Chapter 4: Human Capital and Twenty-First-Century Organizations

4.1 Navigating the Future: The Networked Organization

Phil Condit

Anniversaries are important milestones. They offer us a time to look back and to look ahead, to anticipate the future, to imagine "what might be." Today, I want to talk about the future, about "what might be," as the Information Revolution takes hold and produces dramatic changes in how we communicate, in how we make decisions, and in how we are organized.

I believe we are in a period of unprecedented change. The Information Revolution will produce social impact and disruptive change, just as the Industrial Revolution did when it changed civilization from a rural, agrarian, small economy to an urban, industrial economy. The Information Revolution will change us into a more global, collaborative, integrated economy. The impact on industry and institutions is going to be huge because in a network-centric world, information will flow to where it is required, and this will change decision-making, hierarchy, and bureaucracy as we now know it.

If you look for the roots of the way we are organized, the way every large company in the world is organized today, you will find the organizational lessons of the Greeks, Romans, and Mongols. Whether you were Alexander the Great, who rode in the front of the battle line to conquer a very large territory in a relatively short amount of time; or a general like Julius Caesar, with "legions of many," who added to the Roman Empire; or Genghis Khan, who united all Mongol tribes and organized his army by dividing them into groups of tens, hundreds, thousands, and tens of thousands so he could expand his empire of "all people who lived in felt tents"—if you were going to take "thousands and thousands of soldiers" on foot, or horseback, and march across Persia, across Europe, across China, you had to build both a communications and a logistics structure. You had to have a hierarchical structure because 20,000 or 50,000 people couldn't fit into the tent every morning for assignments. Even a legion of 3,000 to 6,000 was too big for that.

But you could get your top ten people into the tent, and give directions and orders on the plan to march on a city, or to feed the troops. Those top 10 people, in turn, could get their top ten people together to communicate the plan and hand out orders. The pyramid provided the logistics and communications structures. This same basic logistics and communications structure exists today in industry and institutions. Alfred P. Sloan, Jr., studied the military structure and applied it to his company—General Motors. It's the reason why business has "divisions" and "general" managers today.

We are moving into a network-centric world, where organizational structures will look radically different and direct communications will allow for better decision-making. Today e-mail, a graphic-rich environment, videoteleconferencing, and networks are part of a world that allows us to share data and connect, to make better decisions, to improve efficiency and effectiveness. In the future, we will get information directly to the person who needs it to do a job, who needs it to make decisions on the spot. We will routinely communicate messages directly to large masses of people, without going through a hierarchical structure. We have started to do some of that at Boeing, but we are in the very early stages of network-centric communications. I can send an electronic broadcast message over our network and communicate anytime, anywhere, to thousands of employees.

But this is only the beginning. I believe a network–centric world offers a great opportunity to radically change and improve decisionmaking. It will be able to collect data, process data into information, and structure it to allow people at all levels to make decisions quickly. It will allow leaders to move information to people who need to have it, who can turn it into knowledge, who use that knowledge to efficiently make the best decisions.

One simple example is library research. When I was at Sloan in 1974–75, I used the card catalog, the Dewey Decimal system. Created by Melvil Dewey at Amherst 130 years ago, the Dewey System has its own brand of well-developed, structured hierarchy, which was "divided into ten main classes, which together cover the entire world of knowledge."

My searches were often slow and tedious. Today, there are powerful search engines and online links. Today's students have tremendous access to almost limitless sources of material, from MIT libraries and non-MIT libraries, from online subject experts and huge databases, from virtual to brick-and-mortar libraries. A student today saves tremendous amounts of time by researching on a laptop anytime, from anywhere in the world, from an Internet cafe and soon with Connexion by Boeing on an airplane. But this is still just the first step.

Just think "What will it be like in 50 years?" Today part of management's responsibility is to talk to other managers, to go to meetings, to fix mistakes, to make decisions together, to resolve misunderstandings. Take, for example, the first-line manager. Almost everything in a first-level manager's life is driven by recent and current events. Most manage in a chaotic environment. They juggle parts and daily schedules, and make judgments on the best use of everyone's time in order to get the job done for the day. They rebalance work when the team is short a person because someone called in sick that morning. Other management levels have different responsibilities. They may audit the operational plan and communicate status. They ensure that the plan is getting done, just like the ancient empires.

In a network-centric world, that process will fundamentally change. Status will be available automatically online. I believe we will see a shift in roles and responsibilities as more teams work on projects around the clock globally to use time effectively and wisely. When I was an engineer, for example, we created drawings on Mylar that had to be moved physically. Today, we have the ability to work digitally and interactively so our employees can work with customers and colleagues across the world, with a collaborative environment systems tool. The 78,000 people in our new Integrated Defense Systems unit work in 33 states, with many working in a virtual environment on the same programs.

All this is improving our efficiency and ability to compete. Not long ago, we had an opportunity to bid for a government contract, but only had three weeks to write a proposal. We were able to compete and win because we could work 24 hours a day with a virtual team in the United States and Australia. Interactive network tools allowed our people to make it happen.

Historically, we have trained people to follow directions, to let others make decisions. Now, when data and information can be available to all, we must teach and encourage local decision–making. In the military, we have trained people to take orders and follow directions because situational awareness existed only at the highest levels of the pyramid.

Now, as the ability to process data and distribute information spreads widely to the lowest level, we will have the ability to allow people on the front lines to make decisions about what to do next in the battle. Information will be the ultimate "high ground." We saw that for the first time in Afghanistan, where a soldier on horseback used satellite communication to direct bombs from a B-52, bypassing the standard long and often slow command and communication structure.

