Tip: Click ↑ “FMCG Distributor Professional Consulting” to learn more about marketing and distributor internal management. Introduction: The mobile internet era requires eliminating middle management, expanding boundaries, reducing layers, employee autonomy, and amoeba organizations. The internet world undergoes massive changes every day. Traditional organizational forms struggle to adapt to the fast-changing market environment. To avoid being eliminated, companies must adopt flat, cross-functional management. This is like blitzkrieg: you must respond quickly to ever-changing battlefield conditions. Otherwise, if opportunities are missed due to layers of reporting, blitzkrieg turns into a war of attrition, losing strategic advantage. In the internet era, such time advantages are fleeting. Seize them, and new giants may emerge; miss them, and there may be no chance to recover. In Out of Control, Kevin Kelly mentions several characteristics of distributed management representative of the internet: no mandatory central control; secondary units have autonomy; secondary units are highly connected to each other; peer-to-peer influences form nonlinear causal relationships through the network. Its advantages align with all the characteristics and pressures of the internet:

  • Faster innovation and evolution than competitors.
  • No hierarchy, easily leveraging collective wisdom.
  • High fault tolerance, promoting lean innovation and rapid iteration through exploration-discovery-validation.
  • Efficient communication and execution at the grassroots level. The so-called Third Industrial Revolution seems like tomorrow's event, but it is already very close. The Third Industrial Revolution points out: narrow information privatization is overshadowed because the internet drastically reduces the entry cost of producing and publishing information. In the past, "local cottage industries could hardly compete with factory-style production and economies of scale where financial capital was highly concentrated." Now, "the internet changes the nature of the game by integrating the playing field, connecting millions of producers and sellers in virtual space at almost no cost." Only networked enterprises can adapt to a networked world.

1. Changes in Coase's Theory According to Coase's theory, the reason firms exist is that they reduce the costs of pure market transactions, making transactions more economical and efficient. In his 1937 seminal article "The Nature of the Firm," Coase argued that companies exist to minimize transaction costs such as time, arguments, confusion, and errors. Coase provided a rationale for centralized organizations. The famous "Joy's Law" states: "No matter who you are, most of the smartest people work for someone else." We don't work with the best people; we only hire those the company can afford. Even in top companies, this is quite inefficient. The Nobel Prize-winning Coase theorem has been greatly challenged in the internet age. Because obtaining information needed in production has become very cheap and convenient, traditional multi-level management increases communication and friction costs. As enterprise boundaries gradually disappear and internal costs decrease, boundaries extend outward and downward to the most grassroots, closest to the market. If doing it yourself is less cost-effective than having others do it, you stop doing it. The foundation of Coase's theorem is eroding due to the internet; enterprise boundaries expand increasingly, even reaching consumers.

2. Flat Organizations Xiaomi's leading fans seem to have become part of Xiaomi. They contribute to MIUI development, suggest modifications, and even participate in product pricing, decision-making, and sales. Internally, with the internet, you don't need to care who sits next to you. As long as you find the best people online and tap into their talents, even if you're in Shanghai, Beijing, Hainan, or even Shangri-La, you can find them. Excellent people will "birds of a feather flock together" in communities they're interested in, attracted by outstanding projects and smart people, and can find their favorite work and positions—even if not within one company. The author of Rework works at 37signals, a privately held web application company headquartered in Chicago, Illinois. Although all five employees are in Chicago, they don't work together; they work from home and communicate via Campfire. Equality, openness, and collaboration are the essence of the internet, leading to management evolutions like "organization without organization," "boundaryless organization," and "highly flat" structures. What is flatness? When users can connect with all products via the internet, all departments of your enterprise directly interface with the market and users.

