Design Rules, Volume 2: Chapter 9—Organizing to Rationalize

Abstract

The purpose of this chapter is to explain what the technologies of flow production with bottlenecks require and reward in organizations. I argue that the organizations best suited to implementing these technologies are vertically integrated spanning all potential bottlenecks. They are subject to unified governance and exercise direct authority over process design, job definitions and task assignments. As they come to employ more people, they create hierarchical management structures as a means of managing information flows and delegating decision rights. Finally the early 20th Century, most of these organizations have been legally chartered as corporations that can own assets, enter into contracts and employ individuals in their own right. The public’s view of “big business” and “high technology” eventually coalesced into a paradigm of mass production—a cluster of related concepts about how the world worked. Throughout the middle years of the 20th century, most Americans and Europeans assumed that large businesses using advanced technology would be organized as vertically integrated corporations, exercise direct authority, and create managerial hierarchies. These assumptions were not challenged until the spread of personal computers and the Internet began to reward new forms of organization that responded to the requirements and rewards of the new information technologies.