Hollywood was there first

Occasionally, people in marketing industry talk about how to adapt their agencies to changes in the media environment. Every time I see something like that, it reminds me of the same question that media companies were asking themselves 4–5 years ago (no answer), and also reminds me of Hollywood.

Hollywood, as a matter of fact, did organizationally adapt to a relatively sudden change in its own environment (television, and then all other stuff that followed). So maybe there’s a lesson there.

Before any other content industry, Hollywood was faced with the need to quickly and adaptively respond to fast-changing + unpredictable environment that was increasingly hostile to its business model of Fordist movie production (to make an analogy, think minisite/banners/video ads).

So, in order to survive this all this terrible hostility, Hollywood had to reorganize itself … and move away from classical, vertically-integrated studio model towards a networked cluster. Hm.

There’s an old article that talks about this: “Hollywood has mutated from an industry of classic huge vertically integrated corporations into the world’s best example of network economy … Hollywood’s network economy isn’t unique, it’s just more evolved than most — and as a result offers a picture of how and where companies in all kinds of industries will do their work in the years to come. Eventually, every knowledge-intensive industry will end up in the same flattened, atomized state. Hollywood has just gotten there first.”

Okay, so now what do those networked clusters mean? Well, industrial clusters like Hollywood or Sillicon Valley are places where a lot of firms are grouped in immediate proximity. So it’s easy to know everyone, and social and economic ties go together.

What’s cool about clusters as organizational forms is that they are combo of firms and markets. As markets, they have power to create and allocate resources efficiently. After all, they are governed by the laws of supply and demand, and are highly efficient at allocating resources to the “material well being of all”. In short, a little competition can be good for you.

Now, in addition to being a cluster, Hollywood operates on a project basis. Something like this: now that everyone’s clustered together, let’s see who’s the best to respond to some challenge?

Someone defined projects as “temporary systems of diversely skilled people working together on a complex task over a limited period of time.” A person reads a script, goes to a producer who wants to make a movie, and calls this director, and then these actors, etc. etc.

So then someone in Hollywood figured out that they would be more competitive and more adaptable and able to explore environment better if they operated on temporarily and flexibly assembled project teams. This means that the talent is not always the same, because if they were then it would be really boring to watch same people over and over again. Also, things that always-same talent can come up with would also be limited (how many different things can same people come up with?). Most importantly, though, it could happen that limited talent is not up to the current task.

Thus, by continuously reshuffling people vs. not keeping all its talent “in house” Hollywood makes sure that it always has A-team on its disposal. And it also makes sure that it’s flexible for whatever comes next. And, sometimes, it produces innovative stuff.

Now, for a second, think about agencies as clusters. Clusters have spatial proximity of diverse talent, but without hierarchical and formal ties that keeps it in place. Talent is only loosely coordinated (people belong to certain functions, units, etc.) but otherwise works as a market. When people are closely together, it enhances communication and collaboration. But it also creates little bit of competition. So bringing market inside of a firm may be a healthy thing. And who knows, it may help create something new, too.

Originally published on October 26, 2009