Cultural challenges impede organizations from becoming responsive, agile, or autonomic. Decentralized autonomous organizations (DOAs) can help address such issues.
The persistent Covit-18 pandemic is challenging all ournorms. We are starting to see huge financial losses in many sectors. But mostimportantly, we are witnessing mega-shifts that will have profound impacts,once the dust settles. A recent articlefrom McKinsey clearly articulates the post-Covid-19 cultural revolutionimpacting organization of all sizes:
Manyleaders are reflecting on how small, nimble teams built in a hurry to deal withthe COVID-19 emergency made important decisions faster and better. Whatcompanies have learned cannot be unlearned—namely, that a flatter organizationthat delegates decision making down to a dynamic network of teams is moreeffective.
As we discussed in anearlier article – May 2020 (has it been that long?) – the Covid-19 lockdowns and shutdowns of businesses and government willchange us – are changing us. In this article, we are revising and expanding upon an essential trend powering autonomic enterprise:Decentralized Automation Organizations.
TheCovid-19 pandemic is a Black Swan event par excellence. Manyindustries such as manufacturers, pharmaceutical companies, and restaurants re-defining and re-organizingthemselves for Covid-19 products and services. Innovative startups are re-aligningtheir services to accommodate constantly changing Covid-19 constraints.
Becoming an autonomic enterprise in motion is not an option
Recently,Cisco’s former CEO, John Chambers, indicated that 50% of Fortune 500 companies would notexist in 10 years. The importanceof Culture got accentuated in the post-Covid-19 era. Transformationstarts with Culture. The conventional “Org Chart” did not inspireagility, change, or empowerment in the pre-Covid-19 age. Post-Covid-19, ithas been challenged and stressed to the limit. It is a model that is no longerworking – especially with the newer, technologically savvy, independent-minded,and entrepreneurial younger generations.
The Covid-19 organizationaltrends encompass smaller & flatter org charts, virtualization, andinnovative teams – all with an added emphasis on integrity and empowerment.
Organizations are becoming flatter – often not by choice.More than ever, the lockdown, interruption of supply chains, and the emergenceof virtual work shifts are accentuating the need for innovation,entrepreneurship, and autonomy, especially through challenging the archaichierarchical organization structures towards more decentralization andinnovation empowerment at the “edges.”
The top-down hierarchical organization structures are tiredand passé. They do not inspire innovation or digital transformation. Employeeempowerment has been elusive and hard to achieve within a rigidly hierarchicalorganization.
Flattening organizations with increased communication, collaboration, and empowerment is an irreversible trend
Jacob Morgan contrasts several emerging organizational models in the Future of Work. Emerging models include flat and holacratic organizations (vs. bureaucracies and hierarchies – and we know how well those functions!). Challenging traditional management around circles for specific projects and objectives is both liberating and transformational. The Covid-19 pandemic provides a wonderful opportunity for organizations to re-assess their rigid structures and flatten their organizations.
Virtualityis another irreversible trend that has gained incredible traction in theCovid-19 era. Collaboration andvirtualization tools such as Zoom and Slack – often essential for work-from-home- have had an incredible run: 72%of consumers had their first-ever virtual care visit during Covid-19. Thevirtuality shift is complex and multi-faceted. The nine-to-five in the office“normal” is being reset: Employees want greaterflexibility in the percentage of time they spent at home vs. office – thebreakdown is 51% office and 49% home.
Virtuality also has an inter-organizational dimension. Thenotion of “virtual enterprises” or their predecessor “virtualcorporation” has been around for a while. The core idea is the ability fororganizations to deliver customized products and services quickly and globally.This was an amazing vision coming from theearly 1990s. Another term that is used synonymously or embedded in the connotation ofa virtual enterprise is the “extended enterprise.” Basically, “a looselycoupled, self-organizing network of firms that combine their economic output toprovide products and services offerings to the market.”
The extension beyondthe organizational boundaries involving inter-enterprise collaboration isbecoming critical in the Covid-19 era. The extended enterprise needs tofunction as a coordinated whole – preferably seamless to the consumer orcustomer. The core premise is creating very flexible and dynamic organizations thatcan rapidly satisfy customers’ or consumers’ demands and needs.
