Virtual Organization Structure for a Remote Business World

03 Oct Virtual Organization Structure for a Remote Business World

The concept of virtual organizations has been around for many years, but in the last year or so, pretty much the entire world has gone virtual and the idea of a virtual organization has become more relevant than ever. In this post we will take a deeper look at what a virtual organization is and what the virtual structure does.

What is a Virtual Organization?

A virtual organization is an alliance of separate individuals, business units or companies, all with different core competencies, working together to bring a project to market faster. These projects are usually initiated to serve a particular market opportunity. It may also apply to individuals in a single company with separate operational objectives working cross-functionally to meet a specific customer need. To better understand the concep,t let’s take a look at traditional structures and compare them to virtual organization structure.

Related Reading: What is Adaptive Business Strategy?

Traditional Org Chart

In a traditional organization you can expect to find a centralized hierarchical leadership structure with a CEO or president at the top, a layer of executive management below the CEO, then perhaps senior vice presidents, vice presidents and so on. This layered leadership structure has been seen as an effective way to manage a large enterprise, particularly in manufacturing and other industrial enterprises. However, with customer demands changing at an increasingly rapid pace this traditional structure is seen by some as being precariously rigid. The growing popularity of lean manufacturing principles and agile development combined with increased global connectivity have changed the way corporate structures can take shape.

The Flat Org Chart

As early as the 1970s, a digital boom combined with changing demands and expanding global markets caused many organizations to rethink their traditional structures. In order to become more agile and be able to process information through the organization faster, org charts began to flatten. This means more power was dispersed downward, spreading decision making power and giving more autonomy to a wider number of employees. This means that teams are dispersed organizationally and regionally. From this disbursement, the concept emerged in the 1990s to build cross-functional alliances and joint ventures to be more agile and bring innovations to market faster.

Lessons from Virtual Organizations that Matter to Anyone

The principles of a virtual organization structure can help almost any executive, manager or project leader create new ways of problem solving to deliver a product or service. This has never been more true than in today’s widely dispersed business world.

Predictions have been made that about 70% of the workforce will be working remotely by 2025 according to Vox research.

“What is now an incentive or perk will soon become a necessity, especially as aging boomers and millennials alike both try to square their desire to travel with the need to make money,” Vox said. “If remote work is the product of demand for a better work-life balance, the future could tip in favor of the life side of that equation.”

It’s clear that with such a rapid shift to the home office, new ways of organizing a business are in order.

Some features of a Virtual Organization structure with wide reaching relevance include:

• Target a specific market opportunity

• Heavy use of telecommunications and digital tech

• Combined forces of differing core competencies

• Interdependent relationships for more lateral problem solving

• Permeable boundaries for more lateral problem solving

For example, say a small to midsize business owner just created a new tool to do an old job. They can manufacture it but to bring their innovation to market they might hire a team of contractors and vendors that includes a logistics consultant, ecommerce developer, product designer, brand designer and more.

Another example might be a marketing manager spots a sudden market opportunity. To jump on the opportunity they assemble a team of contractors that includes web designers, social media experts, digital advertising specialists and more.

In either example we can assume that teams are spread out over time zones and working remotely. The principles of the virtual organization can help the business succeed under these conditions.

Key Principles in the Virtual Organization Framework

• Collaboration, trust and empowerment.

• Ensure technology works so that teams stay connected

• Stay adaptable

• Identify the key strengths each unit contributes

• Clearly define each unit’s role and obligations

• Aim for complementary skills rather than overlapping or redundant skills

• Ensure teams are well trained or certified

• Foster team culture

Why Cloud is Key to a Virtual Organization

Cloud is what makes data, software and people accessible in a virtual world. Whether you are talking about cloud storage and cloud computing, or even if you are talking about video conferencing, the cloud makes it happen. With recent push toward remote working, cloud has made it possible to assemble remote virtual teams. With secure cloud hosting, businesses can easily move even their most critical software solutions into the cloud.