"Hub and Spoke" Business Formation

Organizational Hierarchy [a.k.a. Hub & Spoke Network]

Free idea generation, flexibility, experimentation and speed to test and implement new solutions demand less formalization and low standard of organization levels which is only possible in an open cultural environment. Traditionally big corporation tend to be driven through efficiency and control over the operations and decision flows in a top-down scheme with no crack open for new ideas.

However, in recent years with the emergence of information technology, businesses are now driven to a wide cultural shift and new forms of organization are arising. Lead by the technology giants with worldwide operations through the web, where competition is strongly related to innovation and creativity, the big companies must found new ways to run decentralize operations.

Inspired in the IT architecture, "Hub and Spoke" Business model permit companies maintains the strategic control in the center and at same time give some flexibility to the units. The central Business (hub) spread the operations through a network of business units (spoke) which have own resources to innovate locally.

Some authors present a few drawbacks of this model considering that it steel centralized and dependent from the center. Although, this approach is highly flexible and depending from the organization culture it could be more malleable if the spokes could communicate with each other directly and not through the central hub.

With the emergence of the social business some strategist are predicting that companies will be driven to new holistic form of organization which is refereed as Multiple Hub & Spoke or "Dandelion" where each business unit have great flexibility and autonomy to focus operations on the needs of the community.