 Complex systems are fundamentally open systems, that is to say that they have such a high level of connection and exchange with their environment that we can no longer define them and manage them in terms of well defined boundaries where things are either part of the organisation or not. This is of course how we traditionally think of organisations as being fixed, relatively static and well bounded Like a football team we can say exactly who is part of the organisation and who is not and everyone typically has a well defined role within that organisation like a government that describes positions to each of its members in different departments. Now think of a metropolitan area, a metro area is a form of complex organisation They are open systems, people, goods and services continuously flow in and out What makes this an organisation at all is not the boundary condition but instead the dense network of interactions and interdependencies Everyone is interconnected and interdependent in affecting the overall state of the system Complex organisations then are more like dynamic networks, people join and leave as they wish Think about Facebook's social network or people sharing files on the internet It happens in a swarm like fashion with people coupling and decoupling from the organisation in a dynamic fashion In these open organisations we do not have control over the components in the system like international political organisations, they don't get to tell the countries what to do The capacity to act and make decisions resides on the local level but members of this kind of organisation have come together because they perceive their joint independence in affecting some outcome that none can achieve in isolation An example might be countries coming together to try and solve climate change Thus the emphasis is on attracting the members into the organisation and creating the conditions that will result in their coordination Organisations may have a centralised component to them that helps to facilitate the organisation If we think about an organisation like the OECD or the Linux Foundation Both have a centralised component that works as a facilitator that coordinates between the members but the vast majority of the members are not part of this centralised component They are autonomous and only partly associated with the overall organisation It's only really in the past decade or two that we've seen the true rise and coherent formalisation of this open model to organisations and we might call it a platform organisation The term platform has become very popular over the past decade or so Every second business coming out of Silicon Valley is now calling themselves a platform This is not surprising because the platform model has proved highly successful Many of the superstar businesses that have shot to the top of market capitalisation like Google, Amazon and Apple are essentially platform organisations So let's talk about what we mean by this term platform organisation A platform is something that supports something else A platform organisation is then an organisation that supports the interaction or exchange between two or more other parties So here we can already see the difference between the closed form of organisation that essentially sits above the members organising them and this open platform organisation on which the members are supported A classical example of this platform model would be Uber the car sharing company that operates as the supporting platform for connecting people with cars to people who need mobility In economics this is called a two sided market where the central role of the platform is in connecting different parties together and facilitating the exchange Multi sided platforms exist because there is a need for intermediation in order to match both parties of the platform in an efficient way to achieve co-ordination Indeed this intermediary will minimise the overall cost for instance by avoiding duplication or by minimising transaction costs This intermediary will make possible exchanges that could not occur without them and in so doing create value for both sides Platforms by playing an intermediary role produce certain value for both parties that are interconnected through it and therefore these sides may both be seen as customers of the platform and this is unlike the traditional dichotomy between seller and buyer or producer and consumer These open platforms typically do not employ or have much control over the users of the system They simply provide the enabling context for the exchange to take place The platform typically provides the tools and protocols through which members interact There are typically no barriers to entry or no barriers at all It is an open organisation people can join or leave when they want In their basic form open platform organisations have been around for a long time More traditional examples would include credit card providers like Visa that facilitate the interaction between card holders and merchants Another example would be job recruitment agencies or accommodation agencies The current rise of these platform organisations is largely due to the reduction in interaction costs that makes it vastly easier to set them up and gain participants and this is due to the arrival of the ultimate platform organisation of our age, the internet Thus many of these new systems of organisation are based on the internet but that's not to say that they stay on the internet The first in this wave of new platform organisations was fully internet based like Napster, Social Networks or Wikipedia But increasingly we see open IT-enabled platforms that organise significant amounts of physical assets such as Airbnb being the largest accommodation service in the world or Uber being the largest taxi service and increasingly these open platform organisations are affecting all industries such as new platforms built on smart grid technology, materials exchange platforms or food platforms This open platform model has a number of advantages over closed forms of organisation Firstly they are highly scalable Rather than being unwieldy with greater numbers of participants they become only more capable and valuable With closed forms of organisation the larger you scale them the more levels of bureaucracy you need to maintain them and the further removed the centralised authority becomes from the actual operations of the organisation Large centralised organisations of this kind can become very cumbersome In contrary platforms are optimised for scale because they do not deliver the end product or service themselves they can maintain a very limited amount of assets even when they scale For example some online platforms have reached millions of users with only a handful of employees on a small budget These platforms have the capacity to scale to a truly global level with Facebook's over 1.5 billion users being a good example Platform organisations are typically built on the long tail They leverage the reduction in transaction costs that information technology is enabled to tap into the vast amount of under-eutonised resources of the end user though are previously not accessible within the centralised model because of high coordination costs In such a way networked platform organisations have the capacity to create new markets and tap into under-eutonised resources and capabilities They aggregate a large number of small and often non-professional resources providing a unified interface for the end user to access them In such a way they're able to bypass traditional centralised incumbents creating whole new value streams out of under-eutonised resources such as access to car use or available accommodation space or excess food In the past sellers have been limited to the economics of production and distribution to a push-based approach meaning that they have to make an efficiently large batch size of their products and hoist them onto the market This means a number of things They needed significant upfront capital expenditure that they had to leverage economics to scale to be able to compete and they had to convince customers to buy en masse or else they would not be able to get the unit price low enough Platforms avoid most of this which makes them much more agile organisations Often the product being sold already exists All that the platform is creating is the connections to enable the exchange Thus there is limited overhead costs No great need for forecast planning and products can be sold in small units that can enable a more personalised experience that is difficult to achieve with a centralised model set up for batch processing Finally, platforms often work to enable the exchange of new value forms such as social capital, natural capital or cultural capital Our traditional business organisation really just sold products and tried to make money doing it Although many of these platforms are strongly commercially orientated because they are connecting people to people they often have also a strong social dimension They often enable more than just commercial transactions but also build in social capabilities that add extra value to the system The bureaucratic organisation is designed to be impersonal one size fits all and this has many advantages but it largely excludes or ignores the value of social capital But these platforms have the technology and capability to easily include and enable the exchange of social capital that adds an extra dimension to them often making them more engaging for the end user With the rise of information technology OpenIT platforms are becoming a standardised approach for managing complex organisations that are more like ecosystems than the traditional industrial age closed mechanical form of organisation that we're used to These platforms are really two sided markets that work to facilitate the exchange of value by accessing whole new value sources by creating a more complex form of user generated organisation And we'll be talking further about these networked organisations in the coming modules