The Starfish and the Spider
the unstoppable power of leaderless organizations
Ori Brafman and Rod A. Beckstrom
Ch1
MGM’s Mistake and the Apache Mystery
In the opening chapter the authors recount highlights of the record industry to maintain its
prominence in light of the internet and P2P networks. A supreme court ruling in 2005 sided in favor
of MGM, joined in suit by Columbia, Disney, Warner Brothers, Atlantic Records, Capital Records, RCA,
BMG, Sony, and Virgin Records, against Gronkster. When threatened, the record companies pool
their resources and go after the threats with their blue chip lawyers, like Don Virelli (who presented
arguments in 2005). Despite the record companies taking the new threat seriously and attacking it
aggressively (e.g. suing Shawn Fanning and bankrupting Napster), their problem did not go away, in
fact it got worse.
To explain this phenomenon, the authors draw comparison to the Apache Indians. In 1519, the
Spanish Conquistador Hernando Cortes entered Tenochtitlan (present day Mexico) with a small band
of troops. He killed the leader, Montezuma, blocked all the roads in and out of the city, and within 80
days starved to death the 240,000 inhabitants, effectively shattering the Aztec Empire. Roughly a
decade later, Francisco Pizzaro captured the Incan leader Atahuallpa, executed him, and installed a
puppet leader. Within two years, another civilization consisting of millions had been completely
shattered. Over a century later in the 1680s, the Spanish push north into present day New Mexico; it
was there they encounter the Apache Indians.
Unlike the Aztecs and the Incans, the Apaches did not have a centralized civilization with a lot of
infrastructure and a powerful leader. Rather they lived in small villages and followed Nant’ans.
Unlike Presidents, CEOs, Kings or Emperors, Nant’ans did not compel subordinates into following
them (the author terms this ‘coercive power’). Instead they lead by example and the peoples either
follow them or don’t. Geronimo was a Nant’an. When he chose to fight the Europeans, the apaches
followed him and went to war. But they did so because they wanted to not because Geronimo
ordered them to.
Its not anarchy, their a still rules and norms that people follow because they choose to. They are just
not enforced by a single authority, rather everyone enforces them. The Spanish were never able to
master the Apaches they way they had the Incans or Aztecs. When the Apache’s villages were
threatened, they abandoned them and became nomads. They easily adapted and they did not have a
single ruler in which they consolidated all their power.
The more the recording industries consolidated power and attacked the harder it was to target their
threat. Napaster was replaced by Kaaza which was then replaced by Kaaza Lite then by eDonkey and
finally eMule. EMule has no leader or central server, no one even knows who started it.
The First Principle of Decentralization is when attacked, a decentralized organization becomes
even more open and decentralized.
Ch 2
The Spider, the Starfish, and the President of the Internet.
This chapter opens with Dave Garrison, the President of Netcom, an early service provider trying to
raise capital for his company in 1995. Dave Garrison had problems trying to explain ‘the internet’ to
potential investors because they all needed to know who was in charge of the Internet and kept
asking “who the president of the internet” was. Frustrated and unable to effectively explain, Garrison
surrenders and tells the prospective investors he is the president of the internet. This points to a
common human trait “that once we are used to seeing something a certain way, it’s hard to imagine it
being any other way.”
This chapter also introduces the concept of the namesake of the book. We are used to seeing most
organizations as “spider” organizations. Spiders have a number of eyes, legs, and other organs, all
controlled by the head, that it uses to slowly but surely build its web. Starfish however are very
different. Starfish don’t have heads. Many of their essential organs are replicated throughout their
body. When you cut a Starfish in half, you will eventually have, two new starfish. With some species
if you cut off a single leg not only will they regenerate that leg, the severed leg can regenerate an
entire new body. This regeneration can occur because instead of a single head controlling the rest of
the body, the starfish is actually a neural network. For one arm to move it has to convince the others
to move, kind of like a Nant’an. Biologists still don’t fully understand how it works which leads to the
Second Principle of a Decentralization; it’s easy to mistake starfish for spiders.
The chapter then gives two new examples of organizations, one a starfish and one a spider. In 1935,
Bill Watson, an alcoholic, seeks recovery through other people with the same problem. This coming
together of substance abusers leads to the creation of alcoholics anonymous. The book refers to AA
as the best known starfish of all. The only thing really holding AA together is its members and real
the only thing they share are the 12 steps. There is no centralized headquarters and no hard and fast
rules.
