(2025-01-15) Denning Why Networks Of Competence Also Require Hierarchies

Steve Denning: Why Networks Of Competence Also Require Hierarchies. On December 19, 1154, in Westminster Abbey in England, Henry FitzEmpress, an educated 21-year old, became the first man to dare to crown himself “King of England”. His aspiration was to create a nation. His problem? The country was in chaos. After a disastrous civil war, robbery was rampant. After the crusades, squatters occupied vacant castles. No one knew who owned what. Henry saw that if being king was to mean anything at all, he would have to establish a system to prevent crime or administer justice, while establishing his own power as the source of justice.

1154: England Creates A System Of Self-Organizing Juries...to settle difficult land disputes by summoning “twelve free and lawful men in the neighborhood” and asking them to determine, based on their own knowledge and judgment, who was entitled to possess the property.

The most startling aspect was the radical shift in power. Henry could have followed the French practice of appointing judges who effectively made the decisions to favor supporters and punish enemies. Instead, Henry’s jury system was a transfer of real power.

The other key point is that hierarchical power had been necessary to establish the system of self-organizing groups in the first place, as well as to defend it from periodic efforts to undermine it

2002: Amazon Shifts To A Network Of Self-Organizing Teams

Fast forward to the summer of 2002, Amazon CEO Jeff Bezos had just come back from vacation. His firm had survived the dot-com crash of 2000, with an obsessional focus on customer value.

Upon his return from vacation, Bezos informed his startled top management team that in future, Amazon was going to be run differently. The company was to become a network of autonomous self-organizing teams. Initially, they were to be small “two-pizza teams,” although ultimately some teams became larger “single-threaded teams.”

2002-2012: Amazon Implements A Network Of Competence

it would be more than a decade before the larger, single-threaded teams fully materialized beyond Amazon’s retail operations in businesses like cloud computing (AWS).

Customers were delighted with the diversity, quality, efficiency and reliability of services, which were often experienced as different and superior to those of competitors.

The speed of Amazon’s services also steadily improved.

Operating costs consistently declined. Value was created by competent people doing less work, because they stopped working on things that created no value.

The hierarchy also had to make sure to align the rest of the organization with the autonomy of the teams. Thus if the pay was predicated on the size of a group in Amazon, guess what happened? Senior leaders would start reinstating hierarchy in their group so as to get more pay! So in Amazon the size of your team is irrelevant to your pay, which is linked to the success or failure of Amazon as a whole, not just the team. That's a decision that only the hierarchy can make.

Amazon of course is not alone.