William M. Snyder
Social Capital Group
Cambridge, MA

January, 1999

William M. Snyder
Principal
Social Capital Group
41 Bowdoin St.
Cambridge, MA 02138-1626
P: 617.498.0903
F: 617.498.0905
wsnyder@socialcapital.com

Submitted to the Academy of Management, Division of Organizations & the Natural Environment, John M. Jermier, College of Business, U. of South Florida, Tampa, FL 33620-5500 (813) 974-1752 jermier@groucho.bsn.usf.edu

ORGANIZATION AND WORLD DESIGN: THE GAIA’S HYPOTHESES

ABSTRACT

We live in a society of organizations, therefore the discovery of new organizing methods may be our best chance to solve many of the world’s most complex problems. Yet deficiencies in current theory prevent us from identifying emergent opportunities to address critical issues–such as ecological destruction, social injustice, and gross economic inequities. This case-study analysis explores how community-based organizing approaches can enable firms to align ecological, social, and financial objectives. The case explores how a for-profit, start-up firm–with an explicit mission to promote environmental and social welfare–organizes customers and employees into communities around areas of shared interest or practice. This approach will enable the firm to develop "moral markets" that value its emphasis on ecological goals and its commitment to build extraordinary levels of passion and competence among geographically distributed employees. This "revelatory" case generates a number of hypotheses that suggest areas for further research, including applications of community organizing methods on a worldwide scale.

We live in a society of organizations, therefore the discovery of new organizing methods may be our best chance to solve many of the world’s most complex problems (Drucker, 1993; Dunphy & Griffiths, 1998; Mitroff, 1998). Yet deficiencies in current theory prevent us from identifying emergent opportunities to address critical issues–such as ecological destruction, social injustice, and gross economic inequities. Scholars have assumed that changes at the firm level are unlikely to solve these intractable problems and have therefore focused efforts on social policy or on specially commissioned non-governmental organizations (Korten, 1995; Cooperrider & Pasmore, 1991). This paper outlines new directions for research on community-based organizing methods that suggest new possibilities and responsibilities for organizations in the 21^st century.

Weick (1979) argued 20 years ago that describing organizations is not enough; we must also understand the process of organizing. He described organizations as dynamic processes, not merely complex systems, and with others heralded the now-commonplace emphasis on organizational learning (Argyris & Schon, 1978; Bennis & Slater, 1968; Hedberg, 1981). We should now reapply the spirit of Weick’s challenge and address an expanded scope of organizing activities, not merely their dynamism.

Recent research has documented the breakdown of clearly defined boundaries between organizations and their "external" environments. In networked organizations (Nohria & Eccles, 1992; Quinn, 1992) and "virtual" firms (Hedberg, 1997) the boundaries between firms are hard to decipher; it is difficult to distinguish customers and competitors, and even the roles of vendors and customers are conflated (Petzinger, 1999). This research parallels increasing attention to informal networks of individuals that exist within and across organizational boundaries, and which serve as important channels for information, innovation, and collaboration (Hargadon & Sutton, 1997; Krackhardt & Hanson, 1993; Von Hippel, 1988).

Trist argued in a broad review of firms’ participative management initiatives that we cannot hope to transform organizations successfully without addressing the "macro-social environment" (Trist, 1981). Peter Drucker stated in the 1998 Academy of Management Address that organization science must look beyond private sector organizations to the public and non-profit sectors; that organization growth and innovation would rely on increased efforts to develop a robust, participative civic culture. Recent research on "social capital" argues that organizational and broader economic success depend on the voluntary networks of reciprocation and trust that de Tocqueville found so striking in 19^th century American life (Fukuyama, 1995; Putnam, 1993). The rise of the internet and internet-based companies has reinforced a remarkable trend toward "radical" (Hill & Rifkin, 1999) or "guerilla" (Levinson, 1998) marketing approaches that advocate organizing customers as communities; that blur the line between the organization and its markets (Hagel & Armstrong, 1997).