AA formed in 1935 is contrasted with the 1935 hurricane that hit the Florida Keys. A local
supervisor of FDR’s public works project raised an alert with higher HQ an requested a train to
evacuate works. The decision cycle for higher takes to long to decide whether or not to send a train
and 259 workers are killed in the storm. The storm could have missed and then HHQ would have
been correct in not sending the train the point is not the more open systems make better decisions,
simply that they are able to more quickly respond be everyone has equal knowledge and the ability
to make direct use of it. This leads to the Third Principle of Decentralization: an open system
doesn’t have central intelligence; the intelligence is throughout the system.
People struggling with additions other then alcohol are quick to take the AA model and adapt it to
help them recover from addictions
to narcotics, food, gambling, etc.
Which leads to the Fourth
Principle of Decentralization:
open systems can easily mutate.
Because the record companies are
spider organizations everyone
decision they make on how to
combat the P2P threat has to be
discussed, debated and agreed
upon, their decision cycle is
markedly slower than the
leaderless P2P developers. This
exemplifies the Fifth Principle of
Decentralization: the
decentralized organization
sneaks up on you. Spider
organizations slowly weave their
webs, taking them a long time to
amass resources and become more
centralized. Starfish organizations
can take an entire industry over in
the blink of an eye.
The chapter returns to the music industry to explain “the accordion principle” which is how over
time an industry will cycle between centralization and decentralization and back again. This effect as
it exists in the music industry is best summoned up in the figure above.
The catch is that in order to profit from the sharing of music files, an organization has to be
somewhat centralized. They need at least need to have an account in which to collect fees. But
having an account or being centralized, presents a target which the record companies can attack.
This leads to the Sixth Principle of Decentralization: as industries become more decentralized,
overall profits decrease.
The remainder of the chapter lists ten questions that can be asked to determine if an organization is a
spider or a starfish..
1) Is there a person in charge?
2) Is there a Headquarters?
3) If you thump it on its head, will it die?
4) Is there a clear division of roles?
5) If you take out a unit, is the organization harmed?
6) Are knowledge and power concentrated or distributed?
7) Is the organization flexible or rigid?
8) Can you count the employees or participants?
9) Are working groups funded by the organization, or are they self-funding?
10) Do working groups communicate directly, or through intermediaries?
Ch 3
A Sea of Starfish
This chapter offer a look at four starfish organizations; Skype, Craigslist, Apache (the web technology
developer), Wikipedia , and Burning Man.
Skype. After experiencing some serious legal problems , Niklas Zennstrom, the founder of Kazaa,
passes to control of the P2P to others and looks for a new industry where he can apply P2P
networking. Like record labels, telephone companies at the time were highly centralized. Thousands
of miles of telephone lines and fiber optic cable along with the building and launching of satellites,
represented a high barrier to entry in the industry. It cost long distance callers three cents a minute
to connect users long-distance which added up to around $20 billion cost for the providers. Using
P2P technology, Zennstrom was able to allow users to connect for virtually nothing. In December
2004, Skype had 15 million users, by the end of 2005 it had 57 million.
Craigslist. Started in 1995 by Craig Newmark, when he kept an email list of local San Francisco Bay
area events. As popularity for the site grows, Craig listens to what the users want in terms of
categories. The website also relies on the users to flag offensive posts. What keeps the whole thing
running is what Craig refers to as a community of trust. In one example a members offers boxes for
free. Another member comes an hour later to pick up the boxes and says he will pass them on once
he is finished with them. Craigslist has a devastating effect on newspaper revenues, who begin
consolidating.
Apache. The first popular browser for surfing the web comes from the NCSA Project at the University
of Illinois. Engineers had been working there for several years to create the backbone of the Web. A
significant number of the engineers leave for high paying jobs once they realize how much profit
potential there is in the web. This departure left a need for talent to create the architecture of the
net. With the NCSA hollowed out, they did not or could not respond to requests from web
development engineers from all over the world. The leaderless engineers decide to develop and
publish the patches needed to make the web work themselves. Brian Behlendorf donates his
computer as a place for other engineers to post their patches and dubs the project “Apache.”
