the way tasks and activities are organized into groups; and 2) authority, power, and influence patterns – the way groups are organized to achieve integration and coordination among groups."
What I wondered was whether the theories presented in the 1998 paper with one type of organization in mind would still hold good for the new type of organization typified by Betaworks. On the surface the potential issues and opportunities are the same – how to help people collaborate for their mutual benefit without getting overly involved in power plays and politics.
Assuming that Betaworks, and the companies it is supporting, are successful – what could other organizations learn from their experience? It might mean much easier and more productive relationships between the various stakeholders in an organization, for example, unions, suppliers, regulatory bodies, and contractors because it develops the notion of lateral relationships and interdependence that extend or span the boundaries of a traditional organization.
This was a concept explored in the book The Boundaryless Organization: Breaking the Chains of Organization Structure by Ron Ashkenas, Dave Ulrich. Todd Jick, Steve Kerr. Originally published in 1995 but in 2002 revised and updated. (Side note: the foreword is written by C. K. Prahalad who died on April 16 2010. There's a lovely obituary in the Economist, April 22. )
Unfortunately, many established organizations are still focused on hierarchical structure and how to 're-organize' them. Thus they miss the possibilities and benefits of thinking of lateral collaboration and interdependence.