Starfish organizations

“If you cut off a spider’s leg, it’s crippled; if you cut off its head, it dies. But if you cut off a starfish’s leg, it grows a new one and the old leg can grow into an entirely new starfish.”

Thus starts the new book causing a stir in business circles, The Starfish and the Spider. The authors are Ori Brafman and Rod Beckstrom, Stanford MBAs who have spent five years researching organizations that they say fall in two categories: traditional “spiders,” which have a rigid hierarchy and top-down leadership, and decentralized “starfish,” which rely on the power of peer relationships. Starfish organizations include Wikipedia, Craigslist and Skype. Since starfish are capable of growing and operating with independent sections, peer companies have a tough time competing with them.

Starfish organizations aren’t a new phenomenon. The authors point to such organizations as the Apache tribe. “The traits of a decentralized society — flexibility, shared power and ambiguity — made the Apaches immune to attacks that would have destroyed a centralized society,” write Brafman and Beckstrom. In fact, the Apaches not only survived Spanish attacks, but they became stronger by becoming even more decentralized and more difficult to conquer.

The authors consider Alcoholics Anonymous the ultimate starfish. Nobody owns it. Each chapter runs autonomously. “AA is constantly changing form as new members come in and others leave,” they write. “The one thing that does remain constant is the recovery principle [but] there is no one in charge; everyone is responsible for keeping themselves — and everyone else — on track.”

More recent examples of starfish organizations share values among their members but independent groups proliferate; leaders act more as catalysts than traditional CEOs. In the financial arena, author Rod Beckstrom points to Electronic Communication Networks, which are computerized order matching and placing systems, as examples of the starfish structure. Until recently, only institutions could trade stocks via ECNs, but when that changed in 1997, the execution, speed and transparency redefined stock trading.

Are starfish companies superior? The authors write that these organizations empower their members (employees) and create a strong feeling of community. This can bring out the best in people. While the authors also write that relatively few starfish companies generate high revenues, they note that the starfish can pluck revenues from out of the spiders’ mouths. For examples, the authors write about how peer-to-peer song sharing networks shook up the entire music industry, draining sales from traditional record distributors.