3. Eliminating Middle Management It's hard for a big ship to turn around. Haier's response to internet-era change: If there is any externally visible effect of Haier's transformation, it is "massively eliminating middle management" and flattening the organization. For traditional industries, eliminating middle management is extremely difficult. The only way is rebirth or the emergence of new organizations. Getting middle managers to develop with the company, having climbed the ladder, and then being eliminated—and having to eliminate themselves—is extremely difficult. But you must clearly see that after economic ups and downs, middle management positions have been reduced by more than 50%. That's the harsh reality. Building a new one is easier than breaking an old one. Without change, past advantages become burdens; without innovation, past pride becomes baggage. Without middle management, the entire network is a node. Each node makes commitments to users and connects with them; between nodes, there are contractual agreements among all employees. Once this networked organization is built, leaders and middle managers disappear, and the company can respond quickly to the market and reorganize instantly. User-driven enterprise: without middle management, how do you know user needs and drive the enterprise? In fact, Haier didn't eliminate middle management; it flattened the organization, putting everyone on one platform. Currently, Haier's exploration is autonomous small microenterprises. Haier has 80,000 employees, transformed into over 2,000 self-managed business units under this philosophy. They operate like small microenterprises, self-driven and self-innovating in the market.

4. Disappearance of Standard Organizations What worries and annoys Zhou Hongyi most is that 360 hasn't become a giant yet but has contracted big-company disease. So Zhou urgently needs small teams to break bottlenecks. In Management Challenges for the 21st Century, Drucker points out that the biggest challenge with the internet is that there is no so-called correct or standard organization, but rather diverse and varied types; nor is there a correct or standard way to manage people. In other words, there are no standard organizations, only efficient ones; no standard methods, only efficient ones. Traditionally, most enterprises were pyramid-shaped, layer upon layer, with the purpose of centralizing information, analyzing it, making decisions, and cascading them down. Now, because of the internet, information is symmetrical. The grassroots get the same information as you, or even more, and can directly face users. With traditional structures and processes, by the time decisions are made, it's too late. So that's it—the pyramid management system collapses, and high flatness is not decided by leaders but forced by the internet. When information is no longer exclusive to leaders, and the grassroots have more information rights, flatness is necessary and inevitable. Even little people can become masters. Start your organizational structure reform early, facing niche markets rather than mass markets, and the uncertain mobile internet era. Moreover, often in marginalized markets, your entire enterprise cannot dominate both niche and global mass markets. To capture niche markets, your organizational structure, strategic approach, and staffing must be more micro and decentralized to better adapt to the characteristics of small network groups. Your strategic advantage quickly translates into customized products, services, and support, which can also be called organizational structural change and innovation, not necessarily technological innovation. It's time to start your organizational structure reform. Otherwise, you'll be forced to reform!

5. Reducing Layers The specific method of management flattening is to reduce management levels, shorten decision-making processes, and accelerate decision efficiency. Gary Hamel, during his research at Haier, said: The future organization has no hierarchy. I compared Haier with Google, Microsoft, and other companies and found that the basic innovation units of these great companies are very small and few in number, which helps them flexibly face the market. Hamel had a dream for future organizations: hoping all organizations can continuously self-renew, with the current of innovation flowing through all activities, companies full of passion and creativity, enabling everyone to fully utilize their talents. He saw Haier's flat, dynamic networked organization based on self-managed business units and interest communities as providing a platform for employees' self-realization. In such an organization, there are no hierarchies or leaders. Hamel believes, "This is precisely the direction of organizational change in the internet era." How we love to use titles; how the internet dislikes titles. Management flattening is a better solution.

6. Employee Autonomy The "employee autonomy" model applies to many companies; the key is for managers to know how to let go and design rules. American management expert Miller said: "Managers must completely abandon illusions. Total control—interfering in everything—is both impossible and unnecessary. Interestingly, our managers find that by not trying to control everything, they gain more power—the power to get things done!" What Miller says is the foundation of "employee autonomy." People inherently resist being controlled and managed. Only when they feel appreciated and respected do they ignite passion from within, and such passion can bring great benefits to the enterprise. Leading Without Control points out: Many leaders are workaholics, burying themselves in work day after day, oriented by work performance. In contrast, the management style of leading without control imposes fewer restrictions and less interference on team members, filling them with a high sense of responsibility and trust, prompting them to strive and pursue excellence in their own ways.