A scalable culture of innovation is too often an oxymoron. Smaller, more nimble organizations are rich with entrepreneurial spirit but often struggle to scale. Larger, more bureaucratic organizations scale like clockwork but in doing so, sacrifice the entrepreneurial spirit that would allow them to adapt in a time of unprecedented change. How do we maintain an innovative culture as an organization invariably becomes more complex? It requires us to rethink the fundamental structure of organizations.
Throughout the 20th century, successful, scalable organizations across categories shared structural DNA: hierarchy. Career growth was characterized by linearity and tenure--as time passed, the best performers moved 'upward' in the ranks. Titles signaled growth. Employees settled into an organization and moved through a system with clearly defined ranks and regulations the same way we move through grades at school. As Sir Ken Robinson explains in his famous TED talk about education, this linear definition of progress mirrors the industrial revolution, a system that valued efficiency above all else.
This pyramid-shaped hierarchy works for organizations that depend on maximizing efficiency for success. But for a rapidly growing number of organizations that have recognized the need to "innovate or die," structuring growth around efficiency is a path to obsolescence. Netflix's CEO and Founder Reed Hastings articulates the challenge perfectly: "Industrial firms thrive on reducing variation (manufacturing errors); creative firms, on the other hand, thrive on increasing variation (innovation)." Unsurprisingly, a system designed around efficiency will produce increased specialization and hierarchy--both of which dampen an entrepreneurial spirit.
The "profound liability" that bureaucracy presents has led many companies to radically reorganize their organizational structure. Zappos founder Tony Hseih made his 2014 goal to create a holocracy by abolishing titles entirely. Hseih's resolution isn't the first of its kind--it's part of a broader trend toward "flattening" organizations by abandoning traditional hierarchy to jump-start a more entrepreneurial culture.
Ironically, instead of fostering collaboration, demolishing traditional team structures often has the reverse effect. A study conducted by researchers at UC Berkley and the University of Oregon found that "humans subconsciously rely on visible cues like attractive features or extroverted personalities to assign status in a group that has no labels to indicate otherwise." Lack of clarity around roles, responsibilities and growth creates an environment that bring out the least collaborative qualities in people. Executive coach Harrison Monarth sums up the challenge perfectly in his Harvard Business Review article: "in a holocracy, the titles disappear, but human dynamics won't." People end up spending more energy defending their territory than they do focusing on their contribution.
Perhaps we have oversimplified the issue. We live in the most dynamic period of human history to date, yet are still thinking in black and white--organizations as either tiered or flat. To preserve growth paths through an organization while also creating a culture of innovation, we must first rethink growth. More specifically, we need to find the space where company growth can overlap with individual growth.
Let's take an example: LevelUp is a mobile payment system that is now used by 14,000 merchants across the US, but it started as an entirely different company called Scvngr. The only thing Svngr and LevelUp have in common is mobile. Svngr was designed to bring digital gaming to the physical world in the form of digital scavenger hunts. While working on Svngr, the team began to delve into the future of mobile payments. They created one product, then another, then another before they arrived at the LevelUp product that's now in stores. As the company grew into a new product and a new arena, the team grew into new, adjacent roles.
In a traditional hierarchy, adjacent responsibilities in an organization were seen as "lateral" and not indicative of progress. The success of LevelUp demonstrates the importance of allowing adjacent growth as opposed to enforcing linear growth. To create an organization tailored for innovation, you actually want your employees to be on exponential, not incremental, learning curves. This philosophy resonates with the desires of today's workforce--studies have shown that the younger generation is looking for "challenge and variety" as opposed to traditional "upward" movement. They want to be growing exponentially, and they're more interested in what they're doing day to day than what their titles say.
Instead of defining jobs by titles, we should delineate the role an individual plays on a particular project or initiative: what they are actually doing. Radical clarity around roles and remits on a clearly defined, temporal sprint enables organizations to maintain efficiency while allowing people to stay flexible from one project to the next. Companies who have experimented with this approach have found huge success. At Google, project teams are formed around a new idea and given three to four months to prove the concepts viability. If the idea gains momentum and has demonstrable potential, the team expands. If not, the team disbands and redistributes.
Empowering employees to think about what type of problems they want to solve from day to day helps them see a non-linear growth path through an organization. It also challenges organizations to think about employees in terms of skill development as opposed to their constrained roles. By encouraging employees to "start talking about things that excite them," employees are incentivized to solve real problems that organizations face--and both the employee and the organization benefit.
Our world has become increasingly dynamic. The organizations of the future must be equally dynamic to succeed. It's impossible to expect radical change without being willing to adapt organizational structure to be radically responsive. We can't design a system that privileges efficiency and expects creativity to emerge. Equally importantly, we can't dispose of a legacy system and expect a better one to evolve naturally in its place. We need to map organizational growth potential with individual growth potential so that both are incentivized to adapt and grow together. Only then will we build organizations that are as scalable as they are innovative.