Archive for the ‘The Starfish and the Spider’ Category

Survival requires finding the sweet spot between centralization and decentralization

November 9, 2007

The success of an organization depends on its ability to find the “sweet spot” between centralization and decentralization.

eBay is an example of an organization that has landed on the sweet spot. It has centralization: eBay requires people to log on, and buyers and sellers must identify themselves. It has decentralization: users can auction items to each other directly, buyers and sellers rate each other. This combination creates both trust and security.

Consider what would happen if eBay were to become more decentralized. For example, suppose eBay didn’t verify users’ e-mail addresses and allowed anybody and everybody to post anonymously. There wouldn’t be much accountability. Less accountability would translate into diminished trust, and eBay would loose customers.

Likewise, if eBay were to become more centralized — say, by verifying the quality of the goods sold — commissions would become higher, and it would no longer be economical to sell on eBay. Again, this would drive away customers and reduce revenues.

eBay would lose market share if it moved further toward centralization or decentralization.

Note that just because a company is on a sweet spot now (as General Motors was in the 1940s) doesn’t mean the sweet spot won’t shift in the future. In some cases, like the online auction industry, the sweet spot seems to be fairly stable. In other cases, however, it is much more volatile and must continually be pursued. It’s almost like a tug-of-war: the forces of centralization and decentralization pull the sweet spot to and fro.

Of course, understanding that the sweet spot can move and predicting these shifts are two very different things.

The Starfish and the Spider by Ori Brafman and Rod A. Beckstrom

Surviving in a world of $0.00 cost open-source tools

October 22, 2007

Instead of competing with open-source tools, IBM supported them.  For example, it deployed 600 engineers whose sole job was to contribute to Linux, and it actively supported the development of Apache and Firefox, the open-source browser that competes with Microsoft’s Internet Explorer.

IBM has predicted that open-source is going to win out in the end.  The company could spend resources developing competitive products but chances are they ultimately would lose out.  The open-source movement simply has too much momentum.

Rather than try to develop a competitive operating system in-house IBM supported the development of Linux, then designed and sold hardware and software that was Linux-compatible.  IBM is harnessing the collective skill of thousands of engineers working collaboratively worldwide, and at no cost to IBM.

Like IBM, Sun has opted to forego revenues from software sales in favor of making money on auxiliary services and hardware.  The price of software is rapidly declining to zero, and the big players are looking for other ways of making money.

The Starfish and the Spider by Ori Brafman and Rod A. Beckstrom

Want to Control a Loose-Knit Collection of People?

October 10, 2007

Want to alter the basic structure of an organization? For example, want to make a decentralized organization into a centralized organization? Here’s one strategy.

Concentrate the power and a hierarchy will form – making the organization more centralized and easier to control.

If you really want to centralize an organization, hand property rights to the catalyst (the person who is very vocal and good at connecting people) and tell him to distribute resources as he sees fit. With power over property rights, the catalyst turns into a CEO and a hierarchy forms.

Wikipedia faces danger if it raises too much money. Ironically, the system works because it is underfunded and because almost everyone is a volunteer. If coveted paid positions are introduced, turf battles and a hierarchical system might result. With concentrated power, Wikipedia would become more centralized and begin to lose its collaborative environment.

The Starfish and the Spider by Ori Brafman and Rod A. Beckstrom

Meet People Where They Are: Avoid Advice-Giver Power Hierarchies

September 14, 2007

Scenario: your friend is unhappy in his job.  You are assertive in your suggestions to him, you tell him: “You need to talk to your boss” or “I want you to interview for this new job.”

Psychologist Carl Rogers warns that this kind of expert advice-giving, though intended to help, actually has the opposite effect.  When confronted with an aggressive push, most people shut down and become even less likely to change.

Rogers practices a different approach.  Rather than suggesting ways for his client to change, he would acknowledge their experiece: “So, you’re unhappy with your job.  That must be difficult.”

Rogers assumes a peer relationship and listens intently.

As Rogers focused on listening and acknowledging his client’s experience, something amazing would happen.  The client would find his own solutions to the problem.  “You know, I don’t like being trapped.  I think I’ll look for a new job.”

When we give advice to someone, we automatically create a power hierarchy.  The advice-giver is superior to the reciepient.  In a decentralized organization this kind of hierarchy is detrimental.

— Extracted from The Starfish and the Spider by Ori Brafman and Rod A. Beckstrom

Are you a traditional leader or a catalyst?

September 2, 2007

“In chemistry a catalyst is any element or compound that initiates a reaction without fusing into that reaction.  For example, take nitrogen and hydrogen, two of the most common elements on earth, put them in a container, close the lid, come back a day later, and … nothing will have happened. But add ordinary iron to the equation and you’ll get ammonia, an important ingredient in fertilizers, polymers, and glass cleaners. The thing is, ammonia doesn’t have any iron in it — it’s made solely of hydrogen and nitrogen. The iron in this equation remains unchanged, it just facilitates the bonding of hydrogen and nitrogen.”

“In an organization a catalyst is a person who initiates an activity and then fades away into the background. In a decentralized organization a catalyst gets the decentralized organization going and then cedes control over to the members. For example, Jimmy Wales started Wikipedia and then allowed the members to take over – content and administration. Another example: Craig Newark started craigslist, and now the users of craigslist decide which categories to list on the site.”

“In letting go of the leadership role, the catalyst transfers ownership and responsibility to the group. A catalyst isn’t usually in it for praise and accolades. When his or her job is done, a catalyst knows it’s time to move on.”

The Starfish and the Spider by Ori Brafman and Rod A. Beckstrom