When the world is moving towards a network economy we start to see new management practices emerging that take into account the fact that supply chains often include autonomous actors. Vertical companies in the past controlled the production of goods from start to end. Now globalization has resulted in increased competition and various verticals are starting to focus on their core competences and out-sourcing the rest. This transformation from vertical integration to horzontal integration requires new ways to think about how to improve the outcome of a supply chain. Often the approach is to emulate the past practices of leadership to cover the new structure, something that we may call network orchestration.
Often these new kind of supply chains are called networks. My definition of network limits a network to such an organization of nodes in which a node autonomously chooses whether or not to connect to another node or not. The driving force is win-win, in which both parties have mutual interest to cooperate or connect together.
I think this definition is somehow in lines with what Manuel Castells calls the network society. Today, many organizations see the ability to network as one of their core abilities to stay in business. This bottom-up behaviour is very different from the top-down organization where one node has total control over the other nodes and chooses who is part of the “network” and who is not. These are more like virtual organizations, intentionally managed by very powerful nodes.
If we think about the word “orchestrator”, the original meaning of orchestrator was to describe someone leading an orchestra:
Orchestration or arrangement is the study and practice of arranging music for an orchestra or musical ensemble. In practical terms it consists of deciding which instruments should play which notes in a piece of music.
Think about this for a moment. The orchestrator decides which instruments should play which notes in a piece of music. In business terms, if the music is the network, notes are business transactions and instruments are the various companies, we see that orchestrator is some single company in the middle who controls the whole masterpiece. There is no freedom for innovation, mutual partnerships or emergence. The structure is defined by one party and it stands. Sounds like a synonym for tyranny.
This is one of the reasons why I think that networks cannot be led like cattle. In true networks in which we have multiple autonomous actors, the most influential are hubs that have more connections than others. The reason why hubs exists is often the value that is generated through the hub, for example the connections the hub already possess and/or the value in the hub itself. In the book Linked, Barabasi explains the concept of so called scale-free networks in which the average connections per node follow a power-law distribution. Rich get richer, hubs that have a lot of connections have good chances to receive more connections than others. All successful ecosystems like life itself follow the properties of a scale-free network. In terms of the network, life is self-organizing itself.
In 1990, sociologist Elinor Ostrom argued that external authorities can damage communities that create common pool resources (CPR). Common pool resources are centrally important, because if the number of free-riders (overconsumers) in a network overpasses the number of actors that add more value in the network than they take, the network will fall apart. A self-regulating community which is collectively able to choose, modify and judge the rules, sanctions and conflict-resolution mechanisms that govern the community will be able to produce common pool resources and work towards a common goal. Once an external authority alone orchestrates all the rules, boundaries and sanctions, the members of the community will start to drive their own self-interest. This results in increase of the number of free-riders. Humans are very bad collaborators. Voluntary cooperation among other participants often emerges only if the community members are aware of being part of a community and have freedom to participate in creating the rules that define the community.
In today’s network economy it’s more important than ever to have qualities to become a hub. To become one, one needs to know how to be influential enough to create a lot of win-win opportunities for cooperation. This is leadership without leadership. Knowing how to be an influencer rather than an orchestrator.