As Mike Welsh points out: For a virtual organization to function, geographicallydispersed teams need the ability to communicate effectively. But that’s onlyhalf the story. Decision-making has to be delegated and decentralized as well —and that means using data to shake up your culture.
How could organizations achieve intra-and inter-enterprise decentralization?
Enter Blockchain and Decentralized Autonomous Organizations.
As of the writing of this article, Bitcoin (BTC) has hit $17,000.It is incredible to realize that this successful cryptocurrency’s governance isdecentralized. Blockchainis the underlying technology for Bitcoin and most other cryptocurrencies. ButBlockchain is much more than that. Through intra-enterprise transactionalcollaboration, Blockchain could empower geographically distributed networks ofteams.
As we discussed in Blockchainfor Master Data Management, Blockchain can also be a good backbone for many extended enterpriseapplications. For instance, the Covid-19 pandemic highlighted thevulnerabilities in supply chains. Blockchain is one of the criticaltechnologies that could address Supply Chain problems.
The digitallyextended enterprise can use all parts, products, suppliers, warehouses,inventory, documentation, tracing, and financial transaction masters stored onthe Blockchain to function as an efficient and optimized pipeline. ThroughBlockchain, organizations can enact governance, share data, and make autonomousdecisions on the Blockchain.
Decentralized Autonomous Organizations (DAOs)
What are DOAs? Here is a gooddefinition: “A Decentralized Autonomous Organization (DAO) is anorganization where the rules of operation and organizational logic are encodedas a smart contract on a blockchain … DAO’s […] formulation combines blockchaintechnology, organizational structures, legal entities, workflow execution,governance/voting, incentive structures, and contribution/work.”
Decentralization is at the core of the crypto-currency revolution,and its importance is increasing in the post-Covid-19 era. The Bitcoin Foundation’s Manifesto states:“the technology is completely decentralized, and the founder does not headup an organization that sets the strategy, governance, and standards.” Infact, Bitcoin was the first Decentralized Autonomous Organization (DAO). Thereis no centralized hub or authority that owns and runs “the Bitcoin.”The governance is by consensus through Bitcoin Improvement Proposals (BIPs).Contrast this how various solutions are governed in, say, centralized financialorganizations such as large Banks, with often archaic and rigid hierarchical structures.Now, there are many DOAs and a robust DAO ecosystem.
If you have been following Blockchain and cryptocurrencies –especially Ethereum – you would have been exposed to Decentralized AutonomousOrganizations (DAOs). The governance, bylaws, and operation of a DAO use SmartContracts executing on the Blockchain. In other words, code running anorganization in a decentralized and distributed network. This approach hasseveral advantages. It allows all the shareholders and employees or otherstakeholders to agree and vote on decisions quickly. Since actual code isexecuted for running the organization, it leaves little to the imagination tointerpret the governing policies. Furthermore, no central government orauthority is regulating a DAO. As we shall see, this is also a weakness of afully autonomous organization executing on the Blockchain.
“DAO” was introduced by Vitalik Buterin – theinventor of Ethereum. As he describes it in a decentralizedorganization guide: “it is an entity that lives on the internet andexists autonomously, but also heavily relies on hiring individuals to performcertain tasks that the automaton itself cannot do.” In his taxonomy ofautomation, including automated agents through AI, Buterin characterizes a DAOas ‘autonomous at the center’ but ‘humans at the edges.’ Thus, the operation,governance of the organization are done through smart contracts executing onthe Blockchain. But humans are also participants and can be involved in A DAOis a Blockchain application.
There are manyadvantages and desirable features of DAOs. But there are also severe vulnerabilitiesand disadvantages.
Blockchain is aboutdecentralization. Therefore, it is not surprising that Blockchain communitiesand cooperatives seek and pursue non-traditional models for cooperation.
- Binance is one of the largest cryptocurrencyexchanges. According to Cointelegraph, “the business has been operating as an international,decentralized team for over three years already. Remote working is an essentialpart of the Binance culture.”
- OpenSource in software has always fostered and promoted democratic collaboration.These cultural trends are also giving rise to several community initiatives.Open Source communities are organizations that encourage communication andcooperation – which are, in essence, democratic and “flat.”
