Why Hierarchy kills Cross-functional Product/Process Innovation Always

Period. Full Stop. No exceptions.

Hierarchy demands the creation of zero-sum winners and losers. It’s the fuel, emerging from the ID, that drives hierarchical artifices and prevents them from imploding. Deeply rooted in human nature, its post-modern dominance of business organizations will persist. Forever.

Internal cross-functional innovation never works, because the turf, self-preservation factory it creates, underpinned by executives’ instinctive understanding that position power is hierarchy’s first principle, ensures its destruction. Line executives often prefer to destroy initiatives for which they can’t claim credit. Especially if the innovation runs directly through their turf.

The solution does not lie in an organization’s kumbaya attempts of appealing to our better angels, but rather in hiring management consultants with product, process, industry, and subject matter expertise that drive disruptive innovation. Today, all enterprise disruptive competitive advantage generating change requires innovating across functions and silos. Especially, innovation within the regulatory compliance space, because of a set of issues innate within this subject matter domain.

Hierarchy not only lacks the vehicle (i.e., methodology) and talent to drive the innovation, but it is also utterly incapable of recruiting, training, and maintaining said talent. In a hierarchy, the best and brightest do not aspire to become cross-functional innovation experts, a job that lacks position power and upward mobility. If by happenstance an employee acquires the necessary skill set, they will quickly leave for greener pastures.

If a partner has a Maserati (i.e. the vehicle) that drives a shippable whole product, then innovative cross-functional change can be actualized orders of magnitude faster. The obvious rebuttal is that what prevents the partner from selling its Maserati to our competitors? Nothing. However, all organizations, to survive, already have market differentiators. With a Maserati coupled with a whole product as core deliverables, the partner's mission is to enhance the existing differentiation of its customers. The dots will never be connected in the same way across organizations.

The only sustainable competitive advantage is the ability to learn faster than your competition and out-innovate them. Once a cross-functional product/process is in place, line executives excel at connecting dots that may have always been present, but were latent, resisting connection because they were not visible or readily apparent.

When the proposed Privacy Rule drops, the healthcare industry writ large, and covered entities, in particular, will experience a disruption to its core business model that has not occurred in a hundred years. The board, C-Suite, and the entire executive management team are completely oblivious to what lies ahead. The healthcare hierarchy will not be able to cope without help, for the reasons discussed above. 

After the Rule drops, it becomes law 30 days hence. Subsequent to that date, covered entities have 180 calendar days to implement the enterprise-wide solutions the Rule mandates. There is no way covered entities can get this done on their own. Hierarchies within the healthcare industry are even more rigid than in any other industry. Here any attempt at DYI is guaranteed to result in death by a thousand cuts.