These trends point towards emerging opportunities to align commercial interests and the goals associated with sustainable ecology and social and economic justice. Scholars have reported data that show justice and profitability objectives are not always contradictory (Waddock, 1997)–but in many markets the "externalities" associated with negative social and ecological outcomes are neither measured nor accounted for (Hawken, 1993; Korten, 1995). Hence, many companies profit while degrading the environment and society’s human and social capital. Ultimately, apart from institutional constraints and legal restrictions, our society depends on the buying preferences of consumers and business customers to influence the moral responsibility of producers.

Traditionally, organization scholars have assumed that firms have limited capability to shape their environments. Contingency theorists found that firms must adapt to environmental constraints; firms thrived when their strategies and structures "fit" with intractable external exigencies (Burns & Stalker, 1961; Lawrence & Lorsch, 1967). Organization design scholars have argued that while firms can do much to adapt internal design elements to meet environmental demands, they have much less influence over stakeholders’ expectations (Galbraith, 1977; Mohrman & Cummings, 1989). Finally, popecologists have concluded that firms’ survival results from a fortuitous fit between its conduct and its environment; the organization itself has little capacity to control either (Aldrich, 1979; Hannan & Freeman, 1977). The role of marketing, sales, and public relations functions, of course, is to shape customer and stakeholder demands–but these efforts are generally based on rigid assumptions about product and service features and current organization capabilities (Leonard-Barton, 1992).

The premise of this paper is that both external and internal organizational environments are highly adaptable. Practitioners and scholars have greatly underestimated the opportunity to shape environmental conditions by organizing markets (Hagel & Armstrong, 1997; Hill & Rifkin, 1999; Levinson, 1998); they have also largely ignored opportunities to organize informal structures within the organization (Gittel & Weiss, 1997; Wenger & Snyder, 1998). An exemplary case study demonstrates the societal advantages and economic feasibility of organizations that focus as much effort on organizing markets and informal dimensions as they do manipulating the design of the firm’s formal strategic and structural elements. This study focuses on a start-up firm in the fast-food industry–a highly representative industry in an economy where: service jobs far outnumber declining manufacturing jobs; the average household spends 50% of its food budget on meals prepared outside the home; fast-food restaurants alone account for $100 billion in U.S. sales at over 200,000 locations; and where the Commerce Secretary deemed the advent of the millenium "the year of the restaurant" (Sebastian, 1999).

The case of Gaia’s Place will demonstrate the extent to which "community organizing" can become an explicit and critical element of a 21^st century business strategy. The case shows how theory regarding "communities of interest" (Armstrong & Hagel, 1995: 131) and "communities of practice" (Snyder, 1997; Wenger, 1998) sheds light on modes of organizing that span the traditional boundaries between the organization and its environment while building relationships between economic players who share common interests and values. Finally, the case suggests a broader approach to "society design" (or "world design") that supports the development of moral markets (Korten, 1995), social entrepreneurism (Leadbeater, 1997; Stainburn, 1998), and the development of social capital across social, economic, and national boundaries.

While a single case cannot provide conclusive evidence, "revelatory" or "exemplary" cases such as Chandler’s historical studies of GM, DuPont, and Standard Oil can provide unique insights that have tremendous influence on scholars, practitioners, and policy makers (Eisenhardt, 1989; Yin 1989). Moreover, an important weakness of organization science (like any social science whose subject is highly labile human behavior) is its emphasis on what exists today as opposed to the conditions that human beings are capable of imagining and enacting (Argyris, Putnam, & Smith, 1987). We are responsible as social scientists therefore to scan carefully for emerging organizational forms that show how sustainability and justice as well as economic ends can be achieved in ways that are mutually compatible, replicable, and scaleable worldwide (Dunphy & Griffiths, 1998).

This paper presents a case study about a company that has yet to open its first store. The firm is nevertheless illuminating for its unique strategy and operational plans, which have been described in the firm’s business plan and in senior management interviews. These provide sufficient evidence of strategic behavior by the firm during its first year to generate hypotheses and questions regarding "community organizing" concepts and methods. The purpose of this case is to generate hypotheses–not validate them–thus an exemplary case-study approach is appropriate (Eisenhardt, 1989; Yin, 1989).

