12 Organization 3.0

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    “Change is a big part of the reality in business. Willingness to change is strength, even if it means plunging part of the organization into total confusion for a while.”
    – Jack Welsh

    The word “organization” stems from the Greek word οργανον (organon), which literally translates into “tool.” An organization is the main instrument that brings people and resources together to add value, within a certain timeframe, to (part of) a product or service, where parts may or may not have been outsourced. From this point of view, the organization cannot be a goal in itself. In addition to this, a real craftsman is one who constructs his own tools…

    Value creation is the reason of existence for organizations. Management thinker Peter Drucker called this “The Theory of the Business.” Value creation is centered on:
    – Performing activities that increase the value of goods or services to clients.
    – Actions that increase the worth of goods, services, or even a business.

    In 1994, Peter Drucker wrote an article with the title "The Theory of the Business":

    "An organization is built around assumptions. Assumptions that shape any organization’s behavior, dictate its decisions about what to do and what not to do and define what organization consider meaningful results. These assumptions are about markets. They are about identifying customers and competitors, their values and behavior. They are about technology and its dynamics, about the company’s strength and weaknesses. These assumptions are what a company gets paid for."

    Traditional methods no longer work. Many organizations have lost their touch with relevance, as Drucker states, “they no longer fit reality,” Hence, they are no longer capable of creating value, and thus lose their right to existence.

    We see organizations that have changed the traditional value creation into what is called “shared value creation.” The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company, while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between social and economic progress. The concept rests on the premise that both economic and social progress must be addressed using value-based principles. Value is defined as benefits relative to costs, not just benefits alone. Value creation is an idea that has long been recognized in business, where profit is revenues earned from customers, minus the costs incurred. However, businesses have rarely approached social issues from value-oriented perspectives, but have treated them as peripheral matters. This has obscured the connections between economic and social concerns.

    “Value co-creation is not efficient when using a traditional value creation process. It requires a complete reconsideration of how a company operates and cannot be approached within the context of a traditional value creation system.”
    – Tanev, Knudsen, and Gerstlberger (2009)

    Don Tapscott, author of the book Wikinomics, sees opportunities in using the Web, and all its possibilities, to create “shared value creation.”

    He argues:

    “Corporations are going through profound changes that are affecting their strategies and business models. The Internet is dropping transaction costs, triggering deep and unprecedented changes in the deep structures and architecture of the firm. ‘People’ who provide capability for firms can now be outside corporate boundaries. Companies participate in complex networks and can innovate through Ideagoras — open markets for uniquely qualified minds. They can turn customers into producers or ‘prosumers.’ They can tap into vast peer production communities outside their boundaries like Linux. For corporations, there has never been a time of such turmoil.”

    The Dutch professor André de Waal, after investigating 1,500 companies in 50 countries, argues that successful organizations, or “High Performance Organizations,” as he calls them, have a number of characteristics in common, and in which they have better performance than others. These are the five key factors:
    – Quality of management
    – Openness & action orientation
    – Long-term orientation
    – Continuous improvement and renewal
    – Quality of employees

    All the above may be alreay absolete. Where virtuality blurs with reality we see the rise of so called Crowd Companies (Owyang, 2013). The crowd can get anything they want from each other and may go around your organization. So in order to survive as an organization, you have to connect with the crowd. Engage with the crowd. Work, design, produce and sell with the crowd and again, they may do that by themselves. Hence the name "Crowd Company".

    So, in order to become a successful organization in Society 3.0, we have to change our organizational thinking, in terms of value creation, our raison d’être, the justification of our existence as an organization, and we have to do that within different organizational structures. We must do so with a different philosophy than we have used traditionally. It is time to reinvent ourselves.

    Let’s have a closer look at value creation.

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