06/09/2026
The need for radical rethinking of organisational concepts
By Professor Klaus Schwab
In my recently published book, 'The Competitive Enterprise in the Intelligent Age' (https://books2read.com/Competitive-Enterprise), I argue that technological transformation demands a radical rethinking of organisational concepts. Yet confronted with accelerating change and information overload, many leaders seek to preserve control by reinforcing industrial-era hierarchies with more reporting, committees and approval layers. They mistake procedural control for the capacity to respond. The tipping point comes when corporate functions such as human resources, finance and governance dominate the organisational system instead of serving and enabling its value-creating functions. Rigidity then cultivates mediocrity: conformity becomes safer than initiative, challenging assumptions becomes a career risk, and advancement favours those who protect the system rather than improve it. Capable people lower their ambitions or leave. Excellence gives way to satisfying the process. Mediocrity becomes a characteristic of the system, not a reflection of the talent within it. The result is an organisation increasingly equipped to defend yesterday’s arrangements rather than meet tomorrow’s demands.
Technology, above all AI systems, must become the integrating backbone of the enterprise. This means more than adding tools to existing departments. It requires shared data infrastructure and connected systems linking strategy, knowledge, people, processes, customers and decisions. Such a backbone can turn fragmented information into shared intelligence, make expertise accessible across functions and support real-time decisions and continuous learning. By reducing the need to transmit information through successive management layers, it can make radical simplification possible. Even large global enterprises should strive for only three or four genuine hierarchical levels below the CEO. Fewer levels must mean clearer accountability, not less responsibility.
A company that merely adds AI tools for individual employees or selected functions, without reconsidering its whole organisational system, risks adding costs without securing enterprise-wide productivity gains. A well-designed AI backbone should improve decision-making while simplifying processes, eliminating duplication and enabling greater value creation without a corresponding increase in overheads. Investment efforts should therefore be channelled into strengthening the enterprise’s intelligent system and developing new value propositions for customers that this technological revolution now makes possible. Recent company announcements show that even successful, growing businesses are reducing staffing levels and seeking to lower staff-related fixed costs. The priority should be to expand capabilities and customer value, not automatically to increase headcount and permanent overheads.
But technology alone cannot hold an organisation together. Mission and values must provide the cohesion once supplied primarily by hierarchy. Mission must function as an operating system: it gives direction, while values establish the boundaries within which autonomy can flourish. The more flexible the organisation, the stronger its common purpose must be. This foundation allows work to move horizontally, through multidisciplinary teams assembled around missions, problems and outcomes. Functions should remain centres of expertise and professional standards, not fortresses defending territory. People and resources should be deployed where they can create the greatest value, rather than confined by departmental boundaries. Managers must become orchestrators, coaches and teachers, developing people and ensuring accountability rather than merely transmitting instructions.
Such an organisation must execute, learn and reinvent itself simultaneously. Learning belongs in daily work, not only in training programmes. Projects should generate reusable knowledge, failures should yield insight, and professionals should continually renew their capabilities. Above all, enterprises must resist the hubris of success: “We know best because we are so successful.” Past achievement can turn established assumptions into unquestionable truths and discourage learning from others. A genuine learning organisation must scrutinise its successes as rigorously as its failures. Intellectual humility is not the opposite of confidence; it is a condition for continued renewal.
Learning must also extend beyond corporate boundaries. No enterprise can generate internally all the knowledge it requires. Permanent participation in wider knowledge systems – connecting universities, researchers, technology companies, customers, suppliers, policymakers and leaders across industries and society – must become part of its learning infrastructure. This is not occasional networking. It is systematic engagement that challenges assumptions, reveals emerging developments and translates external knowledge into better decisions. The AI backbone should connect these insights with internal experience and make them accessible throughout the enterprise. Competitive advantage will depend not only on what a company knows, but on how effectively it learns from those who know what it does not.
Organisational design also shapes the people an enterprise attracts and the ambitions it rewards. The old model can become a refuge for those whose overriding objective is to find the most comfortable position within the hierarchy. Today’s competition requires people driven by a shared mission, guided by values and prepared to take responsibility, exercise initiative and keep learning. They seek opportunities to contribute, not merely positions to occupy. Attracting and retaining such people requires more than a compelling mission statement: it requires leaders who live the values and a culture that rewards contribution rather than conformity.
The answer to uncertainty is not a more elaborate bureaucracy. It is a stronger core of mission, values and accountability, combined with flexible teams, an integrated AI backbone and learning that reaches beyond the enterprise. The winners of the Intelligent Age will not merely add technology to yesterday’s organisation. They will redesign the organisation itself, protecting its purpose, not its inherited structures.
