By removing these “old fashioned” structures, companies:
1) Can spark innovation among employees who no longer feel confined by their organizational role.
2) Create more informal network relationships across organizational boundaries.
3) Distinguish themselves from competitors.
This article argues that old-style, hierarchical organizational structures are detrimental to technological companies. “It creates a straight jacket that makes organization adaptability to changes in the market impossible.” The argument is that the inflexibility of a rigid corporate structure creates a “straight jacket” for firms’ innovation, because employees are always consumed by the operations within their business unit.
Davis also argues that these organizational structures prevent network relationships across organizational boundaries. Creating incentives/rewards for this kind of communication needs to be available to drive cooperation.
Lastly, Davis points out that if all companies have a hierarchical organizational structure, that it is not distinguishing itself from its competitors. A person at Firm A can quit and start working a similar position at Firm B the next week, and would need minimal training because the systems/processes across these organizations are almost identical.