Engineers all over the world use Apache to run their servers with 67% of all websites currently
running on Apache. Most people don’t realized that without Apache, that without Apache the
internet today could have been two or more separate and incompatible internets that were run by
spider like companies like Microsoft and Netscape. Similar to VHS/Beta or Mac/PC.
Wikipedia. In 2000 Jimmy Wales launches a web based encyclopedia for children with parents who
can’t afford a hard copy set. The project is called Nupedia and relies on peer-review for content.
However, the peer-review process is seven steps long (assignment; finding a lead reviewer; lead
review; open review; lead copy-editing; open copy-editing; final approval and markup) and time
consuming.. The editor and Chief Larry Sanger learns about technology called “wiki” (Hawaiian for
‘quick’). Jimmy Wales agrees to use the wiki technology in an offshoot an Wikipedia is born. Within
five years Wikipedia was available in 200 languages with over one million English language entries.
Nupedia squeezed out 24 finalized articles and 74 still in progress when it shut down. Wikipedia
relies on users not just for content and editing, but also for functions like beautifying the website.
While the website is routinely vandalized, the vandalism never lasts long as it is routinely cleaned up
by other users.
The authors use Wikipedia to introduce the Seventh Principle of Decentralization: put people into
an open system and they will automatically want to contribute.
Burning Man. A yearly festival held in Nevada described by the authors as the only 24/7
decentralized experience you can find these days. The two main decentralized qualities to the
festival are that there aren’t many rules and nothing costs money (exceptions are ice and coffee the
proceeds of which go to local school districts. There are also no police at the festival. This absence
results in members having to take on a bigger sense of responsibility. One the one hand there’s more
freedom, on the other, there’s more responsibilities. The crucial lesson for businesses drawn from
burning man is that when you give people freedom, you get chaos but you also get incredible
creativity.
Ch 4
Standing on Five Legs
In 1765 in London Granville Sharp, a musician and attorney meets Johnathon Strong. Strong was a
16 year-old slave who had been nearly beaten to death by his master and subsequently had been
brought to sharp’s brother, a doctor. Sharp successful represents Strong in court and succeeds in
winning his freedom. From that point forward many London slaves sought legal counsel from Sharp
who soon became an avid abolitionist. After eighteen years of representing slaves Sharp had won a
few minor victories but nothing that had more then a marginal victory in the overall movement.
Then he got plugged in with a network of Quakers and that’s when things began to change. Quakers
had a very decentralized organization where no one was in charge and the congregation listened to
whichever member was inspired by god to speak.
A decentralized organization stands on five legs. It can lose a leg or two and still survive, however
when all five legs are working together a decentralized organization can really take off.
Leg 1: Circles. Important to nearly every decentralized organization. Circles don’t have hierarchy
and structure and it is hard to maintain rules as there is no central authority to enforce them.
However, they are not leaderless. Instead of rules they rely on norms. AA has norms of
confidentiality and support. Wikipedia has norms for editing entries. Apache has norms for
developing code. Burning Man has norms for maintaining a gift economy. The norms become the
backbone of the circle.
Leg 2: The Catalyst. In every decentralized organization a catalyst gets the organization going and
then cedes control to its members. Craig Newmark allows the users to decide what categories to list
on the site. Jimmy Wales allows the members of Wikipedia to take control of the content of the site.
Brian Behlendorf lets programmers take control of the Apache server program. eMule is the ultimate
catalyst as no one knows who he or she is and the sources code is available for anyone to use.
Leg 3. Ideology. Ideology is the glue that holds the circle together. The Apaches believed the land
belonged to them and they deserved to self govern. The AA ideology is that people can help each
other out by following the twelve steps. eMule subscribers believe that exchanging free music is
worthwhile.
Leg 4. The Preexisting Network. Almost all decentralized organizations that have made it big were
launched from preexisting networks. To launch AA, Bill Watson drew upon the Oxford Group, an
independent Christian organization with a six-step program for recovery. Sharp had been working
his abolitionist movement for eighteen years before getting plugged into the Quakers, a group with
over 20,000 member in England. However its not as easy as showing up with a good idea.
Centralized organizations aren’t good platforms to launch circular movements in which members are
expected to take ownership. In centralized organizations subordinates might follow movement but
won’t be inspired to give their all. Further centralized leaders will want retain control there by
limiting creativity. Skype, eMule, and Craigslist are among the many decentralized organizations to
launch on the internet.
