Decentralised digital corporate bureaucracy
It’s time we start to rethink the corporate by making better use of digital technologies.
Large enterprises are light in terms of operation but heavy in terms of bureaucracy. We can all thank Hamel & Prahalad for that, who wrote an influential article and book on the core competencies of the organisation which led to massive outsourcing of non-core activities by large enterprises.
This outsourcing has gone so far that most multinationals today are in essence financial conglomerates and large coordination hubs for various supply chains in the industry they are active in. Most of the highly specialised equipment or people to operate their core competencies are supplied by third parties and contracting and procurement have become a vital function.
These enterprises are in fact distributed: central coordination of outsourced operation. The coordination task is ensuring delivery of products and services to the operation against the predefined or negotiated conditions which are laid down in a contractual agreement. Derived from that the financial function kicks in. This central coordination is closer to Soviet-era bureaucracy than Silicon Valley entrepreneurship; the amount of paperwork and manual labor, even in 2020, is massive.
By not only digitising but also decentralising corporate bureaucracy, costs would decrease significantly.
Let me explain: digitising this bureaucracy would for instance get rid of wet signatures and replace them by digital signatures and automated entry of agreements into the company’s ERP system removing the need for manual reconciliation of this information. A step up would be to do this at supply chain level, across industry by having one ERP system to rule them all. Reality is that this will probably not happen so quickly because of legacy systems, vested interests of ERP vendors and business models of system integrators. It would also lead to the Central Bureau of Central Coordination of supply chain XYZ; a nightmare scenario for most companies.
A real decentralised system runs on a shared infrastructure which serves as a utility (used by everyone, not owned by a single entity).
On this shared infrastructure light applications can be built to make different existing systems in the supply chain exchange — or rather disclose- data under pre-agreed conditions. (New) Suppliers can be qualified once and contracts can be automatically populated based on specific requirements. The execution of the contracts is automated and verifiable. Manual steps are eliminated as much as possible.
This would not only make the corporate bureaucracy much more efficient, but it will also change processes such as invoicing. If the digitised contract and its terms & conditions are agreed upon, automated settlement could be built into the contract and an invoice becomes a report at the end of the cycle instead of a trigger to start the process.
If you are interested how this could work for your organisation, get in touch and I would be happy to share more insights and cases.
