People
Chris Mulh
Partner & Managing Director, Global Co-Leader of Operating Model & Org Transformation
Chicago
Networked organizations are the future, part 1
In a business landscape marked by volatility and rapid technological advancement, the traditional rulebook is being tossed aside. Companies that rely exclusively on rigid, hierarchical operating models are at increasing risk of being overtaken by agile competitors who harness AI, real-time data, and cross-functional collaboration to sense and respond to change.
This tension is not new. More than a decade ago, a widely read Wall Street Journal investigation chronicled how a well-intentioned matrix structure at Cisco, designed to improve collaboration and shared accountability, instead produced near-total gridlock. Decision rights blurred, leaders multiplied, and even routine product decisions required consensus across layers of overlapping authority, slowing execution at precisely the moment speed mattered most.
The story today is not just about technology or tearing down organizations wholesale, it’s about fundamentally rethinking how work gets coordinated, decisions get made, and people get mobilized. In this 3-part series, we expand on our perspectives from “Ripping up the rulebook: How AI is driving corporate reinvention,” exploring how companies are evolving toward hybrid operating models that combine the strengths of hierarchy with the speed and adaptability of networked ways of working, and sharing practical steps for transitioning to networked organizational models that are built for speed, resilience, and ongoing innovation.
Why traditional hierarchies struggle on their own
As companies expand, the limitations of the traditional organizational chart become increasingly evident. The proliferation of silos, segmented teams that operate in isolation, restricts both the flow of information and the organization's creative potential. These silos hinder agile problem-solving, stifle cross-functional decision-making, and ultimately slow a company’s ability to compete in fast-moving environments. For large, global enterprises, silos can exist across functions, geographies, and cultures, often leading to deep-rooted organizational divides.
The public sector offers an even starker illustration. Large infrastructure or technology programs are often governed by rigid hierarchies designed to minimize risk and enforce control. The result is familiar: years-long delivery timelines, ballooning costs, and solutions that are already obsolete by the time they launch, despite thousands of diligent people doing their part exactly as designed.
In many traditional, hierarchical organizations (particularly those that are privately owned), there is a preference for clear individual ownership of processes, rigorous adherence to pre-defined KPIs, and linear, stage-gated project delivery models. For example, launching a new product often involves long, sequential handoffs from department to department, each focused on “checking the box” for their specific mandate before the next team can proceed. While this may guarantee robust processes and controls, it comes with a hidden cost. The loss of speed and the critical early-mover advantage, which is especially crucial in today’s hyper-competitive markets. When innovation requires rapid iteration, customer feedback loops, and cross-functional coordination, rigid hierarchies become a bottleneck.
The issue isn’t hierarchy itself. It’s hierarchy applied universally, even where it no longer fits the work.
Networked organizations: Not a replacement, but a powerful complement
Networked or agile organizational models offer a different way to organize work. Rather than flowing decisions up and down layers, they bring together cross-functional teams aligned around outcomes, empowered to act quickly within a defined scope. These teams are accountable for end-to-end outcomes, accelerating decision-making, enabling real-time problem-solving, and making rapid iteration not just possible but routine.
Where the traditional model runs new product launches through a slow, sequential relay, the networked approach brings all stakeholders (e.g., R&D, marketing, manufacturing) together from day one. Projects advance on parallel tracks, guided and facilitated by scrum masters through agile ceremonies that are designed to resolve bottlenecks and incorporate customer or executive feedback, resulting in drastic reductions in time-to-market.
This approach isn’t theoretical. Blue-chip corporates such as Procter & Gamble have adopted these structures to unlock innovation and responsiveness without dismantling their core structures.
However, decades of experience show that networks do not replace hierarchies at scale. Instead, they work best in pockets, supporting strategic initiatives, innovation, and transformation while hierarchies continue to provide stability, accountability, and enterprise-level coordination.
The hard and soft benefits
Networked organizations aren’t just a tech-sector trick. Across traditional industries, from automotive to consumer goods, the evidence is clear: breaking down hierarchical silos and prioritizing cross-functional flow delivers real, measurable benefits.
Some of the most important benefits include:
- Organizational agility: Teams can pivot quickly to respond to market disruptions or emerging customer needs. Flatter structures reduce bureaucracy, minimize infrastructure, and cut costs.
- Resilience: Decentralized decision-making helps buffer the organization from shocks, as empowered teams can operate independently yet in alignment with global strategy. Quicker, more informed local teams allow for improvisation, better communication, and more informed responses.
- Employee engagement: When staff are trusted with greater autonomy and given direct responsibility for outcomes, both engagement and productivity rise.
- Customer-centricity: Teams structured around customer journeys drive faster, higher-quality service compared to legacy organizations that default to what’s easiest for themselves, not their clients.
The recent transformation of Barnes & Noble is a great example, making it more like a collection of neighborhood bookstores with improved sales, customer loyalty, and unique in-store experiences, providing evidence of the benefits of distributed, empowered management. As its CEO, James Daunt, has said, “If you actually let the local book-selling teams do what they think is best, you suddenly get much better bookstores.”
But networks are not universally effective. They are excellent at learning and adapting, but less effective at making hard trade-offs, managing large-scale cost actions, or executing enterprise transformations on their own. These are aspects in which traditional hierarchies will continue to persist and be required. When networks are asked to do everything, organizations often end up with matrix complexity rather than speed. Truly transformational organizations not only adopt new technologies, like AI, but also reshape their operating models to use networks where they add value.
The bottom line
Networked, agile models, supported by practical tools, data-driven transparency, and leadership committed to outcomes over process, will be critical components of organizations that will win in today’s fast-moving marketplace. AI and modern technology will not eliminate hierarchies. In fact, they often enable larger, more coordinated enterprises. The winning organizations are those that adopt hybrid models:
- Hierarchies for strategy, accountability, and scale
- Networked teams for innovation, speed, and transformation
Many companies are talking about networked organizations, but few are implementing them successfully. In Part 2 of this series, we will explore the practical steps to building a networked organization and integrating it into the broader enterprise without chaos.
