The largest taxi company in the world, Uber, owns no cars. The largest hotel in the world, Airbnb, owns no rooms.
More than 450 million users in 108 countries use the Uber app every month to hail a cab. The app is designed with a universal language that appeals to both the tech-savvy user in Silicon Valley as well as the car driver in India who may not even have finished high school.
In the hotel industry, it takes Hilton or Marriott two years to add as many rooms to their inventory as Airbnb can in two weeks.
I live and work in Silicon Valley, where several of these companies and their technologies are developed. These have profound implications for businesses, organizations and social systems around the globe. How do managers and policy makers respond to these changes?
As old institutions and legal systems are rendered obsolete, we find that the industrial era principles of management are not so relevant for this digital era organizing.
We have long accepted that organizations stifle individual creativity and rob people of their initiative, if not their humanity. We accepted that because efficiency, productivity and the pursuit of profits were prioritized.
Competitive advantage came from controlling resources and accumulating assets. The organizations were managed by compliance, contracts, and constraints that allowed senior managers to control the strategy, structure and systems in organisations.
In the digital era, management must refocus on creating societal good and serving a purpose, over and above profits or productivity. The open source movement — an online community where developers and users create and share software — is an exemplar of the new ways of doing something for the greater good.
Conscious capitalism and Benefit Corporations are other movements that are growing the new economy by championing new ways to organize. Humanistic Management, another international movement, is driving the change to have management embrace the value of human dignity and social well-being, over and above profits and productivity.
The modern organization is a social system, where people work and collaborate because they want to build something they can believe in together, with a shared vision. The senior leaders must articulate the vision that attracts and enables the right kind of talented people. They must design processes that permit people to take initiative and build trust and cooperation.
Elon Musk and his companies, Tesla Motors, SpaceX, SolarCity, Hyperloop Transportation or even PayPal, may offer examples of how to do this. His vision is to change the world. The rapid innovations he imagines are developed and executed by hundreds of people who work in the several companies he leads. Elon Musk is able to deliver on his grand ambition and aspirations by attracting highly committed and engaged teams of people willing to commit to his vision.
Knowledge and creativity are the new bases of competition. These thrive in a climate of trust, discipline, stretch and support, so that each individual can contribute.
Senior leaders need to 1) shape the purpose of the organization, 2) inspire people by their vision, 3) attract and retain the bright people, 4) and design the processes that unleash the entrepreneurial and creative abilities of the people.
Revitalizing people is the key to revitalizing organizations.
This is a radical shift from being controllers to being enablers. Instead of control over assets, including human resources, the new basis of competition is how to creatively deliver value to the customer and offer new opportunities for work to whoever is willing to contribute in ways that they wish to, mediated by technological platforms.
Google, Pixar, Intel or Oracle, are some other examples where a climate of trust, transparency and open sharing of ideas enable people to thrive.
Jyoti Bachani is an Associate Professor at Saint Mary’s College of California (a Lasallian school) and a founding member of the US chapter of the International Humanistic Management Association. She is a graduate of London Business School and Stanford University and serves on the board of the Journal of Management Inquiry. Email: firstname.lastname@example.org