What started out as a gradual realization that corporate hierarchies were going the way of the dodo, has turned into a fashionable new embrace of the ‘business network’. Now the world’s most highly-regarded HR organization, CIPD, has formally endorsed this new ‘world view’.

The Global HR Conference in Harrogate, England, confirmed the stark realities: fragmented and interconnected global markets have re-shaped the role of people in business.

“To compete effectively, businesses have to adopt the same dynamic characteristics as their markets,” says FutureWorld Think Tank’s Neil Jacobsohn. “Corporations are networked into tens of thousands of business partners and even mid-sized companies cannot thrive without developing these new relationship and leadership skills.

“In a hierarchy, the structure and relationships were pre-defined and it was HR’s job to slot the best people into the various boxes. This gave rise to the idea that ‘people are our most important asset’.

“In business networks, relationships are created and destroyed, constantly and dynamically – the network is constantly being shaped by market forces. In a fragmented and interconnected world, people are no longer an organization’s most important asset, relationships are!”

These realities may come as a shock for ‘Company Man’. Competitive differentiation now becomes the sum of all relationships! We all have to understand this new ‘Quantum Physics of Business’ – the world has changed and so has the role of people and HR.

The opportunities seem to be profound – but very different.

ANALYSIS >> SYNTHESIS: How this scenario came to be

First a truly African story:

Mafika Mkwanazi was previously managing director of South Africa’s transport conglomerate Transnet, employer of more than 100,000 people. This is a company where authority is cautiously delegated, and where the consequences of failure can result in powerful public censure. Even so, Mkwanazi learned early on what it takes to release the power of people, and the need to provide ‘white space’ for people to explore.

“As a small boy I would lug heavy boxes of peanuts and handkerchiefs to sell to train passengers on the Faraday line between Soweto and Johannesburg,” he recalls. Back at home, Mafika, the youngest of four children, would light a candle at night, then read and study into the early hours, an effort that kept him in the top five in his school.

“I will never forget where I came from,” he says. “Yes, there was poverty, but my mother gave me the greatest gift ­- the space and support to do whatever I wanted to do.”

He applied that thinking to the future of Transnet, breaking up the unwieldy conglomerate into smaller focused business entities with private sector involvement in each one. “We must give more space to the operating companies, allow them to be viable and thrive,” he says.

What Mafika’s mother intuitively gave to her youngest child is what every corporation ought to give its people ­- the space to flourish. Today that ideal is being given wings by increasingly open markets, fragmented and interconnected businesses and individuals who are relishing the freedom and opportunities provided by the new marketspace.

Hierarchies are out, networks are in!

Think about it, would you be able to build a successful sports team by getting each of your star players to conform to some hierarchical control structure? Wouldn’t you want each of them to exercise their own particular character and skills to the utmost? To push the barriers?

Similarly, we should not try to shape our bright young things to the corporate mould. Instead it should be the other way round, they should be able to shape the corporation around themselves and create brand new customer value. We should allow each and every one to exercise their unique skills, and let the market be the judge of the value they add.

It takes bold leadership and courage to do this and allow for risk and failure. But innovation thrives on open leadership that lives on the edge of chaos and finds inspiration in uncertainty.

The new employees and young minds that will enter your business in the next decade will bring another dynamic to your business -­ they tend to create networks where previously there were only hierarchies. We see this in new consumer markets, which are smarter and more connected than ever before.

Companies can no longer hide behind the corporate marketing image because smart consumers are having dynamic, open and honest conversations about your products and services even while you are planning the next campaign.

In a hierarchy, people ARE your most important asset because relationships are pre-defined according to the organizational structure. Once this structure is in place, all that remains is to find the best people to plug into the organizational pigeon holes.

In a network, on the other hand, relationships are not pre-defined. They are dynamic, driven by market realities day in, day out. People who thrive in networks do so because of the quality of their relationship skills, be they face-to-face or virtual. Whatever the context, it’s the power of relationships that create quantum change.

That’s why, in a fragmented and interconnected world, it’s not people who are a company’s most important asset, but relationships, both inside and outside the business.

Take IBM. Once the archetypal hierarchy, it now includes a network of more than 50,000 business partners woven into a network of solutions for the biggest customers on the planet. Google, Amazon.com, eBay and Germany’s Web.de are other examples of 21st Century networked businesses whose business models are being integrated into industrial-age blue chip companies.

Companies realize that you cannot get to be a leader in this future by working harder. In a world where universal access to communication technologies is lowering the barriers to entry, you need to make quantum change just to stay relevant.

In future HR will have to focus on helping the business take relationship value up a quantum level. HR’s role will be to drive the company’s major competitive differentiator – relationships, not just to manage the ‘parts’ (the people) but to focus on the spaces between people. And, to develop their skills that will enable them to build relationship value.

The role of HR will have to include relationships inside and outside the organization – with business partners and customers. In fact, we have to ask what the name for HR should be in future – perhaps Human Relationships? Certainly HR can become central to competitive differentiation, and centre-stage in company strategy.

For individuals, this means a profound new recognition that they have to develop the new relationship skills to release their personal value in a networked world. They will have to dump the ego and focus on the added value they can create with each and every relationship. There will no longer be any kind of ‘job security’ – other than that offered by satisfied partners and delighted customers.

Opportunities for new support services will abound – from skills development to strategic positioning, new tools to measure the performance of networks, and new thinking to analyze the implications.

These realities may come as a shock for individuals who feel safe in ‘just-tell-me-what-to-do’ hierarchies. Company Man should be feeling threatened. Competitive differentiation now comes from the sum of all their relationships! We all have to understand this new ‘Quantum Physics of Business’ – the world has changed and so has the role of people and HR.

The opportunities are profound – but very, very different.