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BUSINESS PLANS

Revenge of the Old Rules
 

Inc.'s editor explains why the mistakes smart people make can teach us old lessons about the new economy; plus, how today's organizational charts reveal that we're all making it up as we go along.
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The difference between being smart and being wise, someone once said, is that smart people learn from their own mistakes, whereas wise people learn from the mistakes of others. I'd add a corollary--namely, that the wisest people learn from smart people's mistakes. Why? Because smart people tend to make more interesting mistakes than the rest of us do--mistakes that reveal something not just about the perpetrator's foibles but also about the world at large.

A good illustration can be found in the experiences of the entrepreneurs in this month's cover story, " I Was Seduced by the New Economy." What they have in common is that they're all very smart people, and they're all victims of the conventional wisdom about what it takes to succeed in the face of relentless change. I'm talking about the so-called "new rules"--how companies can't survive anymore without growing, how even the smallest businesses have to learn to compete globally, how the age of the virtual corporation has arrived. The problem isn't that such notions are wrong. On the contrary, they're all based on accurate observations of real developments in a world that is changing.

But even the smartest people may forget that some things don't change--for example, the need to execute well. Doing the right thing, whether it's going global or building a virtual company, isn't enough in this new economy. You still have to do the right thing right.

CEO ART, 1981-1998
As I read Donna Fenn's article " Masters of Improvisation," I thought of a refrain I keep hearing in conversations with CEOs these days. They say they often feel as though they're "making it all up" as they go along, meaning that they are constantly having to reinvent every facet of their business. "Is this just me," they ask, "or are other people having the same experience?" I reassure them that they're not alone, and then I tell them a story.

Years ago, when I first arrived at Inc., I developed the habit of asking CEOs I met to draw organizational charts of their companies. Back in the early 1980s, most of the charts featured the classic pyramid, with key managerial positions represented by boxes at the top and with workers at the bottom. Differences in draftsmanship aside, the pictures all tended to look pretty much alike.

In the mid 1980s the drawings started to change. The pyramid gave way to new geometric shapes as people attempted to portray more complex relationships among employees. Meanwhile, customers and suppliers began to appear in the drawings for the first time.

By 1990 the CEO artists had cut loose: the drawings increasingly looked as though they'd been produced by participants in an arts-therapy workshop. There were gyroscopic concentric wheels; complex molecular forms that turned in on themselves, helixlike; elaborate solar systems. Most striking was the originality of the drawings--no two were alike. What's more, CEOs felt the need to change them constantly. One woman sent me a new drawing every year. The most recent version arrived with a note saying, "I think it's time we began calling these charts what they really are--disorganization charts."

I wish I'd saved all the drawings. If I had, I'd stage an exhibition, "American Primitives: Chief-Executive Art, 1981-1998," and I'd use it to depict the transition from an economy based on mass production to one in which we are constantly having to customize our products and services.

I believe that the structure of an organization reflects the type of work it does. In the old mass-production economy, standardization was the key characteristic not only of what we made but of how we made it. Organizations tended to look pretty much alike and changed slowly over time. But as customers have increasingly demanded customization, organizations have had to become both more flexible and more fluid. The result is that we are all being forced to "make it up" in ways that weren't necessary two decades ago.

That's my theory, at any rate. You can test it if you want. Draw your own organizational chart on a piece of paper, and seal it in an envelope. Put the envelope away for a couple of years. Before you open it in the year 2001, sit down and draw another chart. Then see how the two compare. And, oh yes, be sure to send me copies of both charts--for my exhibit.

Last updated: Feb 1, 1999




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