Leg 5. The Champion. Champions relentless pursue the promotion of a new idea. Thomas Clarkson
became involved in the abolitionist movement in 1785 when he entered an essay contest. He
eventually got plugged in with Sharp where the two of them were two out of three non- Quakers in a
12-man abolitionist circle. Clarkson worked relentlessly 16 hours a day. He traveled all over the
British Isles and started abolitionist circles in every town he entered. In 1833, slavery was abolished
in England.
The Five Legs in Action. Elizabeth Cady Stanton is the catalyst that uses the circular abolitionist
network to promote the ideology for equal rights for women. It is through circle of abolitionists that
Stanton meets Susan B Anthony who becomes the champion of the cause.
Chapter 5
The Hidden Power of the Catalysts
The beginning of the chapter introduces a few new catalysts to the audience. Auren Hoffman who
has launched a variety of networs including The Silicon Network (a network of leading thinkers and
business executives that convenes to discuss social issue), the CIO Symposium in which chief
information officers meet to discuss issues important to them, and the silicon Valley 100. Josh Sage.
Who connects activists around the country. Deborah Alvarez-Roriguez is the former director of San
Francisco’s Children, Youth, and Their Families and current head of Goodwill Industries of San
Francisco.
Through their interviews with catalysts, the authors begin to notice traits shared by all of them. They
term these shared traits :”the Catalysts Tools” which include:
Genuine interest in others- Auren thinks if you are bored by talking to someone then you have not
found the right questions to ask to find that person’s true passions;
Loose connections- similar to the interesting conversations one might have with their close
personal friends, a catalyst has these meaningful connections with thousands;
Mapping- in addition to being genuinely interested in the conversation you are having, a catalyst is
also mapping out where you fit into their social network;
Desire to help- if the catalysts network is one-way, meaning the catalyst’s pursues the network for
self profit, then participants would quickly get tapped out and become unresponsive;
Passion- the catalyst starts the organization and then takes on the role of constant cheerleader, but
the don’t cheer to hard or they would become the center of attention;
Meet people where they are- a catalyst doesn’t try to persuade people are push them, when
confronted with an aggressive push most people shut down and become less likely to change. When
people feel heard, understood, and supported they become more likely to change. When you give
someone advice a power hierarch is automatically created. Catalysts inspire without being coercive;
Emotional intelligence- emotional bonds are stronger in decentralized organizations, people run
programs for catalysts because they respect and believe in them;
Trust- catalysts have to trust the network.
Inspiration- After speaking with Jimmy Wales, you want to spend hours in front of a computer
contributing to Wikipedia.
Tolerance for ambiguity- When asked ‘who is in charge of your server software?” Jimmy Wales says
‘I don’t know.” There’s no way to measure results or keep track of members or know what their
doing. Attempting to impose order and
structure would provide more control
but kill the starfish.
Hands-Off Approach- catalysts get out
of the way. In a c2 heavy environment
it is possible to closely trak what
everyone is doing, but it is less likely
employees will take risks or innovate.
Receding- After a catalyst map a
network, make connections, build trust,
and inspire people to act, they leave..
The final section of the chapter
contrasts how CEOs differ from
catalysts. See adjacent chart.
Ch 6
Taking on Decentralization
The chapter begins in a bookstore in Berkely California where and individual named Sky is
addressing an eclectic group of animal activists. Sky teaches the group how to read topographic
maps compass skills, where to buy air horns and everything else one would need to know to disrupt
a hunt. One of the audience members is concerned over hunter aggression. Sky neither encourages
nor discourages the woman, he doesn’t see that as his job, he is there to pass along a set of skills and
allow the circle to figure out for itself what it is going to be doing. Sky has the bigger picture in mind.
He travels around the country talking to similar groups, establishes circles and moves on. These
circles take action to disrupt hunts but also move into other activities like breaking into testing labs,
freeing the animals, documenting abuse, and in some cases burning the labs to the ground. The loose
collection of circles eventually becomes know as the Animal Liberation Front (ALF). After the arson
occurs, labs do what spider organizations always do, they consolidate, increase security and
command and control. The FBI begins actively seeking out to investigate and prosecute the members
of ALF. They have some limited successes, and make a few arrests but don’t have a significant
impact.
