In Business, Fractal Model

Fractals are patterns that are similar at different scales; they are created when a single all-purpose rule-set is repeated at different scales rather than using unique rule-sets at each scale.

The fractal business model creates a company in accordance with the rules of the wider society, these external rules form the basis of the all-purpose rule-set. The fractal business arranges its internal structure to follow this same rule-set, this single rule-set is applied though out the business right down to each individual person.

Everyone is subject to the single rule-set and if they comply with all the contractual, regulatory and statutory requirements that constrains the statutory company then, by definition, the statutory company is also fully compliant to all its requirements. Where a traditional business is built from the top, a fractal business is built from the bottom.

What does this structure look like in reality? A fractal business arranges job roles so that the rule-set can apply to everyone. This does not mean everyone does exactly the same thing, but rather that everyone must know how the rules impact them and they share a common administrative approach to their activities. A fractal business could be considered similar to a street market; each stall-holder follows the same rule-set and yet each stall can be different in content and style. Traditional businesses are usually divided into functional departments and hierarchies, by contrast in a Fractal business everyone is equal and share multiple skills, like stall-holders in a street market.

The tricky part for a fractal company is to overcome the cost and inefficiency of the duplication of activities that occurs when each “stall holder” is separately administering and processing only their activities, and the inefficiencies of multi-skilled people moving from one admin activity to another (as well as doing productive work).

In many ways this problem is why fractal companies are resurging currently: today we have the opportunity to overcome these costs and inefficiencies using IT (established communication networks, easy availability of cheap hardware and the commonly held IT skills of the working population).

IT allows the individual to administer their operations very easily (often automating them fully as part of the productive work), along with the easy aggregation of all the individual data and its feedback to the individuals in real time (again often fully automated). For example, IT can be used to automatically take data from the actions of purchasing stock and pass that data directly onto the organizations accounts journals- which themselves can be automatically aggregated into the account ledgers and management accounts – removing the need for the traditional journal clerk and removing the delay in the process. In addition, real time financial data can be fed back to the individual purchasing the stock to help them in their decision making.

With the removal of administration staff and the opportunity to optimise activities in real time any organization can take advantage of the fractal approach and achieve significant savings in labour costs (typically halving them) as well as increasing the effectiveness of the productive staff (typically doubling productivity).

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