The Case for Institutional Innovation

The past belonged to push, but the future belongs to pull.

That’s an argument we’ve made before and in our most recent post, “Why Do Companies Exist?” –as well as more expansively in this Journal of Service Science article. What will pull-based institutions look like? How will they be organized? What dispositions, or mindsets, will they require? And what management practices will help them succeed?

The answers are necessarily speculative: A truly pull-based organization has yet to be seen in the wild. Sure, one can point to Toyota and Dell as examples. But as we argued in “Managing Resources in an Uncertain World,” these companies practice pull with a relatively limited number of business partners. Furthermore, they practice it mostly in the sense of creating flexible access to resources, which is only one (albeit a very important) aspect of what it means to pull.

In its full sense pull also means to cause something or someone to move in a certain direction by exerting a force upon it or them. This is the force of attraction. Pull-based institutions are those that bring the force of attraction to bear on tens or even hundreds of thousands of participants around a common platform. Probably the best examples of today’s big institutions pulling in this way are Li & Fung, the motor cycle assembler Dachangjiang, and open source institutions like Linux.

Pull institutions unleash the forces of attraction through:

A galvanizing view of the opportunity unfolding as technology and policy changes disrupt a market or industry for a wide range of players. This helps clarify and make sense of an uncertain world, drawing participation and creating buy-in or influence.

A set of positive incentives that share the value among all who helped create it. Incentives can help catalyze collaborative action.

A platform that supports and organizes the activities and interactions of participants.

Already we can hear the objections of executives who struggle with the complexity of managing just a few partners. How is it possible to manage tens of thousands of participants? The answer lies in loosely coupled institutional arrangements. These focus on designing standardized interfaces and specifying performance measures rather than seeking to tightly specify and control activities. Loose coupling reduces interdependencies between participants in a network, reducing the risk that the actions of one participant will create unproductive complexity for another. (Read more about loosely coupled institutional arrangements.)

Note the shift in disposition required as we move from push to pull institutions. Push institutions are typically centralized, bureaucratic, and command-and-control, and the prevailing dispositions among their executives are similar: tightly hold intellectual property (thus putting faith in stocks rather than flows of knowledge), and approach collaboration cautiously and with only a few carefully selected partners with similar dispositions.

Pull institutions, by contrast, tend toward the decentralized, the modular and loosely coupled, and the emergent. Their prevailing dispositions are far more collaborative than controlling. Pull-oriented executives recognize that the most powerful forms of collaboration are highly scalable, mobilizing large numbers of participants with diverse and deep specializations.

Pull institutions seek to attract customers to them, rather than focusing on pushing messages out to broad audiences. Pull institutions also invest heavily in accessing talent wherever it resides and building relationships to motivate this talent. This “distributed talent” then supports the organization’s initiatives regardless of whether it chooses to formally affiliate with the institution.

In practice, of course, companies will need to smartly blend aspects of push and pull, just as smart leaders seek to combine both hard and soft power.

Nevertheless, it is clear that our existing institutions, firmly rooted in the world of push, will require significant redesign in order to effectively harness the potential of pull. Institutional innovation – redesigning the roles, relationships and governance structures required to bring participants together in productive endeavors – will be a key requirement. In fact, institutional innovation will trump either product or process innovation in terms of potential for value creation. Doubt this? Consider the economic value generated from the innovations leading to the institution of the joint stock company.

As you will see in our next post, pull institutions will need to re-orient completely with regards to talent as we re-imagine corporations and other institutions as places where talented individuals experiment, learn, perform, and thrive. This will in turn require far-reaching changes to strategy, organization, operations, and technology.

Meanwhile we’d love to hear your views on pull versus push and the implications of this shift for both private and public-sector institutions. What are the key institutional innovations that will help to accelerate adoption of pull practices? What are the biggest institutional hurdles to overcome?


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