Scenario One: Small Companies, Large Networks

Imagine that it is now the year 2015….

The corporation of the late twentieth century was just a transitional form.^[4] It lasted more than one hundred years, but few corporations of that kind remain today. Now, looking back at the "dinosaur" era in which General Motors, Microsoft, and Sony stalked the earth, we are most aware of the tiny "mammals"—entertainment production companies, construction project teams, and consultant workgroups—which operated without much public notice back in the 1990s, only to become the prototypes of today's modern organization.

Today, nearly every task is performed by autonomous teams of one to ten people, set up as independent contractors or small firms, linked by networks, coming together in temporary combinations for various projects, and dissolving once the work is done. When a project needs to be undertaken, requests for proposals are issued or jobs to be done are advertised, candidate firms respond, sub-contractors are selected, and workers are hired largely on an ad hoc basis.

Consider the design of automobiles.^[5] In a typical project, a variety of independent firms form competing coalitions, to explore alternative designs for the electric system, the chassis, or the task of putting the car's subsystems together. Some of these firms are joint ventures; some share equity; some are built around electronic markets that set prices and wages. All are autonomous and self-organizing. All depend on the ubiquitous, high-bandwidth, transaction-heavy electronic network that connects them to each other. A highly-developed venture capital infrastructure identifies promising teams and provides financing.

Authority is still evident, but not through commands. A small "Chevrolet/Saturn" central company still has senior people who exercise their judgment by choosing where to invest their R&D, marketing, and production capital. But groups also try wild-eyed ideas that turn out to be very successful—and financially rewarding for their participants. For instance, one team of four people created a factory for nano-engineering individualized lighting systems for each car's grille. They bucked conventional wisdom when they built it, and all became millionaires in the process.

Even though this way of organizing work is extremely well-suited to rapid innovation and dynamically changing markets, the world would be a lonely and unsatisfying place if all our interactions were contractual. Therefore, we are all fortunate to have independent organizations for social networking, learning, reputation-building, and income smoothing. These communities evolved from professional societies, college alumni associations, unions, fraternities, clubs, neighborhoods, families, and churches. Many are similar to the writers' and actors' guilds of Hollywood. They help us save for retirement, and most of us pay a percentage of our income to our "guilds" as a voluntary form of unemployment insurance. It is here that we learn and update the skills of our professions, and share war stories and reputations. Perhaps most importantly, we derive much of our sense of identity and belonging from these stable communities that we call "home" as temporary projects come and go.

Shifting Task Networks with Stable Homes

There are two key elements of the "small firms" scenario: fluid networks for organizing tasks and the stable communities to which people belong as they move from project to project.

Examples of shifting task networks already exist. Film production and construction are organized in this way in the U.S., and the texile industry in the Prato region of Italy has thousands of small firms, most with five or fewer employees. Radical outsourcing, in which a firm keeps product development and high-level marketing functions in-house, then contracts out the rest of the value chain, is prevalent in the apparel industry and the computer sector in Silicon Valley and other high technology regions.^[6] The preceding chapter of this volume, on the "e-lance economy", describes several examples of this kind in greater detail.

The second element of the Small Companies/Large Networks scenario is that existing or new organizations will step in to meet the "life maintenance" requirements—the need for health insurance, protection against unemployment and income fluctuation, professional development, and a sense of belonging and community—of those who work in networked organizations. In the developed world, these needs are now largely met by some combination of corporations and the state, with more of the burden carried by employers in the United States and Japan, more by governments in Western Europe.

The Small Companies/Large Networks scenario posits that these life maintenance needs will be met by a variety of other organizations, some of which are currently playing a part in one or another of these areas. The leading candidates for assuming these roles include: professional societies, unions, universities, alumni associations, churches, political parties, service clubs, fraternal orders, neighborhoods, and families/clans. There may also be opportunities for entrepreneurs to create new kinds of organizations to fill some or all of these life maintenance needs. Another possibility envisioned by the Scenario Working Group was that collections of families and individuals might pool their resources and form semi-communal living arrangements to fulfill non-economic needs and mitigate the potential harshness of a solely market-driven work environment.^[7]

The "life maintenance" organizations of this scenario might look very much like the guilds of pre-industrial times or labor unions of the early years of the industrial revolution.^[8] The potential for organizations of this sort is addressed in more detail in chapter 17 in this volume, on "the retreat of the firm and the rise of guilds".

^[4]The narrative descriptions of both scenarios included in this chapter are excerpted and adapted from a report on a meeting jointly sponsored by the 21st Century Initiative and Global Business Network in November 1995; see Kleiner (1996b, 5–7).

^[5]An early version of the automobile industry scenario set out here appears in Malone (1993).

^[6]On the film industry in the vertically-integrated studio era, see Schatz (1988) and Bordwell et al. (1985); on the post-studio era, see Lewis (1985) and Pierson (1996). The Prato region's textile industry is described in Enright (1995); Jaikumar (1986); and Voss (1994). The apparel industry's structure is recounted in Voss (1994), and Silicon Valley practices are discussed in Saxenian (1994) and Jackson (1996).

^[7]Sloan faculty member Maureen Scully created a series of vignettes dramatizing the possible fate of several character types—authoritarian CEO, "enlightened" senior manager, engineer, vocational trainer, unemployed inner city resident—under the two MIT scenarios, and these were presented, with the parts played by professional actors, at the MIT Industrial Liaison Program Symposium in May 1994; see Scully (1994).

^[8]The literature on unions and other organizations created by the industrial working class is vast. Two classic works addressing the early years of the industrial era are Thompson (1964) and Foner (1970).