The structure and tactics of ALF are remarkably similar to al-Qaeda. Following September 11 the
governments response was to consolidate power under the department of Homeland Security and
aggressively seek out and attack al-Queada. Al-Qaeda’s fate is similar to ALF’s which is an
organization that is alive and well.
The chapter then goes on to outline three strategies for a spider to deal with a decentralized threat.
Stategy 1: Changing Ideology.
Eliminating the catalyst is a futile effort, and if you focus on getting rid of circles, they will only be
replaced by new ones. The only part of a starfish you can realistically go after is the ideology. The
Jamii Bora Trust in Kiberia, Kenya has been successful in lifting individuals out of poverty through
microloans. Some of the individuals include felons who normally would be prime candidates for
recruitment to al-Qaeda. Future Generations, instead of sending supplies to Afghanistan, sends
catalysts. One catalyst was Abdullah who started the “poggel” or ‘crazy’ movement. Admission to the
party cost 200 sundried bricks. The circle then decided what to do with the bricks which included
building 350 Mosque-based literacy classes now teaching over 10,000 women in children. “Chinook
Diplomacy” in Pakistan and Kashmir following the 2005 went a long way to improve the perception
of America in that part of the world. Social psychologists say it takes a month of concerted
persuasion to change someone’s ideology.
Unsuccessful attempts to change ideology include the movie industry 45-second commercial
preceding movies that compares downloading movies to stealing cars, handbags, and televisions.
Also, Nancy Reagan’s “Just say no campaign” The last thing teenagers want to hear is messages from
adults, trying to sound like teenagers, telling them what they’re doing isn’t cool.
Strategy 2. Centralize Them (the cow approach).
The Apaches were a threat to the Spanish, the Mxican that followed them, and the Americans that
followed them. They remained a threat until the early 20 th Century. Nant’ans kept rising to
prominence and the people would follow them. The threat evaporated when the American
government began giving cattle to the Nant’ans. Once they had possession of a scarce resource a
centralized bureaucracy soon formed around them to determine how the resource was divvied up.
A similar occurrence happened when Bill Watson and other AA members wrote down their life
stories and published them in a book called the Big Book. In the ultimate act of letting go they decide
to donate all the profits to the AA National headquarters. With 22 million copies sold and counting
the profits proved to be significant. The National HQ of AA spent millions on remodeling their office
space. Later when members translated copies of the book and attempted to give it away for free,
National HQ went so far as to sue members.
If you want to turn a starfish into a spider hand property rights to the catalyst and tell them to
distribute the resources how they see fit. We want structure, control and reporting when it comes to
our money.
Strategy 3. Decentralize Yourself (if you can’t beat ‘em, join ‘em).
The first two strategies focus on how to change the decentralized threat. The third one focuses on
how to change yourself. To demonstrate this strategies the authors return to combating al-Qaeda.
The authors don’t discuss where this took place or who was involved but according to them a Muslim
country decided to combat al-Qaeda by decentralizing. The used the already established network of
police and ex-military groups to form circles to counter terrorist circles. They supplied the network
with weapons and ammunition and didn’t ask many questions. While acknowledging there are
serious political and moral obligations involved with a program that encourages an unofficial killing
spree, the fact doesn’t change the program was hugely effective and about 1/100th the cost of
attempting any sort of conventional action.
Ch 7
The Combo Special: The Hybrid Organization
In 1995 a company called Onsale was founded. Onsale knew there was a growing market for
computers and designed their business model around auctioning refurbished over the internet. The
problem with online auctions, which are brand new at this time, is being able to guarantee quality to
users who are bidding on a product sight unseen. For this reason they acted as intermediaries and
guaranteed the quality of their product. Around the same time, a man named Pierre Omidyar created
a similar auction site as an attempt to help his fiancée to find and buy collectable PEZ dispensers.
Pierre’s company, originally named “AuctionWeb” was soon renamed to “ebay” The biggest
difference between eBay and Onsale was that EBay did not act as intermediaries. EBay’s basic
premise was that people are good. They established a user rating feature in their site that allowed
purchasers to leave feedback for sellers that is publically viewable. And it works, sellers with
positive feedback can sell their products for 8.1% higher prices than non established sellers.
