The Internet and mobile communication technologies have brought about major changes in company organizational structures and operating realities. The changing nature of work and economic conditions in the Digital Age provide a great challenge and opportunity to completely rethink traditional corporate roles and relationships.
When the Scottish-American engineer Daniel McCallum set forth corporate roles in the first organizational chart in 1854 the business world was very different than it is today.
Following the tremendous upheaval caused by the United States Civil War, the US economy was defined by many important trends, including territorial expansion, rapid population growth, the development of new transportation infrastructure and industrialization.
Heavy industry, generally characterized by the use of large amounts of resources, interconnected work procedures and extensive physical distribution channels, required clearly defined organizational roles to operate efficiently.
| Organization roles were originally designed for an economy heavily based on the industrial sector. |
Since that time, there have been massive changes to the United States economy and how firms are organized. Most importantly, economic development since the late 19th century has been characterized by a dramatic fall in agricultural and industrial activity as percentages of GDP and a dramatic rise in the services economy.
Major structural economic changes led to the creation of many different types of companies, flatter organizational structures and numerous types of joint commercial relationships with external parties. These tendencies, which greatly accelerated with the globalization of commerce, have been closely mirrored by the path of economic development of many other countries.
Company Operating Realities in the Digital Age
In the 20th century, some of the most important changes to impact the business world have no doubt been the rise of the Internet, the digitalization of commerce and the proliferation of mobile technology. These changes have brought about many shifts in how companies think about and do business.
| The Digital Age has brought about massive changes in how many companies think about and do business. |
● Market Size. The growing world population and rapidly increasing Internet penetration rates have completely transformed business market reach and potential. Companies that previously only targeted small, local markets suddenly have access to millions of potential consumers who can be reached in fractions of a second.
● Market Dispersion. The explosion of potential consumers, growth in consumer credit markets and the ability of many products to be rapidly or instantly delivered has redefined many companies’ consumer bases. Instead of being concentrated in defined geographical regions, the Internet has allowed a firm’s consumer market to be spread across many jurisdictions, cultures and languages.
● Market Interaction. The Internet has led to the transformation of many vendor/consumer relationships. Customer relationships that were previously characterized by compartmentalized, formal and intermittent communication pathways are now highly dynamic, direct and constant.
Given the fact that the Internet allows information about a company and its products to be rapidly disseminated to customers, potential customers and competitors, many companies’ market interface has been converted from relatively narrow angles to 360 degrees.
● Technological Development. Many new technologies have been developed, the pace of technological development has increased and the Internet has allowed for information about technology to be rapidly shared.
● Market Dynamics. The availability of massive amounts of free information, highly interconnected markets, the ability of digital world to reduce operating costs, growth of sharing economy concepts and technological advances have all combined to create highly dynamic market conditions.
● Generational Dynamics. Markets have also been defined by new generations and their work and life choices and the fact that people are living longer.
● Work-Space Concepts. Historically, in many types of corporations, people worked in one place for fixed periods of time. Today a recent study found that 70% of people work remotely at least one day a week and 53% work remotely at least half of the week.
The Corporate Structure in the Digital Age
These market and social changes are creating the need and the opportunity to rethink traditional corporate roles. The following sets forth a few ways that corporate roles could change.
● The Open Corporation. Due to growing firm wealth, the rise of crowdfunding and the coming impact of block chain on financial markets, it is likely that firm legal and capital structures will significantly evolve. This will require more flexible forms of oversight over corporate activity, new types of financial rights and new ways to communicate with company stakeholder bases.
● The Sharing Economy Corporation. Given the reality that many areas of firm life require increasing specialization and many firms, particularly at early stages of their growth cycles, do not have sufficient resources to retain large numbers of experts, creativity will be required to obtain specialized assistance at an affordable cost.
This will likely lead to new models for obtaining expertise, such as through the creation of advisory boards, more creative advisory remuneration models and sharing economy model services.
● Chief Executive Officer. The role of the CEO will always be heavily dependent on the type and size of the company. However, it seems reasonable to expect that as firms are stretched out horizontally due to digitalization a significant responsibility of the CEO will be not only setting objectives but also determining what roles will be kept in the firm, what will be delegated to technology and what will be provided by third parties.
There may be significant changes in the positioning of organizational resources with some roles outside of the firm brought inside (such as marketing and technology positions) and roles that are traditionally inside the firm outsourced (such as organizational back office functions).
Chief Information Officer. Given the importance of technology in the Digital Age it is highly likely that the CIO role will significantly expand. This will not only include analysis of technological trends and products but also a much more active role in proposing to firm executives tech-driven strategic growth pathways. It is highly likely that for many types of business models, such as ones that are based on very large numbers of consumers, tech will increasingly drive strategy rather than strategy driving tech.
| For many types of companies, tech will increasingly drive strategy rather than strategy driving tech. |
Corporate Coach. As companies become increasingly digitalized and spread out, traditional challenges with employee management and mentoring will likely significantly increase. It is likely that firms will increasingly turn to persons such as corporate coaches whose sole function will be find ways to monitor and improve employee performance.
Chief Marketing Officer. Given the access to consumers and the tremendous competition for consumer mind space, marketing will become an increasingly important executive role. This will include not only issues of brand strengthening but also the process of closely following consumer dynamics is the target market segment, setting and implementing market interface strategies and developing metrics for tracking marketing impact.
Chief Data Officer. While there are massive amounts of data that can be used to improve every dimension of how companies run, it is extremely time consuming to sift through this information, extract what is valuable and put it into an actionable form. Data officers and mining experts will become charged with designing data analysis and extraction strategies, incorporating or participating in the development of algorithms that can extract information and designing corporate, department and individual data feeds.
Conclusion
As we move farther into the Digital Age and the pace of technological development continues to accelerate, there will be major changes in business environments. These changes will require companies to rethink their organizational structures, the definition of organizational roles and corporate relationships.