Background: Gaia’s Place is the brainchild of two successful entrepreneurs who are also leaders of a network of business people who share social as well as economic goals: the Social Venture Network. One is the CEO of a 50MM firm in the natural foods industry and the other is an former CEO of a firm with a dual social and economic mission (an inner-city firm that supplies much-needed jobs to an impoverished neighborhood and brownies to Ben & Jerry’s). Gaia’s operations director was the top graduate in his business school, which he attended after spending several years in the Peace Corps. He chose Gaia’s over other attractive offers largely because of its social mission and the opportunity to "change the way business is done"–a theme voiced by all three senior managers.

Gaia’s purpose is to provide natural, fresh foods to customers in a quick-service, family-oriented format. Gaia’s guiding principles include: 1) serve fresh foods that are prepared on site for customers; 2) provide a friendly, fun, family-oriented place to eat; and 3) model an environmental and social commitment by minimizing waste, developing local suppliers, providing education on environmental issues, and being a great place to work .

Several market trends support Gaia’s plans to open a national chain of stores over the next ten years: 1) Americans spend 50% of their food budget on pre-fixed meals and this percentage continues to grow as dual-income families juggle demands at work and home; 2) the natural foods segment has gained legitimacy as store sales have increased 20% annually in last five years while mainstream grocery sales have been relatively flat; and 3) consumers are increasingly concerned about unhealthy contents in many prepared foods, such as fats, certain oils, sugar, salt, and various insecticides and preservatives.

The vision of Gaia’s Place is to provide a setting where parents as well as kids can get a healthy, good-tasting meal served by people who prepare the food themselves and who care about making customers’ dining experience a gratifying one. In contrast, industry leader Macdonald's has seen a decline in parents’ consumption of its products and growing dissatisfaction with the quality of food and dining experience in many stores.

Ultimately, the success of Gaia’s will depend on its capacity to execute its vision to provide a friendly, enjoyable setting and fast, good-tasting natural food at a competitive price. Even then, to attain its profitability and long-term growth goals Gaia’s must meet ambitious volume objectives–approximately 800 meals/day per store (average volume for a successful fast-food store). Finally, the social-change and financial ambitions of founders and investors will only be realized if Gaia’s Place, Inc. learns how to expand and manage a far-flung empire of stores as McDonald’s and Starbucks have done.

Hence, Gaia’s must develop an array of competencies, including strategic, operational, and support:

• market development (includes community organizing)
• menu/product development (eat-in and take-out; standard and high margin)
• local vendor partnerships (access to distinctive, natural, fresh foods)
• location selection and space design (reflecting unique mission and values)

• store management (both performance and innovation outcomes)
• product & service delivery (quality, attention, and on-line customization)
• people recruitment & development (includes communities of practice)

Support

• finance and accounting (fast, accurate results for operations; innovative ways to finance expansion)
• purchasing and logistics (availability of fresh, local foods and distinctive prepared foods)

Furthermore, the firm must figure out how to align these disparate competencies to provide a compelling service and product experience, while continuously adapting, growing, and reconfiguring capabilities to respond to new opportunities and challenges. Gaia’s ability to innovate and adapt in a variety of regional locations and communities will be key to its success.

It’s important to see these competencies as a unique configuration or gestalt, not merely as a list (Grant, 1996; Prahalad & Hamel, 1990). The most important and distinctive competence may be the "community organizing" competence that lies at the heart of Gaia’s distinctive approach to both "market development" and "people recruitment and development." In large part, these two skills will establish and differentiate the others outlined here. First, a community-organizing approach to market development will foster a loyal customer following, help develop products people want, provide privileged access to local vendors, and ensure that the store design evolves to fit the local culture and collateral service opportunities. Second, a community-based approach to organizing employees will help link people inside and outside the firm who share interests or expertise. This knowledge-based organizing approach will help members learn and innovate capabilities, not only meet short-term performance objectives. The combination of community-based approaches to both markets and members enables Gaia’s to leverage core skills and values in both domains and to establish the power and legitimacy of these relatively unfamiliar approaches.

Innovative organizing methods have both benefits and risks, as demonstrated by earlier management innovations such as Taylor’s (1923) scientific management (more efficiency, less flexibility) and more recently, team management (greater effectiveness, but difficult to manage). Benefits of a community-based organizing approach include the firm’s ability to develop unique levels of customer loyalty and participation at a low cost and to develop remarkably high service-delivery capability and flexibility. The risks are that managers will have difficulty applying these new methods and the firm will lose money and customers in the early phases.

