We spoke to entrepreneur Peter Hinssen about the power of networks and the role of HR.
Technology is consistently disrupting not only processes but entire industries. What qualities must an organization embed in its culture in order to remain relevant and competitive?
This is a core question that many companies are faced with today. Two things have happened in the last couple of years. First, technology has become the norm. Technology used to be a side activity to optimise processes and increase efficiency. However, the next generation of employees as well as the proximity and the ease of use of technology has made technology main stream. Second, technology is getting disruptive. It has the power to transform industries and change business models. This process is accelerating to the point that companies are now taking it much more seriously.
what companies have to do is focus on figuring out how to be more alert for fast-changing models and opportunities.
Yet, embedding these developments into corporate cultures is not a technology issue. Instead, what companies have to do is focus on figuring out how to be more alert for fast-changing models and opportunities. They have to figure out the way to embed this disruptive thinking into their DNA – more so than technologies.
How can a company go about embedding a receptiveness to technology-driven disruption?
There are plenty of opportunities to fathom the potential of the new. Let me give you an example. I see a lot of traditional organisations with a strong influx of young people every year, yet their proximity to the new is hardly utilised. I see so many young people entering companies and following very traditional organisational and structural approaches.
This may be a cliché, but they are at the forefront of all things digital and disruptive and often understand certain things more clearly than people higher up in the hierarchy, but remain an untapped potential. To take advantage of this potential, companies can practice reverse mentoring where young people are given a chance to be vocal about their concerns, be involved in strategic decisions and have an impact on more senior people in the organisation. Reverse mentoring is a very simple trick, and it does not involve technology. It is about tapping into the next generation, which is probably much closer to the future than a 65-year old board member who still thinks e-mail is a great adventure!
You advocate that companies need to learn how to function as a network. Could you break it down into the specific processes that a company should commit to to function as a network?
Digital is becoming the new normal, and it functions as a network. Look at Airbnb and Uber. Their success stems not from powerful new technologies but rather their ability to leverage the power of the network. Networks are flat and hyper-connected environments. That makes them fast. Those still using traditional hierarchical structures lose out on the power of the network because their org chart obsession makes them terribly slow and rather blind to change.
To embrace the concept of a ‘network’ within an organisation two paradigms need to shift. (1) Information should flow freely and fast through the company, which is only possible if it functions like a network. This is an enormous challenge because in many companies information is still locked up. It’s in silos, it’s in repositories. It doesn’t flow freely inside an organisation but rather follows the hierarchy, and that’s a problem to be solved. (2) The concept of a hierarchy and its accompanying structures should be transformed.
Companies today are too dependent on their organisational style. It is understandable as they offer the security of mechanisms that we know, and are comfortable with. For many HR departments, the mechanisms of the past are the only ones they have. Even the new generation of employees that is more accustomed to network thinking, and wants to break free from traditional hierarchies, after the initial happiness of working in a place free of such hierarchy soon starts getting concerns like “Who is going to approve my holiday? Who is going to do my appraisal at the end of the year?” We are basically stuck in very traditional ways of looking at these things because we don’t have the mechanisms of the network future. This is an area where HR is going to have to really step up and figure out the best way to make it a reality.
We need people who are capable of building, guiding and leveraging the network instead of just managing human resources.
Could you elaborate on the role you think HR should play in creating a connected organisation? What would be the first steps to take?
I think the role of HR is going to be incredibly important in the next couple of years, let me be very clear about that. It will be all the more important to put the right people there as this is an age where the true potential of HR is going to pay off. It will shift from a department that is used to control and manage a workforce, to the one that is used to fuel the dynamic of the network of an organisation.
This is a wake-up call because I honestly think that it is time to completely rethink and give a complete makeover to HR departments. We need people who are capable of building, guiding and leveraging the network instead of just managing human resources. Maybe we need to start attracting input from those outside of HR. At the moment if you ask people in a company to spend some time in HR many will not see it as an opportunity, but rather as a punishment. Many still see HR as a black hole. I think it is time to really rethink that.
Therefore, the composition of HR is the first thing. The second thing is identifying a clear strategy and the mechanisms to shift the organisational structure towards a connected one. I’m not saying that we have to abandon all hierarchies and throw organisations into complete chaos. But we have to train ourselves to be extremely flexible, to come up with new ways to guide these new types of organisations. There is no playbook, no recipe. We are going to have to take chances and risks, and this is something which is not very natural to the culture of HR. Many HR professionals are risk-averse. Therefore, entrepreneurial thinking inside HR is going to be absolutely paramount.
As long as people have a common goal, you can unite them around a network way of thinking.
One of your areas of expertise lies in the structural transformation of organisations from hierarchies to meritocracies as a result of networks. While many would agree that old-school bureaucratic hierarchies are not the management style of the future, what are some of the disadvantages of a meritocracy?
One of the big problems is that we don’t have enough historical evidence or tools to understand how to guide meritocracy. The second problem is that meritocracy works really well as long as everybody believes that they are engaged in the same vision, that they have the same mission. As long as people have a common goal, you can unite them around a network way of thinking.
Unfortunately, if one link becomes loose the entire chain unravels. Look at some of the internet companies of the first age. While many had done really well, some have fallen into the trap of turning into old boring institutions. eBay is a good example. It was one of the darlings of the first internet wave, founded by a genius who didn’t believe in structures. eBay grew into a large organisation and fell apart. Now it has all sorts of problems – legacy problems, structural problems. It has become the bureaucracy that they wanted to avoid in the first place.
Yahoo! is another example. It was the number one company of the first internet wave. Then all of a sudden it got bypassed by Google. They went through a couple of CEOs, and at this point even a miracle baby like Marissa Mayer apparently isn’t enough. Yet, the first thing she did when she got on board was to bring people working at home back into the office and see what they are doing. Once a meritocracy loses its sense of purpose and its clear vision, it is extremely difficult to keep up the entrepreneurial momentum. In my opinion, what you need to do is to combine the force of both – using the structure when it makes sense and then leveraging the network within it.
You spend a lot of time in Silicon Valley. What are the major differences between the European and North American start-up scenes?
I coach a lot of start-ups in Europe and in the US. I think the fundamental difference is the culture of risk and failure. You can see it throughout the entire ecosystem. Let me illustrate that with an example. If, as an entrepreneur, you have a good idea and pitch it to a VC asking for $5 million, in Silicon Valley the chances are very high that if you find a VC who believes in your endeavour, he/she is going to ask “If I give you $10 million how far and how much faster could you go?”
The problem in Europe is that this VC will ask you “What if I give you $2.5 million? What could you do then?” And that’s the intrinsic difference in risk culture and risk appetite. You see it in small enterprises and in large corporations alike – there is a much stronger tendency towards embracing risk and failure in the North American culture, based on the belief that the potential rewards far outweigh the fear of failure.
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