The Starfish and the Spider the unstoppable power of leaderless organizations



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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 20th 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..

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