Divisional Organizational Structure is divided into semi-autonomous units or divisions. Each division is responsible for its own set of activities. However, often these different divisions can serve the same audience/user.
Brian Chesky’s comments in his interview with Lenny paraphrased: Divisional Organizational Structure can lead to dysfunction. You end up accumulating technical debt because different divisional teams operate varied stacks. New promising initiatives are siloed as a side-project instead of becoming mainstream. Eventually, you’ve each team doing 5 things instead of 5 teams doing 1 thing.
- In such environments, product managers are compelled to prioritize advocacy and relationship-building to secure resources.
- This dynamic can inadvertently breed a culture of politics, where success hinges more on interpersonal influence than on merit or organizational needs.
- The resulting bureaucracy further obfuscates roles, diminishes accountability, and fosters complacency.
- Finally, this promotes the tendency to prioritize individual interests over the company’s collective goals, often leading to redundant meetings and discussions that do not directly contribute to progress.
It is always advisable to have one major source of revenue and then diversify by having multiple minor streams of revenue that de-risk you from that major source of revenue. For example, YouTube’s revenue split is 1:3 between subscriptions and advertisements.
Why it matters:
- It protects against risk of ruin.
- It protects against ups and downs. For example, revenue from advertisements is seasonal.
How: There are different forms of revenue models:
- Digital Advertisements, where revenue is Sessions Per User x Users x Pages Per Session x Ad Impressions Per Pageview.
- Subscription, where revenue is Average Revenue Per User (ARPU) x Active Subscribers (i.e., Existing Subscriber Base + New Conversions + Renewal)
- Affiliate and deals
- Sell playbooks, courses, trainings, etc. using micro-transactions
- E-commerce: For example, launch branded products
- Offer services like Job Boards
Downside: Some of these revenue models can be in opposition to each other and make commoditized businesses complicated. This in turn mandates the need for propensity models.
Bad decisions add cognitive load to the organization without providing value to the user. Examples include:
- Bad HR policies.
- A business leader within the organization wants the website or app of his business unit to look different. The user does not care.
- Building a confused organization structure/hierarchy. The user does not care. For example, the Twitter Fail Whale image had birds flying in different directions.
- Choosing a sub-optimal stack because developers in that stack are more cost-effective to hire.
- Building a low-trust work environment
“Low margin businesses (eg many media biz) often create an internal culture of ‘survival of the fittest’, where different divisions compete, viciously, to eke out another 0.5% profit. Makes digital transformation even harder…”– Alex Watson, Ex Head of Product at BBC.
Complexity bogs us down. The more you have to keep in mind before doing something, the slower you’ll go.
Why it matters:
- This complexity and commission risk can cripple companies, leaving them open to disruption.
- It also slows down onboarding new staff and moving existing staff across projects or departments.
- Failing to remember everything can result in ‘Commission Risk’ – inadvertent omissions that lead to more work and unintended consequences.
If left unchecked, the amount of entropy in systems keeps rising.
As a company grows…
“… a scaling-up of a software entity is not merely a repetition of the same elements in the larger size; it is necessarily an increase in the number of different elements. In most cases, the elements interact with each other in in some nonlinear fashion, and the complexity of the whole increases much more than linearly.”– Frederick P. Brooks from No Silver Bullet, 1986
Why it matters: Complexity slows down execution.
How: With company growth comes an increase in:
- The count and diversity of sub-systems, teams, software, and their nuances.
- Interactions across all these elements.
Remember this: On January 7, 1997, at Macworld Expo, then Apple CEO Gil Amelio discussed how MacOS has evolved on an outdated architecture.
The journey of any organization transitioning to fully-adopt AI is fraught with challenges:
- Need to build judgment: AI is costly and it is easy to get it wrong. You could spend months building a model and then realize that an underlying hypothesis was wrong and you have to start all over again.
- Need for change management: People within most critical functions of the organization will have to change, up skill, or retrain to adopt AI. AI will also mandate change in mandate/scope/power of various stakeholders. None of this is easy.
- Need to expand talent pool: There is limited AI/ML talent pool in the market and the number of companies competing for the same is high.
Anthropologist David Graeber talks classifies Bullshit Jobs into five categories:
- flunkies, who serve to make their superiors feel important, e.g., receptionists, door attendants, etc.
- goons, who act to harm or deceive others on behalf of their employer, or to prevent other goons from doing so, e.g., lobbyists, corporate lawyers, telemarketers, etc.
- duct tapers, who temporarily fix problems that could be fixed permanently, e.g., programmers repairing bloated code, airline desk staff who calm passengers whose bags do not arrive;
- box tickers, who create the appearance that something useful is being done when it is not, e.g., corporate compliance officers, quality service managers;
- taskmasters, who create extra work for those who do not need it, e.g., middle management;
A measure of randomness, a parameter of disorder.
Energy broken down in irretrievable heat.
What might appear to be chaos, even decay,
is really a system’s way of smoothing out differences — its search for equilibrium.
Uncorrelated parts interact,
find their connections in an evolving system
so, from one perspective, entropy is a clock
charting the irreversible.