Even prior to the pandemic, we were seeing a story unfold before our eyes in the business world; one that had happened before, but not in our lifetime. When technologies converge, industries transform, and work is remade.
Since the 18th century, at least three industrial revolutions have occurred. Organisations evolved—or closed. Predictability became king. Scale mattered. For the innovators, productivity soared.
The fundamental challenge now is that even the most successful companies today are designed to operate by the old rules of management thinking that emerged during the First Industrial Revolution, approximately 250 years ago. They are mechanistic. They solve for uniformity, bureaucracy, and control. Ask executives about organisation, and most reach reflexively for a hierarchical chart. We see four macro trends unwinding these old rules of management, with implications for organisations in Thailand and across the globe:
1. More connection
Global human interconnectivity is permanently shifting not only the speed of disruption but also the principles for disruptive innovation. This is particularly true for Thailand, where the National Broadcasting and Telecommunications Commission estimates that there are over 50 million internet users and 93 million mobile devices in a population of 70 million people. Information that moves freely instantly fuels change and bypasses—or even challenges—existing hierarchies and formalised change channels.
2. Unprecedented automation
Technology at scale and low costs are forever changing the way management creates value and improves efficiency. It's vital that Thai workers in heavily automatable environments seek reskilling or upskilling to maintain their competitiveness.
3. Lower transaction costs
The free-market mechanism, the main reason for-profit corporations have flourished for the past 200 years, is becoming increasingly irrelevant. More and more people are self-organising in a gig economy. According to a 2018 survey by the Economic Intelligence Center, up to 30% of Thailand's workforce are involved in the gig economy.
4. Demographic shifts
Gen Z (and beyond) simply will not behave the same way as prior generations of employees; their demands are fundamentally different. Companies that don't respond will not survive as new generations of employees seek work elsewhere, even more so in a nation with historically low unemployment rates like Thailand.
These trends are not new—but they are now approaching tipping points, placing organisation at the top of the CEO agenda. The COVID-19 pandemic is accelerating some of these trends: in recent months, we have seen the extraordinary forced shift of the workforce to remote environments and to areas of highest value creation, increased agility of internal teams, and the next level of diffusion between “corporate” and “gig” economies.
Although management theory has evolved, its foundation, which includes a hierarchical organisational structure with specialised departments and roles, has remained largely intact:
- Organisations can be optimised as machines for efficiency and productivity
- Stability and predictability at minimal risk are most important
- Surprises are bad
- Behaviour should be controlled
- Labour is a factor of production
Tweaking a management system based on these old rules will no longer be effective. Those rules were a response to a world in which people's lives changed incrementally from one generation to the next and information came from physical—and later analogue—sources. Further, the cost of acquiring proprietary information contributed to relatively high transaction costs because of the time, energy, and money required to obtain it.
Collectively, the four macro trends require companies to adopt a set of new principles. Many of these new principles—such as anti-fragility, experimentation, adaptability, behavioural and systemic views of organisation, human-centricity, inspiration in place of control, and positive surprises—are becoming increasingly critical to survival.
Executives must act now to start building their organisation in accordance with these new principles. Leading companies are reimagining the basic tenets of organisation.
Emerging models are creative, adaptable, and anti-fragile. Corporate purpose fuels bold business moves. “Labour” becomes “talent.” Hierarchies and matrixes become networks of teams. Competitors become ecosystem collaborators. And companies become more human: inspiring, enabling collaboration, and creating experiences that are simple, meaningful, and enjoyable.
We see leaders organising for the future by addressing the most pressing questions:
Who are we?
Do we have a compelling, standout identity that attracts and inspires people—employees, investors, clients, and partners? Leading organisations convey the reason for their existence by embracing three imperatives:
1. Define a resonant purpose that embodies the organisation's unique role in the world and aligns the entire enterprise with shared meaning.
2. Sharpen your value agenda, the list of priorities that can double or triple the value you create.
3. Create a special culture defined by a unique set of practices, rituals, symbols, and experiences.
How do we operate?
Do we have a nimble, frictionless operating model that fosters simplicity and speed? Leading organisations build this operating model by adopting the next three imperatives:
4. Radically flatten your structure to allow the organisation to operate as a network of empowered, dynamic teams.
5. Turbocharge decision making to improve both the quality and velocity of decisions.
6. Treat talent as the scarcer capital by creating a special employee experience, expanding people's capacity, and allowing people to “be human.”
How do we grow?
Are we building for scale to get smarter and more innovative, to iterate more rapidly, and to be able to tap into resources and networks beyond the bounds of the organisation? Leading operations pursue scale by addressing the last three imperatives:
7. Take an ecosystem view, in which communities create value together and partners share data, code, and skills.
8. Build a data-rich technology platform to generate insight into what works, embed automation on a grand scale, and allow your people to focus on what only they as humans can do.
9. Accelerate learning as an organisation to enable employees to access, create, and share innovation, capabilities, and know-how in real time and on demand.
These nine imperatives are strongly connected. Interventions in one imperative can have a profound impact on the others; for example, our purpose shapes the priorities of our value agenda. Companies embarking on their journey to organise for the future will need to address the organisation as a dynamic system in which all elements affect and reinforce each other.
In light of these imperatives, executives have a choice: continue with the status quo—if there even is such a thing in the next normal—or reimagine their organisations to build more creative, adaptable, and human systems that are fit for the future.
About the Authors
Elizabeth Mygatt is an Associate Partner at McKinsey & Company's Boston office, Richard Steele is a Partner at the firm's New York office, and Liesje Meijknecht is an Associate Partner at the firm's Bangkok office.
For further information please contact Alan Laichareonsup at email: Alan_Laichareonsup@mckinsey.com
Series Editor: Christopher F. Bruton, Executive Director, Dataconsult Ltd, chris@dataconsult.co.th Dataconsult's Thailand Regional Forum provides seminars and extensive documentation to update business on future trends in Thailand and in the Mekong Region.