Excursion 61
The Fractal Business Model
Sometimes simplifying structure is not just about the organisational structures but about how the structures are utilized. As just one (of many) interesting examples, consider the possibility of emphasizing self-management. This is the core concept of the self-managing organisation promoted by The Fractal.
In a “fractal” business model” each person within an organisation operates as a “mini” business. While some redundancy is inevitable, the fractal framework intends to ensure that each person has more clear responsibilities and goals, as well as the pride of ownership that comes from being visibly involved in the success of the entire organisation. Can it really work for larger organizations? Transaction cost economics theory (for which Oliver Williamson won the Nobel Prize) states that firms exist precisely to minimize the costs generated by such a system. But the costs of communication and routinization are decreasing thanks to information technology. As automation eliminates human activities, the value-add of individuals’ use of soft skills will become proportionately higher. It is reasonable to believe that the benefits of self-management could equal or outweigh the efficiencies of organisation in larger firms as these trends continue. Perhaps the business models of the future will require “mini” business models for the individuals operating virtual businesses inside the organisations they work for.
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