How do community-based organizing methods differ from conventional approaches, and what do they look like in practice? A brief review of Gaia’s operating plans for organizing both market- and firm-based communities provides sufficient detail to generate hypotheses that deserve further research.

"Communities of interest" or "topical" communities (Armstrong & Hagel, 1995; Hagel & Armstrong, 1997) are defined not by geographic proximity, nor by residence in a traditional neighborhood or city. Rather communities of interest (CIs) consist of members who have a shared interest in learning or practicing in a domain such as parenting, kayaking, or investing. They are distinguished from communities of practice because members have less intensive mutual interactions and generally a weaker sense of a joint enterprise or shared culture–although they may share an interest in learning about a practice domain and cooperating to earn a privileged position vis-à-vis vendors (Hagel & Armstrong, 1997; Wenger, 1998).

Gaia’s has conducted a number of focus groups on its store concept and even specific menu items and prices. The firm has collected demographic data and selected the location for its first store in a prosperous suburb of a major city. The focus groups, demographic data, and systematic efforts to plan for purchasing and service logistics are familiar start-up activities. But Gaia’s Place will diverge from convention as it begins to develop its market. The store management team will begin soon (before the first store opens) to promote the store’s concept and marketing approach through local media contacts. Meanwhile, the team will establish relationships with members of local schools, churches, colleges, businesses, and non-profits to find connections with people and organizations who share Gaia’s passion for healthy, convenient food and an ecologically sustainable lifestyle. This word-of-mouth, "guerilla-style" marketing methodology builds on an approach that has worked well for the founders in previous start-ups. (For example, one firm has succeeded in a market where it spends less than 1% of sales on advertising while its chief rival spends nearly 15%.)

Once the management team has built its network of local contacts, they will recruit a "core group" of organizers from the community who are motivated to establish a "community of interest" related to healthy, sustainable living. The group may lead a series of workshops with others to identify issues related to this interest domain, such as healthy diet, exercise, stress management, ecological household products and services, etc. While the issues related to "exercise" and "stress management" are not directly related to the mission of Gaia’s Place, the core group will scope the domain as it sees fit to include the matrix of issues of greatest interest to the local population.

The core group (as well as peripheral and transactional participants) will then identify experts and other resources as well as "markets for expertise," i.e., people who would likely use the information and resources developed by community members. At this point, the group might propose a range of projects that promote healthy, sustainable lifestyles in the community–one of which would be to introduce people to Gaia’s Place and to encourage community participants to shape the products, services, and design features of the store so it meets its own and the community’s objectives. Projects might feature workshops in local schools and businesses to discuss sustainable agriculture, natural foods and nutrition, and healthy lifestyle habits. The community might put up a website that highlights local and national resources vetted by the community as legitimate and competent–including Gaia’s Place. The community could also help address collateral issues not well managed otherwise, such as finding babysitters and carpools for kids; here again Gaia’s Place might contribute with a community bulletin board and in-store computers with access to the community website.

Ultimately, the "healthy lifestyles" community of interest could partner with Gaia’s Place to help it succeed in several ways: 1) develop its market for services; 2) contribute product and service design concepts; 3) identify reputable, creative suppliers for local products and services; and 4) attract and develop talented, motivated employees. This community partnership would help Gaia’s Place build a loyal and strong market, while providing unique opportunities to co-develop products with customers and a range of unique suppliers–who may incorporate partly as a result of Gaia’s outreach efforts. For example, a local housewife (or husband) with a talent for natural molasses brownies might be more likely to make a vendor proposal after meeting a community member familiar with Gaia’s Place. Gaia’s would expect to sponsor the community’s core group with training, initial funding, and proffer the firm’s imprint (and the founders’ reputation for competence and social responsibility) to help legitimize and publicize the community’s organizing efforts. Gaia’s may ultimately agree to share a percentage of local profits with the community’s organizers based on explicit market-development incentives.

