In his book, The New Age of Innovation, C.K. Prahalad, with his co-author M.S. Krishan, redefines the organization as “The New House of Innovation.” Prahalad poses that the traditional organization, as the epicenter of value creation, is a thing of the past. Rather, value is created by having access to knowledge and information, and not by having ownership or control. Value is something that is overwhelmingly created outside the comfort zone, or paradigm, of the traditional organization. Social networks shift the power of organizations to their stakeholders, in particular, their consumers. If the organization wants to capitalize on this, they will have to emerge as a communication interchange, with the main goal of facilitating and optimizing cooperation between all stakeholders.
According to Prahalad, every customer wants a customized and co-created experience in every moment of contact with the organization, its service, and the product. Only then can we talk of distinctive capacity. This requires an unprecedented decisiveness and flexibility in the company processes. This is one of the three qualities of his New House of Innovation.
The second organization quality is N=1: the customer is unique. Human, material and immaterial sources for organizing are available everywhere.
Their key to success is collaboration between all stakeholders. The high measure of Internet connectivity enables even the smallest organizations and free agents a role on the world stage. Or, as Chris Anderson puts it in his book, The Long Tail: “The webification of the supply chain in many industries, from electronics to apparel, now means that even the smallest companies can order globally.” With that, he subscribes to the third organization quality Prahalad postulates: R=G, resources are global.
With this model for The New House of Innovation, Prahalad and Krishan designate an organizational architecture that, as far as I’m concerned, deserves the designation of 3.0. It is based on a social structure and a technical architecture, and excels in the qualities of flexible company processes, “N=1” and “R=G.” Their insights confirm that organizations, small and large, have to focus on the individual instead of the masses.
For me, this means a connection with Anderson’s Long Tail theory. So, let’s have a look at that.