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MANAGEMENT & VIRTUAL DECENTRALISED NETWORKS: THE LINUX PROJECT By George N. Dafermos ABSTRACT This paper examines the latest of paradigms – the ‘Virtual Network(ed) Organisation’ and whether geographically dispersed knowledge workers can virtually collaborate for a project under no central planning. Co-ordination, management and the role of knowledge arise as the central areas of focus. The Linux Project and its virtual decentralised development model are selected as an appropriate case of analysis and the critical success factors of this organisational design are identified. The study proceeds to the formulation of a managerial framework that can be applied to all kinds of virtual decentralised work and concludes that value creation is maximized when there is intense interaction and uninhibited sharing of information between the organisation and the surrounding community. Therefore, the potential success or failure of this organisational paradigm depends on the degree of dedication and involvement by the surrounding community. In addition, the paper discusses the strengths and implications of adopting the organisational model represented by the Linux Project in other industries. “This paper was submitted as part requirement of the degree MA in Management of Durham Business School, 2001” 1 Acknowledgements I would like to thank my supervisor, Dr. Joanne Roberts for all the help I received over the research. Had not been for her guidance, this paper would not have materialised. I also wish to thank all those who shared their experience and valuable insight with us by accepting to be interviewed. They are in alphabetical order (they are also mentioned in Appendeix IV: Interviewees): Dan Barber, Chris Browne, Chris Dibona, Matt Haak, Philip Hands, Ikarios, Ko Kuwabara, Robert Laubacher, Michael McConnel, Glyn Moody, Ganesh Prasad, Richard Stallman 2 TABLE OF CONTENTS Abstract Acknowledgements CHAPTER 1: INTRODUCTION CHAPTER 2: FROM HIERARCHIES TO NETWORKS PART 1: THE EVOLUTION OF THE ORGANISATION 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 Science seeks to solve problems Enter the organization Bureaucracy is the inevitable organisational design The American Revolution The Corporate Man The beginning of the end The fall of the old order The Japanese threat Quality is everything Learning means evolving PART 2: THE NETWORKED ORGANISATION 2.11 2.12 2.13 2.14 2.15 2.16 2.17 The Network structure reigns Mergers, Acquisitions and Strategic Alliances Economic Webs Outsourcing & Software Unbundling outsourcing Virtualness & the Virtual Organisation Project-centric perspective CHAPTER 3: RESEARCHING AN EMERGING PARADIGM 3.1 3.2 3.3 3.4 3.5 3.5.a 3.5.b 3.6 3.7 Qualitative Research Case Study Approach Advantages of the method Disadvantages Primary Sources of Data Observation Interviews Secondary Sources of Data Framework of Analysis 3 CHAPTER 4: THE LINUX PROJECT 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Open Source & Free Software Innovation Structure and Decentralised Development Modularity Motivation Learning Management of the Economic Web CHAPTER 5: MICROSOFT Vs. LINUX 5.1 5.2 Business Processes Management, Structure and, Knowledge CHAPTER 6: THE NEW PARADIGM PART A: TRANSFORMATIONS OF MANAGEMENT 6.1 6.2 6.3 Management can be digital and networked Management should ensure that the organizational and project design maximizes organizational learning and empowers big teams to collaborate digitally Management Focus shifts from Organisational Dynamics to Economic Web Dynamics PART B: IDENTIFYING THE NEW PARADIGM 6.4 6.5 6.6 6.7 6.8 The emergence of a new paradigm? Motivation is the source of sustainability The Virtual Roof Knowledge is the competitive advantage Rational Organisational Design PART C: APPLICABILITY OF THE LINUX MODEL TO OTHER INDUSTRIES 6.9 Implications CHAPTER 7: CONCLUSIONS 7.1 7.2 Epilogue Commentary on the objectives of this research 4 APPENDIX 1. Microsoft – The Cathedral 2.Increasing Returns 3.Communication Networks 4.Interviewees q Bibliography LIST OF FIGURES 2.1 2.2 2.3 2.4 2.5 4.1 4.2 4.3 4.4 4.5 4.6 6.1 6.2 6.3 6.4 I II III IV V The Scalar Chain of Authority & Breakdown in Communication New paradigm organization Alliances in technologically, unstable, knowledge-intensive Markets Alliances are driven be economic factors (environmental forces) From the Value Chain to the Digital Value Network Free Software Open Source Innovation skyrockets when users and producers overlap Structure of Linux The Linux development model maximizes learning Positive Network Effects driving ongoing growth-adoption of the GNU/Linux operating system Linux structure depicted as flows of information among value streams Pareto’s Law & The Linux Project The Linux project & The Virtual Roof Creation and Exploitation of Massive Knowledge Synch-and-Stabilize Life cycle for Program Management, Development and Testing Microsoft Scalar Chain of Control Microsoft holds the most powerful position in a gigantic network of corporate partnerships Value increases with the number of users-members The S - Curve LIST OF TABLES 2.1 2.2 2.3 2.4 2.5 5.1 I II Mechanistic and Organismic Style of Management Original Megatrends Transition from Industrial to Information Age Organisations From Closed Hierarchies to Open Networked Organisations Modern and Virtual Organization compared on Weber’s criteria Microsoft Vs. The Linux Project Overview of Synch-and-Stabilize Development Approach Synch-and-stabilize Vs. Sequential Development 5 CHAPTER 1: INTRODUCTION The last century has had a great impact on the organisational structure and management. During this period, organisations have gradually evolved from ‘bureaucratic dinosaurs’ to more flexible and entrepreneurial designs and consequently revised their management practices to cope with the constantly growing complexity of the business landscape and take advantage of a unique competitive advantage - knowledge. In the same time, technological breakthroughs in connectivity have extended the reach of organisations and individuals alike to the extent that access to an unlimited wealth of resources without intervention of any central authority is feasible. These technological achievements enabled organisations to become more centralised or decentralised according to their strategic orientation and further enhanced the efficiency of managing global business processes. However, centralisation is still the prevailing mode of managing despite the increased desirability of decentralised operations. In the light of the volatility and competitiveness that the new world of business has brought with, new perceptions of the organisation and management have flourished. These perceptions are termed paradigms and this study examines the latest: the ‘Virtual or Network(ed) Organisation’. The Linux Project is an example of this emerging paradigm as it has defied the rules of geography and centralisation and has been growing organically under no central planning for the last ten years. It is being co-developed by thousands of globally dispersed individuals that are empowered by electronic networks to jointly co-ordinate their efforts and, has recently gained the attention of the business world for its business model that represents a serious threat to leading software companies, especially Microsoft Corporation. 