There are several risks associated with Gaia’s community approach to market development, including: 1) failure to pull it off competently, hurting Gaia’s reputation and the legitimacy of future community organizing efforts; 2) the countervailing power of a well-organized, (but perhaps unrepresentative and misguided) customer market that demands products Gaia’s does not want to sell; and 3) proliferation of micro-competitors encouraged by a more visible, accessible, and robust market for healthy foods. These risks point out the uncertainties of this radically new approach to market development and reinforce the importance of a management team dedicated to on-line learning and improvisation.

Communities of practice (CPs) are groups of people who are informally bound by a shared interest in learning and applying a common practice. This concept is relatively new in the management literature, although the phenomena are as old as the craft-based "corporations" in ancient Greece; the guilds of medieval Europe; or the professional groups that Durkheim (1933) described in the Second Preface of The Division of Labor in Society (Snyder, 1997; Wenger, 1998). In any case, Gaia’s Place managers believe that the execution of a national chain will be especially dependent on networks of practitioners who learn and innovate across functional, geographic, and organization boundaries. Gaia’s members who apply skills such as community organizing, product development, and store management will face unique challenges in different locations and will be pushed constantly to improve by demanding customers and aggressive competitors. Gaia’s success will depend on robust communities of practice to foster continuous learning at the individual, team, and organizational levels.

Gaia’s will develop in-house experts or core groups for each of its competence areas–market development, service delivery, etc.–as an adjunct role that members play in addition to their production roles. Communities of practice develop much as communities of interest do: They begin by mapping out the basic issues related to their domain (e.g., "customer service" issues such as: convenience, cleanliness, responsiveness, friendliness, ability to customize service, etc.) and identify experts and resources (articles, frameworks, diagnostics, performance metrics, best practices, training videos, case studies, etc.). They outline a series of projects (a.k.a. a "learning agenda") to build competence in their domain, for example: 1) define levels of competence and performance metrics to diagnose them in practice; 2) identify learning methods (formal and informal) tailored to specific performance gaps; and 3) propose changes in organization conditions (e.g., management, selection, training, or procedures).

New members of Gaia’s will be selected for their commitment to the firm’s dual mission (social and economic), guiding principles, and the ability to learn, as well as their interest in the work itself (i.e., food purchasing and preparation, customer service, performance management, and community development). The community structure complements the team-based operations structure. While operating teams are accountable for day-to-day performance results, communities of practice focus on opportunities to enhance capabilities across team and store boundaries, draw on resources outside the firm (including CI members) to innovate, and establish formal and informal learning mechanisms that improve competence and commitment levels.

One benefit of Gaia’s organizing approach is that it provides a plethora of opportunities for people to innovate and learn effectively on the job (as well in formal classes). Employees are members of both operating teams–where the focus is on service, volume, and financial results–and communities of practice, where the focus is on learning and innovation. The community structure also provides a foundation for innovation and knowledge transfer across store boundaries–a crucial condition for rapid, successful expansion in the fast-food industry. Communities of practice reinforce Gaia’s commitment to learning and excellence and will help attract and retain exceptionally talented members in an industry known for dull jobs and high turnover. Finally, the CP approach contributes to the skills and ethic needed to support its market-based community efforts.

Risks of CPs include setting development expectations for members that are not fulfilled and making an investment in learning structures without clearly linking learning efforts to performance outcomes. These risks recall those mentioned earlier regarding market-based community organizing.

In summary, there are a number of noteworthy insights related to Gaia’s twin community organizing strategies:

1. There is a set of common skills, attitudes, and processes associated with both market-based CIs and firm-based CPs, including: mapping knowledge domains, defining a learning agenda, collaborating on projects, building informal relationships (inside and outside the firm), measuring competence levels, and aligning personal interests and social/organizational needs.
2. Many of these skills, attitudes, and processes are new to managers as intentional activities that can and should be managed (forming informal network relationships, for example). Yet they are at the heart of Gaia’s strategy to achieve a distinctive position in its markets.
3. There are synergies between the two methods of community organizing that suggest they are inextricably linked. CI members are likely to provide information and coaching that make Gaia’s members more competent and passionate about their work. Conversely, Gaia’s employees will find ample opportunities to share their expertise, develop their professional network, and build Gaia’s reputation in relevant CIs.
4. Community organizing raises a number of contractual issues for members, customers, and vendors because Gaia’s is asking for a deeper commitment of loyalty, learning, and identity than is typical between market-based economic players. These emerging contractual agreements (formal or informal) may cause tensions and misunderstandings and will have to be monitored carefully by Gaia’s leaders and members.
5. Finally, the community approach to market and people development suggests that a new level of capability is possible that could radically change the "rules of the game" in this industry (or any other), significantly increasing Gaia’s ability to achieve its lofty operational and financial goals. However, this promising strategy also has a downside: Leaders may not sufficiently understand what they are getting into and may not be able to learn quickly enough to succeed.