However, EBay is not a complete starfish organization. It is the first of two types of hybrid
organizations, a centralized company that decentralizes the user experience. While EBay’s user have
proven that they trust each other, there are other situations where users demand safe guards that
come only with some centralized command and control. User’s banking information is an example of
this. Because, users would not want to exchange their banking information with strangers, EBay
does act as an intermediary through PayPal. Both Yahoo and Amazon made attempts to copy EBay’s
business model as they believed they could do it for cheaper. EBay fended off this encroachment for
a couple of reasons. First, user’s were reluctant to go to a site and buy from a user with an un
established reputation. Second sellers were reluctant to go to a new site where they would see the
premium prices they were receiving for their established track records.
EBay was able to benefit from the “network effect”; that is, the more their network grows, the more
useful it is to the users.
Amazon is also a hybrid organization that decentralizes the user experience. Amazon user reviews
on retail products have value to other users and cost the company nothing. Oprah added a
decentralized element to her production company with Oprah’s Book Club where thousands of
circles of followers meet and have become a coveted customer bloc in the publishing industry.
Scott Cook, the founder of Quicken and Turbo Tax, started an accountants version of Wikipedia called
TaxAlmanac.org. He does not advertise on the website but began it because he believes the collective
knowledge of the tax community is more powerful than any handful of experts.
Google similarly puts its users to work by basing its search algorithm on which search results its
users fin “useful”
Both Sun Microsystems and IBM open-sources software movements that are threatening so many
other tech companies. IBM employed 600 engineers to work on Linux, an open-sourced operating
system that challenges Windows. IBM believes that because Linux is bad for Microsoft, it is good for
them as they have focused more of their business around designing hardware and software that is
Linux compatible. Sun has also centered its business on providing auxiliary services along with
hardware.
The second kind of Hybrid organization is a centralized company that decentralizes internal parts of
its business.
Jack Welch when he took over GE and broke units into separate organizations that had to perform as
stand alone businesses. Most of the units were so independent that if one unit wanted to purchase
something for another part they would have to pay full market price. Jack’s model was that the
company needed to be either the number one or two in a market or get out and generate high returns
on investment.
Tim Draper runs Draper Fisher Jurvetson (DFJ) a silicon valley venture capital form. The model for
most venture capitalist are described by the authors as castles. All the board members meet in one
place and they are very hard to brake into unless you know somebody. DFJ reversed this by having
71 partners with 19 offices in the US and 23 abroad.
David Cooperrider, a professor at Case Western Business School developed a process to help
company decentralize that he termed “appreciative listening.” The process works by taking a cross
section of workers from all levels of an organization, from janitor to CEO, and have them ask each
other meaningful questions. First members are paired up and given questions to ask each other that
are designed to break down hierarchal differences and help people see each other as individuals
instead of subordinates and bosses. After the interviews the participants form circles where they
dream and brainstorm. This processes gives bosses the ability to tap into innovation on the ground
floor that they previously didn’t have direct access to and it gives the subordinates buy-in as they
have felt heard.
Ch 8
In Search of the Sweet Spot
In 1943 a man named Peter Drucker set about finding out why GM was such a successful company.
Drucker set about this task by focusing on the internal structure of the organization; specifically he
analyzed the power structure, political environment, information flow, decision making, and
managerial autonomy. This approach was somewhat out of the norm, as most researchers doing this
kind of study would tend to focus outside the company. At the time “management” seemed like a no
brainer; managers told workers what to do, and they did it. Drucker interviewed and studied every
echelon management of the company. He published ‘Concept of Corporation’ when he was done.
Drucker praised many aspects of the company, GM delegated a high level of power to their division
managers who were able to make critical decisions while the executive team took on more of a
catalyst role.. However, his report also suggested some changes for the company. Specifically, he
suggested customer feedback into the corporate strategy. His report was not well received by Gm
and they did not attempt to implement any of his suggestions.
In the 1980’s Toyota had built a much flatter organization then GM. At Toyota line workers were
more empowered, there were mechanisms in place to receive suggestions from lower level workers,
there was less of a salary gap in between workers and management and the company was organized
more into teams or circles then a pyramid. One example described was how a line worker at GM had
the power to stop the line which would trigger an alarm and bring dozens of workers/.managers that
would work furious to correct the problem and get the line moving as quickly as possible. At Toyota,
when a line worker stopped the line, a much more pleasant ‘ding-dong’ would ring workers and
managers would gather to study the problem and understand what happened before the line
resumed moving.