6 Rationale To date, the existing organisational and management theory that examines the “virtual – network(ed) organisation” is not clear and does not provide more than a basic explanation about boosting technological developments related to emerging business opportunities to be seized by flexible organisations in a global, volatile marketplace. Similarly, no in-depth analysis has been carried out regarding the management of “virtual organisations” and the key success factors that play a decisive role on the viability and potential success or failure of this fluid organisational structure. Objectives This primary research focuses on the management of decentralised network structures and whether virtual and decentralised collaboration is feasible, especially under no central planning. It presents an attempt to analyse the Linux Project and identify the crucial success factors behind this novel organisational model with emphasis on its management and investigate whether the adoption of this model in other industries is likely to be successful. Also, it seeks to provide a managerial framework that can be theoretically applied to industries other than the software industry. The prospective opportunities and limitations of the framework’s adoption are analysed. 7 q Chapter 2 documents the evolution of the organisation with emphasis on the role of knowledge and discusses the emerging paradigm - the ‘virtual network(ed) organisation’. q Chapter 3 shows how this research was carried out and explains the choice of the methods used. The strengths and limitations of the chosen approach are also analysed. q Chapter 4 provides some background information on the software industry and analyses the Linux Project. q Chapter 5 compares Microsoft Corporation with the Linux Project and highlights areas of significant difference. q Chapter 6 provides a managerial framework that may be suited to all types of virtual decentralised work, analyses the new organisational – management paradigm as proposed by the Linux Project and, discusses the applicability of its model to other industries. q Chapter 7 comments on the completion of this research and whether this study’s objectives have been met. 8 CHAPTER 2: FROM HIERARCHIES TO NETWORKS PART A THE EVOLUTION OF THE ORGANISATION 2.1 Science seeks to solve problems The concept of hierarchy is built on three assumptions: the environment is stable, the processes are predictable and the output is given (Hedlund 1993). Obviously, these assumptions no longer apply to today’s business landscape. Hierarchies were first developed to run military and religious organisations. However, hierarchies with many layers started to appear in the 20th century, in organisations as the sensible organisational design. In 1911, the book The Principles of Scientific Management was published. F.W Taylor proved that efficiency and productivity are maximized by applying scientific methods to work. When he started working, he realised that the most crucial asset of doing business - knowledge and particularly technical know-how about production - was well guarded in the heads of workers of the time. He was the first who developed a methodology to convert tacit knowledge into explicit knowledge. He intended to empower managers to understand the production process. Armed with a watch, he embarked on his ‘time-and-motion’ studies where by observing skilledworkers, he showed that every task when broken down to many steps would be easily disseminated as knowledge throughout the organisation. As learning did not require months of apprenticeship, power - knowledge about production - passed from workers to managers. Ironically, the man who grasped the significance of communicating knowledge throughout the organisation, had formulated a framework that regarded the organisation as a machine and the workers as cogs. 2.2 Enter the organisation Shortly after Taylor, H. Fayol (1949) elaborated a managerial framework. He focused on the efficiency of the production process and reinforced Taylor’s view that specialisation is essential along with constant supervision, and that no organisation can prosper without 9 a set of rules that ‘control and command’. That was the part of his ‘story’ that got well accepted at the time. The other side was anarchical for then, but utterly prophetic. He rejected the abuse of managerial power since authority is not to be conceived of apart from responsibility. Moreover, he was the first to identify the main weakness of hierarchy: breakdown in communication (Fig, 2.1) and pointed out that employees should not be seen as cogs in a machine. Despite his insight that hierarchy does not (always) work, he concluded that a “scalar chain” (hierarchical chain) of authority and command is inevitable as long as mass production and stability is the objective. Figure 2.1 The Scalar Chain of Authority & Breakdown in communication A B L C M D N E O F P Section E needs to contact section O in a business whose scalar chain is the double ladder F-A-P. By following the line of authority, the ladder must be climbed from E to A and then descend from A to P, stopping at each rung, and then from O to A and from A to E. Evidently it is much easier and faster to go directly from E to O but bureaucracy does not allow that to happen very often. Source: Adapted from H. Fayol, General and industrial Management, Ch.4, 1949 2.3 Bureaucracy is the inevitable organisational design Taylor showed the way, Fayol provided a set of rules and Weber evangelised the adoption of bureaucracy as the rational organisational design. His writings were so influential that modern management theory is founded on Weber’s account of bureaucracy. Firstly, he made the distinction between ‘power-force’ and authority: the 10