Gaia’s Place provides a revelatory case study of an organizing approach that goes beyond reframing industry "rules of the game"; it also challenges basic assumptions about the theory of the firm and the nature of organizing (Snyder, 1997). This case manifests trends that firms are becoming increasingly "virtual," networked, and reliant on informal modes of organizing such as personal networks and communities of practice and interest. There are many questions related to both research and practice generated by this case, many of which are raised below as hypotheses to explore in future research. In broad terms, these issues concern: 1) the generalizability and validity of the case study; 2) how community organizing helps firms succeed; 3) macro issues such as the influence of institutional and socio-economic conditions; and 4) implications for social policy and "world design" suggested by these community organizing methods.

While this case study was presented to generate–not validate–hypotheses, it is worth considering how representative Gaia’s Place is in industry today. The case background mentions that the natural foods segment of the food industry is growing rapidly. Some of the most notable players in this market are using "radical marketing" approaches similar to those described above. For example, Whole Foods supermarkets actively recruit customer loyalty by holding cooking classes and distributing a customer newsletter with information about nutrition, healthy lifestyles, and community events. Tesco, Britain’s #1 food retailer, has a "loyalty card" program in which customers provide demographic and purchase information in return for coupons and promotional offers. This enables Tesco to use transaction data (correlated with demographics) to develop customized products beyond its original mission, including specialized magazines, cooking classes, and even a travel program. In many industries, leading players are using market-based communities to build market loyalty and develop distinctive capabilities to innovate products. For example, Harley-Davidson’s motorcycle clubs ("HOGs") build Harley brand loyalty, create a market for retail sales of collateral gear, and provide cooperative test markets for new product ideas. The Grateful Dead are famous for their loyal following of fans who assure sellout crowds at concerts and who buy 60MM in annual sales of tapes, T-shirts, and other high-margin paraphernalia–even three years after Jerry Garcia’s death (Hill & Rifkin, 1999; Lydon, 1999). Broderbund software and Baxter Pharmaceutical are examples of companies who have organized business customers to understand better their collective needs in order to provide new services. Finally, Internet-based companies such as AOL, Amazon.com, GeoCities, and I-Village have made community organizing an explicit dimension of their business strategy. For example, I-Village’s ParentsSoup is a "virtual community" whose website enables parents to share tips about parenting while learning about products and services sold through the site. Small company vendors such as Earth’s Best Baby Foods sell their products on-line to customers through an analogous site called ParentsPlace (Hagel & Armstrong, 1997). Amazon.com explicitly encourages customers to link with other customers to learn about books in areas of shared interest–ultimately building new sources of loyalty and value in their relationship to Amazon.com.

In addition to these examples of companies organizing market-based communities, there are many firms today developing "knowledge networks" or communities of practice to improve their ability to build, share, and apply higher levels of competence. Multinationals have been especially active in this area, including firms such as Xerox, National Semiconductor, Shell Oil, British Petroleum, Monsanto, Buckman Labs, McKinsey & Company, Arthur Andersen, DaimlerChrysler, Ford, and StorageTek–but also national firms with distributed offices such as the Veterans Benefits Administration whose CPs in technical skills and team management domains serve 57 offices located nationwide (Brown & Gray, 1995; Snyder, 1997; Stamps, 1997; Stewart, 1996).

