The decentralisation of organisations

www.nesta.org.uk/report/introducing-decentralised-futures/decentralisation-organisations/
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Just as the government or the web are systems that can become more decentralised, so too are individual organisations. In general, businesses and other organisations have stuck relatively closely to the traditional corporate structure which has dominated for more than a century. Unfortunately, in many contexts, this may no longer be the most effective way of organising work.

Centralised organisations are typically more hierarchical in their decision-making. Such structures are well-suited to rapid implementation of directions from the leadership, which is why most armed forces are strongly hierarchical. However, they are quite poorly suited to generating new ideas and enabling ‘bottom-up’ innovation, which is important in the knowledge economy. The lack of peer-to-peer networks is often visible in organisational silos, where information has to flow up (i.e. towards the centre) and then back down to other units.

In order to encourage innovation, therefore, many organisations have consciously tried encourage more decentralised, peer-to-peer connection: for instance, according to Elon Musk, ‘Anyone at Tesla can and should email/talk to anyone else according to what they think is the fastest way to solve a problem for the benefit of the whole company’. Together with advances in information and communication technology, this is one reason behind the trend towards flatter corporate hierarchies over the last 20 years.

Interest in more decentralised organisational forms has also been motivated by the desire to create fairer work conditions. Historically, worker cooperatives – businesses that are owned and self-managed by their workers – were first started in reaction to the poor and insecure work conditions of the Industrial Revolution. More recently, there has been growing interest in using the cooperative model to create alternatives to the precarious ‘gig economy’. For example, TaxiApp provides an alternative to Uber which is owned and run by its drivers. (However, as we have described elsewhere, although these platform cooperatives may provide an exciting and potentially fairer model, their non-profit nature often means that they struggle to raise finance, which means it is difficult for them to invest the resources required to reach the critical mass of customers and vendors needed to compete with incumbents.)

A more recent development, decentralised autonomous organisations (DAOs) may be able to overcome this challenge while still creating a more equitable structure for workers. As discussed below, DAOs take the idea of a decentralised organisation even further, utilising blockchain technology to essentially create leaderless organisations.

Authors

Jonathan Bone

Jonathan Bone

Jonathan Bone

Interim Mission Manager, A Healthy Life mission

Jonathan is the Interim Mission Manager for the A Healthy Life mission.

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Christopher Haley

Christopher Haley

Christopher Haley

Head of New Technology & Startup Research

Chris led Nesta's research interests into how startups and new technologies can drive economic growth, and what this means for businesses, intermediaries and for the government.

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