HEC Paris Leaders of Tomorrow Series

What is an ‘Open Organization’ and how does it differ from other organizational models ?

Companies are often divided into four main categories : traditional, digital, digital-like and mutant. Where ‘traditional’ companies exhibit traits from as early as the first industrial revolution, ‘digital’ companies only appeared 10 to 15 years ago and could not be more dissimilar from the companies of the ‘old world’.

 

When you think of fully digital organizations, companies such as Google and Facebook immediately spring to mind. Although they function and are organized like digital companies, the core business of ‘digital-like’ organizations is not digital. Companies such as Tesla simply take advantage of digital tools. The final group of ‘mutant’ companies consists of companies from the ‘old world’ who, in the course of their digital transformation, end up adopting the traits of new world companies.

For Albert Meige, CEO of PRESANS and Academic Director of the Leading Digital Transformation program at HEC Paris, there is now a fifth category, which he refers to as an ‘Open Organization’.

An Open Organization can be defined, at its most basic level, as the automatic reaction of most companies to the rapid and violent transformations of recent years. As such, although Open Organizations can belong to the digital, digital-like and mutant groups mentioned above, they do not fall into the ‘traditional’ category. Born of these recent digital transformations as well as their social and economic repercussions, Open Organizations are a completely new form of company.

Leon C. Megginson once noted, “it is not the strongest or the most intelligent who will survive but those who can best manage change.” Change is inevitable within business contexts. We cannot avoid it. Indeed, we are defined by our response to it – whether we choose to adapt with flexibility or cling to tradition and habit. Just like all other living beings, organizations must adapt to their evolving surroundings in order to survive, let alone thrive. For Albert Meige, whilst there is no magic formula for the successful modernization of a company, becoming an Open Organization is the only sustainable and durable adaptation within the current business ecosystem. This new organizational form enables companies to couple the agility of a startup with the employee count of a major corporation; to evolve and progress with great flexibility.

So, how does a company become an ‘Open Organization’ ? What concrete steps can be taken to guarantee the longevity, value and structural integrity of your company within this ever-shifting business environment ?

According to Albert Meige, an Open Organization is characterized by its user-centric, functional and data-driven nature. These companies need to put the user at the center of their strategies; sell a function rather than a product; and digitize all layers of their organization in order to optimize operations, maximize performace and make effective strategic decisions.

They must see digitization as the solution that will allow them to transform and adapt successfully. In terms of strategy, Open Organizatios must implement platform strategies that attack value chains in order to disrupt and capture customer relationships and profits, all the while carefully monitoring the profit margins of suppliers. Moreover, on-demand talents need to be identified and leveraged not only during the organization’s projects but also to aid their hiring and training processes.

Perhaps most important of all, however, is that an Open Organization must exhibit a clear aspirational purpose. Today’s younger generations are searching for a sense of meaning and purpose in their work. A common goal is vital if a company seeks to inspire, engage and retain these younger employees – after all, motivation has long been the key to successful innovation. What is more, digital transformation has meant that business practice now involves an increasing number of organizations across a wider range of countries. A clear company mission creates a collective spirit, facilitating cooperation and ensuring that the relationships between these different groups is as fluid as possible.

CONCLUSION : Would you like to find out more about Open Organizations ? Download the White Paper.

About the Author

HEC Paris specializes in education and research in management sciences. As a leading academic institution in Europe and worldwide, HEC Paris offers a complete and unique range of education programs for students and executive education programs for leaders.