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As for me, all I know is that I know nothing.

— Socrates (469 / 399 BC)

bviously, this is a hypothetical case study. The story may be simple, but, it illustrates those critical issues that are at the center of the modern-day-organizational conundrum. To name a few:

• Inherent inefficiencies of hierarchical organizations
• Explosive crisis of knowledge, information and complexity
• Hyper-accelerated advances in science, technology and society
• Power shift to a network world
• Questioning authority

Why did Space Hotels lose its 2nd place?

SHL lost its market share to its immediate competitor, Hungry Hotels, Inc. (HHI) in less than a year. There was an element of luck because HHI's custodian had important information and he was able to deliver it to its CEO. Still, this does not explain why SHL misinterpreted the market so badly, especially if we consider that they were getting accurate field reports.

However, this management style dates back to early 19th century or before; since the beginning of the industrial revolution.

SHL was an organization whose power was concentrated and its business driven, from the top. Ideas that did not come from the top echelons were ignored. In any given organization, the amount of knowledge and information generated grows exponentially. Most of it is missed by the small number of people which make up the leadership group. Therefore, SHL had to rely on limited data.

It was also mentioned, that SHL was a hierarchical / pyramidal organization. Command-and-control would be its preferred management method. This is not unique by itself. However, this management style dates back to early 19th century or before; since the beginning of the industrial revolution. In the information intensive world of the 21st century, this management style is inadequate.

Information that flows from the base, to the top of the pyramid, is inherently flawed. This is not only true of SHL but it is true of most of hierarchical organizations. The reason is quiet simple. Human beings are notoriously poor at communicating.

Most of us are familiar with the children's game called Chinese whispers or Broken Telephone. The objective of this game is to have a person whisper a simple story into the ear of the person that is next to him or her. In turn, this other person whispers the same story into the ear of the next person down the line, and so on. In the end, the last person in the line will tell everybody what he or she heard. Then the first person in the line tells everyone the original message. Typically a big laughter ensues, because the original story and the ending story have nothing in common.

Just as with the children's game, as information travels up the organizational pyramid it gets distorted. Therefore, it is not far fetch to think that what started as a customer demand for “pink toilet paper” was received by the board as “rainbow colored napkins.” This is plain to see in our simple little story. However, in the real world, the number of information points that will affect the decision making process is almost infinite: The probability of error is therefore much greater.

Could Space Hotels, Ltd change?

The larger question is: Could SHL change so that they regain their market share and avoid similar mistakes? Yes it is possible; but is it probable? SHL could pour a gargantuan effort of labor, time and money to regain its market share, at least in the short run. However, avoiding similar mistakes would literally require an organizational paradigm shift; and these cultural changes are most difficult to achieve.

SHL, as well as millions of business large and small, face similar structural problems. Today it is imperative for organizations to excel in the following areas, in order to survive the complex global environment.

• Identify changes rapidly
• Creatively adapt to changes
• Respond effectively

It was also stated the SHL employees where competent and loyal. It is likely that they were also very well trained. Many of these workers probably held college degrees. But in a compartmentalized and over specialized organization, most of the knowledge held by their employees goes to waste. There is very little latitude for creativity to flourish. Having to perform a work activity which is beneath ones potential is a cause of frustration, apathy, dissatisfaction, etc.

SHL could train its managers, directors, supervisors to see themselves as mentors and enablers to the people that report to them. This vision is in stark contrast to the idea of the all powerful you-do-as-I-say “boss.” Furthermore, SHL could implement information technology tools which make the organization operate more like a network than a pyramidal hierarchy.

Conclusion

Trying to keep up, adapt and grow using the methods of a much slower era is a recipe for disaster.

In the 21st century, organizations large and small face a new crisis which, ironically, does not get much coverage. This is the crisis of complexity. Information and knowledge expansion are moving at accelerated speed. Consequently, product and service obsolescence has become more prevalent. Many new product efforts become obsolete in their blue-print state.

Trying to keep up, adapt and grow in this environment using methods of a much slower era is a recipe for disaster. Nevertheless, this new era has also created a wealth of tools which could, if applied correctly, help thousands of organizations thrive.

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