Technology Replaces Organizations

Everyone has heard about platform economy and its branch, sharing economy. But what does it imply for an existing company? How do blockchains get into the picture? What should management boards care about? What is the challenge for legislators? Why should Unions start to rethink their business?

Organizations as software

The name of the game is “Technology replaces organizations.” That is, technology enables us to functionally implement organizations and its processes as software. Whatever is standard business can follow standardized processes and decision rules, and whatever follows standardized processes and decision rules can be implemented as software.

There are variations with respect to the potential for standardization, which lead to a range of solution types for organizations implemented in software – from autonomous processing over human exception handling to man-machine co-working. But starting with administrative processes, a great many of organizational units of contemporary companies can be fully or widely replaced by software. That is not nice. That is business.

Blockchains as platforms

Well-known platforms like Uber or Airbnb have done it, thereby demonstrating that a big opportunity of organizations implemented in software is easy scale-up since they can profit from scaling effects and consequently from network effects. Blockchain implementations have done it, too, whereby they come as close as so far possible to autonomous operations. It is further clear that whenever the activities of a company can be fully described by contracts, that themselves are fully formally specified, the whole company can be implemented as a so called “smart contract” on a blockchain. This may lead to the emergence of companies that are no longer legal persons and thus exist outside regulation and law. Lawyers are fascinated, of course!

Strategy departments as software

A typical candidate for replacement by software is the strategy department of a company. Many strategy departments merely collect studies and trend statements, relate them to the business of the company, evaluate them afterwards, and forward a selected list to the board. The board then does the real strategic work, hopefully, and makes strategic decisions. In such cases, the strategy department can either be fully replaced by software, or it can reach a much higher quality of work through new forms of man-machine co-working. In the latter case machines will take over most of the traditional work of the strategy department. External consultants will dislike the message: They are the first candidates to be replaced by software!

Peter Drucker revisited

In the late 90’s Peter Drucker forecasted the emergence of companies consisting only of boards, which was then considered to be the most extreme form of a “dynamic virtual enterprise”. 20 years thereafter, Drucker’s vision is back: the key economic challenge ahead is to create a platform that runs a whole company for the board. If successful on a broader scale, this will turn the labor market upside down – as then a great many of employees will automatically become entrepreneurs.  Unions may have to reinvent themselves!