- TheEthereum Foundationencourages collaboration for “development and education to bringdecentralized protocols and tools to the world that empower developers toproduce next-generation decentralized applications (dApps), and together builda more globally accessible, more free and more trustworthy Internet.”
- Another exciting initiative under the Linux Foundation – that promotesOpen Source projects, among them the umbrella Hyperledger collaboration forBlockchain projects.
DAOs go beyond mere consortia and collaborations and creategovernance and sharing capabilities on the Blockchain via dApps and Smart Contracts.
There are many categories of products and services thatsupport Decentralized Autonomous Organizations. The following illustrates the DAOEcosystem.
The following provides the descriptions for the DAOEcosystems categories:
- Non-Tech Grants: Giving out grants forsocial, economic, political, and community-based activities.
- Investment DAOs (for-profit): DAOs thatinvest capital into projects.
- Decentralized Governance: These companiesare specifically working on building out tools and infrastructure to enabledecentralized governance capabilities to be built into DAOs.
- DeFi DAOs (for-profit): These DAOs arebuilding out different parts of the Decentralized Finance stack, aka “moneylegos.”
- Protocols / Organizations: These are theunderlying protocols DAOs are being built on top of. Organizations/Companiesare also creating DAOs for token holders.
- DSaaS (DAO Software as a Service):Software platforms that provide infrastructure to build out DAOs.
Here are some organizations from some of the DAO Ecosystemcategories:
- DAOX:In the Non-Tech Grants Category: “Crowdfunding campaigns are launchedusing the Daox Protocol. Each DAO holds the raised funds and is managed by thetransparent voting of its token holders.”
- Kava: In theDeFi category:“Kava is a multi-asset DeFi platform that offers stablecoins, loans, andother financial services for users of major cryptocurrency assets includingBTC, XRP, BNB, and ATOM to name a few.”
- Dash DAO:In the Protocols/Organizations category: “In the Dash DAO, decisions aremade by the masternode network, a decentralized and permissionless network thatanyone in the world can be a part of.”
- Pocket:In the DSaaS category: “Pocket Network’s mission is to ensure thesustainable decentralization of blockchain infrastructure…the most completesystem for blockchain APIs, by way of its all-inclusive relay network andcrypto-economic protocol.”
DOA in Post-Covid-19 Era
Two major cultural themes impact the emergence of DOAs inthis post-Covid-19 era: empowerment of the workers from the virtualizedwork-from-home experiences and the need to optimize cross-enterprisecollaboration in the context of virtual or extended enterprises. DAOs addressboth these significant trends.
It is becoming clear the challenges organizations face to becomeresponsive, agile, or – as our title suggests – autonomic are cultural. As the ecosystem illustrates,slowly but surely, DOAs are becoming a reality.
Therefore, the advantages of DAOs can be summarized asfollows:
- DAOsEmpowering the Modern Digital Worker: there are irreversible trends inworkers or employees wanting to be more autonomous to become creative,productive, and enjoy their work. We saw that this not a new trend. It is oneof the main characteristics of the cognitive knowledge worker. There areseveral DAOs, and others will emerge. However, government liabilities andrecognition are still a considerable challenge – and will be for theforeseeable future. Blockchain’s most likely scenario for cultural change willbe sub-organizations that leverage elements of a DAO approach. Smart Contractsfor organizational, worker, shareholder, or even customer empowerment canaccelerate and improve decision-making: the crowd’s wisdom
- DAOsEnabling Inter-Organizational Collaborations: There are mostly yet to bediscovered opportunities for Blockchain assisting flat organizations. SupplyChain is one of the killer applications leveraging Blockchain. The extendedenterprise involved in source-to-target of the supply chain needs to functionas a coordinated whole. DAOs support the governance, visibility, andinformation as well as transaction sharing across the value chain. The corepremise is creating very flexible and dynamic organizations that can rapidlysatisfy customers’ or consumers’ demands and needs. DOAs can achieve this. Blockchainis essential for digital transformation. There is no other technology on thehorizon that is decentralized, fault-tolerant, secure, and reliable for inter-enterprisemaster-data and information sharing.