Toyota asserted that if GM adopted some of their management strategies they would be able to raise
their efficiencies to Toyota’s levels. GM accepted the challenge and offered to let them take over one
of their plants in Fremont, California. The Fremont plant was the lowest performing plant they had.
Toyota reopened the plant under the name New United Motors Manufacturing, Inc or NUMMI.
Within three years NUMMI had become one of the top performing plants in the company, it was
producing 60% more efficiently then similar plants.
A production manager at GM’s Buick City plant named Jamie Hresko decided to conduct another
experiment. He went applied and was hired as a line worker at the NUMMI plant while maintaining
his identity as a manger a different plant secret. Once hired he went on a one-man sabotage
campaign. He came in late, slacked off, created safety hazards by stacking parts where they were not
allowed. Not once was he reprimanded by management, instead his team-members admonished
him. The union, who was once a thorn in the side of management, was now the party who wanted to
ensure the plant ran smoothly.
The point of the case study is that in the 1940’s GM had found the “sweet spot” in the spectrum of
centralization and decentralization. By the 1980’s their model was the same but the “sweet spot had
moved”. The sweet spot Toyota had found in the 1980’s allowed for creativity but supplied sufficient
controls and structure to ensure consistency.
Ebay found the sweet spot as an online auction house. Unlike Onsale it didn’t hold inventory. Unlike
Craigslist though it didn’t depend entirely on trust. User ratings on Ebay created a combination of
trust and security.
The sweet spot for the music industry has shifted multiple times over the past century. The music
industry started completely decentralized with individual performs operating independently. With
the advent of the phonograph is soon became more profitable to run a record label. When more
record labels came into being, it became even more profitable to consolidate into mega-labels which
provide economies of scale. With the advent of P2P networks, the sweet spot shifted again. EMule
was to decentralized to offer a profitable but did carry its own downsides for users. Pirating music
and the risk of downloading malicious software was too much of a risk for some users. Apple found
the sweet spot by allowing users to by individual songs for a reasonable price, without having to
purchase the whole album or risk downloading malicious software.
The desire for anonymity pulled ALF, eMule, and al Qaeda towards decentralization. Security and
accountability pulled iTunes and eBay toward being more centralized.
Ch 9
The New World
In 1917 the Soviet Union could have invested in telephone networks as the rest of the world was
doing. Instead it focused on a technology that they felt more reflected their Imperial values of higher
ups telling the common people what to do. Loud speakers. But in the 20th Century, the power of
networks that allowed individuals to communicate was far more value.
Rule 1:Diseconomies of Scale.
Organizations used to be more powerful the bigger they were. Skype proved in the
telecommunications industry size was no longer important.
Rule 2: The Network Effect
The bigger a network becomes, the more valuable it is to users. eMule, Wikipedia…
Rule 3: The Power of Chaos
Institute order and rigid structure you may achieve standardization but you will crush creativity.
Rule 4: Knowledge at the Edge
In starfish organizations the knowledge is spread throughout the organization. The best knowledge
often lies at the fringe. Ed Sheeran had the best knowledge of how big of a threat the 1935 hurricane
was.
Rule 5:Everyone Wants to Contribute
Burning Man, Wikipedia, TaxAlmanac.org, and Amazon user review all prove this.
Rule 6: Beware the Hydra Response
The Apaches, P2P networks, and al Qaeda all got more decentralized when attacked. There are ways
to counter decentralized threats but don’t try to cut off its head.
Rule 7: Catalysts Rule
Catalysts are crucial to decentralized organizations. Unlike CEOs they don’t coerce people to action,
instead they inspire them. Attempt to turn them into a CEO and the network will be in jeopardy.
Rule 8:The Values Are the Organization
Decentralized organizations don’t have huge staffs or a lot of structure that holds them together. Its
ideology that binds them.
Rule 9: Measure, Monitor, Manage
Decentralized networks are hard to measure. What is important are its circles. How active are they?
How distributed is the network? Are the circles independent? What kind of connections do they
have between them? You can monitor them by asking How’s the circle’s health? Is it spreading? Is it
mutating? Is it becoming more or less decentralized? Catalysts can get a feel for these without
demanding reports or control.
Managing a decentralized network requires a cross between an architect, a cheer leader, and an
awestruck observer.
Rule 10: Flatten or be Flattened
Increasingly companies are having to move towards a hybrid structure to survive..