The same applies to the business world. We have trained people to follow orders, follow rules, take direction. When the data and the information are directly available to them, what will that mean? What happens in a network-centric world when people are able to make their own decisions because they have the information to get the plan done, to make decisions to fix problems, to smooth the disruption of a team member who is out for the day?

What happens when the right information easily flows to the right people, in the right way, and not through levels of bureaucracy? What happens when you have fewer errors and mistakes that the complex bureaucracy and long communications paths create? I can imagine less structure, fewer people. I think the role of management will, and can, be significantly changed in a network-centric world. The leaders, fewer in number, will be coaches and teachers. They will focus on removing barriers. The efficiencies will be huge. We will be able to build products faster from design to market, with enormous benefits to customers and consumers. So what will happen when organizations and decisionmaking look very different? How will we reward employees?

Today, we have a reward structure that, for the most part, is based on how many layers are beneath you and where you are in the pyramid. We pay people based on where they fit in that hierarchy; but does that really make sense? If we no longer need that structure and can get a lot of information to flow through the organization, how do we pay the valuable people—sometimes individuals with no direct reports?

There will be tremendous hurdles to cross as we move toward a network-centric world. Remember, we have thousands of years invested in a hierarchical structure, and so this is not going to change overnight. We might start by asking questions: How can we build an organization that will quickly shift direction when new information, data, or circumstances change the business environment? How do we evaluate progress, skills, and people? What are the roles of management? How do we provide the social structure that is part of the fabric of everyday business?

If we have a network-centric organization where everyone has access to information at the same time, how do roles shift when the old axiom "Knowledge is power" applies to all? How do we get the right data easily to the right people in the right way? Will there be less middle management and more individual contributors? What does a world look like that allows us to achieve the massing of information versus the massing of people? Will these changes be phenomenally rapid or happen slowly? What education and training are required when we expect each person to act logically, with common sense, and make the best decisions?

All of these questions reflect my belief that a network-centric world will be about superior decision-making by those closest to the action. What will be very difficult for many people is that they will have to perform in a totally new and unfamiliar environment. It will not allow participants to sit on the sidelines and complain about those who lead.

I don't have all the answers. But I do know all of this is going to take a phenomenal amount of leadership. We must consider the implications for our industries and universities, for our government and military, for our managers, students, and employees of a network-centric environment. In business, we will need leaders who understand their roles in business, how they can move the company forward, and be willing to think about the future so their company will exist 20 or 30 years from now. My bet is that many companies aren't going to survive because they won't be able to make the huge transition.

It will take working against huge cultural and institutional biases that have been in place for thousands of years. But it is a journey with huge rewards, and thus one worth taking.

Discussion

Q. The future networked corporation will be smaller. How will society be different when many fewer people can aspire to work for larger companies like Boeing, GM, etc.?

A. I think the reality is that we will create jobs at a pretty amazing rate. The challenge is that they will be very different jobs than those there ten years earlier. That's the disruptive part. Boeing will do less bending of sheet metal and building of airplanes but do a lot of network development and tying of systems together. We are not the builder of platforms but the integrator of systems. There will be lots of jobs, but they will be ones that will change at a rate faster than in the past. When my father went to school, he said "I can do this job for the rest of my career." That is no longer the case. That's why continuing education will be so critical.

We have a tuition reimbursement program, and people can go to any school they want and take courses on anything they want. When we put this in place, some people worried that people would take courses on issues not related to our business. And sure some have done some of this. One person got a degree in mortuary science—but this was offset by two people who got degrees in divinity. But the point is, everyone is learning and they are developing, and we are playing a constructive role.

Q. What is the view of Boeing on sustainable development?

A. One of the fascinating parts of the global corporation today is the understanding of the social responsibility that goes with it. Toffler pointed out that corporations can move faster than government institutions. That puts a responsibility on corporations to address issues like sustainable development. All corporate leaders I talk to think about this. We have to look at our role and how we are doing it since that will determine whether we will be here in twenty years.

Q. What kind of managers and leaders are required in the world you describe? How does Boeing create these leaders? Who will be running the future corporations and how?

A. We have a leadership center outside of St. Louis that has graduated 11,000 leaders. I am there about eighteen times a year. That's where we talk about these issues. What will it take to be a good leader, a good coach? How do you employ those skills? Having a place and opportunity to discuss these issues is absolutely critical for leadership development. It also serves other purposes. We are a company that comes from McDonald Douglas, Rockwell, Hughes, Boeing, and others. This is where we mix people together and build their common skills. The most common e-mail I get is one that says our people are amazed at the range of experiences we have in this company.

Q. What are the differences between being an American company operating globally and a global company?

A. We have traditionally been an American company doing business globally. So when we first said we want to be a global company, some said we are already. We sell to 145 countries and have operations in 132 countries. But most have been there to support the products we have sold. I believe we have a responsibility to have our voice heard. To do this we must be present. We can't stand outside and yell—we have to be in the room. The diversity of experience that is brought by people from different countries is amazingly powerful, so we have to be on the ground in a lot of different countries. We have about 3,000 people on the ground in Australia. This allows us to do things we couldn't do otherwise. We run their secure radio network. We couldn't do this as an American company selling globally. I can sit down with the prime minister and express my view on where technology is going because we are there. To be a truly global company, you have to be on the ground and have a truly global management; and your leadership must reflect the diversity of that breadth.