The preponderance of firms applying community strategies either to markets or to competence domains within the firm (or both) is striking and growing rapidly. Yet there is scant research on these phenomena and even less on firms applying both strategies in combined, synergistic ways. These firms are evidence that the Gaia’s case is not an aberration; rather, it may prefigure the firm of the future. A recent MIT study on the evolution of organizations in the 21^st century argued that firms are likely to depend even more in the future on networks and communities to innovate and grow (Malone & Laubacher, 1998). This case is especially important because it shows how these community methods may help firms influence markets–or be influenced by them–in ways that could align social, ecological and economic goals. Of course, the power and direction of influence by communities will depend on familiar factors such as leadership, access to resources, and membership capabilities. We may hope that because these organizations are voluntary and open-ended in scope that they may be less influenced by narrow, vested interests and more likely to pursue goals consistent with a sustainable future–but this is now merely a hypothesis.

Additional issues are described in terms of hypotheses generated by the Gaia’s case:

Hypothesis 1: Business firms that use community organizing approaches are more likely to depend on and contribute to social capital in target markets than firms that use more conventional market development approaches.

This case describes behaviorally why social capital theorists have found that business firms are more successful in countries and regions where there are high levels of social capital (i.e., voluntary reciprocation and trust, often measured by network density and by participation rates in voluntary organizations [Fukuyama, 1995; Putnam, 1993]). The case shows how a domain-based community of interest (related to healthy lifestyles) can reduce uncertainty and increase innovation and competence in cooperating firms. The case supports new public policy efforts to encourage business formation and economic growth in the inner city by supporting churches because they foster social trust and reciprocation of voluntary services (Eaton, 1999). The case suggests that further research in this area would show that where firms rely on communities of interest, they will depend even more than typical firms on civic levels of social capital–or be forced to foster it themselves.

Hypothesis 2: Successful firms that use community organizing approaches to develop both markets and people will develop new social contracts with employees, customers, vendors, partners, and cultural institutions at large.

Gaia’s Place has set high goals for itself, and expects extraordinary levels of commitment from its employees, vendors, partners, and even customers. Employees are expected to feel a passion for natural foods and sustainable business practices, as well as personal commitments to customer service and product quality. The employment contract extends to expectations of voluntary contributions to others’ learning through communities of practice. Vendors and partners are also selected on the basis of deeper values that hold the community together. Finally, customers who participate–as core or peripheral members–in a community of interest relevant to Gaia’s market may expect greater levels of integrity and social contribution from the firm than if it did not rely on CI activity for its success. Passionate customers are more likely to feel a high level of ownership in what the firm sells and how it operates.

Prahalad and Hamel (1994) argued that firms typically take a blinkered view of the bases of competition–often limited to product and market dimensions. They suggested that firms should consider additional bases of competition, such as technologies, competencies, and standards. But they didn’t mention communities, and communities are different than markets. Traditional markets include people with little collective influence or proactive intent to influence product development or the environmental policies of firms. Communities of interest–depending on their organizing purpose and philosophy–may be highly influential and demanding regarding how firms’ behave. They may negotiate prices, contribute to product development, and influence management policies. Some firms will understand how market-based communities work and others will not; some will leverage and even develop such communities, while others will succeed only in traditional markets. The Gaia’s case describes the criteria for effective community organizing. Future research might explore where, when, and why some firms succeed in community-based markets while others do not.

This hypothesis draws on Pfeffer’s (1981) theory of resource dependence, which seems to apply as much to community organizations as it does to conventional firms. The question for "business members" of CIs (such as Gaia’s) is whether they gain more market legitimacy by giving up control of the CI or by controlling the CI sufficiently to ensure that it has adequate management and resources. This may depend on the amount of social capital in the community domain (see hypothesis 1). GeoCities provides an interesting example of a business that offers sites for community members to publish webpages, but it incurred the wrath of community members when it insisted on attaching ads to members’ homepages. Here again, business participation in communities of interest will require considerable renegotiation of expectations regarding behavior and remuneration (see hypothesis 2).

Hypothesis 5: Firms that launch communities of practice and interest will succeed only if they have developed leadership skills and attitudes consistent with community formation and leadership.

Community leadership is different from traditional top-down management and different from new styles of team management. On the one hand, functional groups and teams both have measurable bottom line objectives for which they can be held accountable. On the other hand, communities are responsible for learning and innovation related to competence areas. These activities by nature are informal, highly voluntary and not amenable to typical incentives or management influence. They rely more on the self-initiative of members and the alignment of members’ personal goals with the organization’s mission. Moreover, the case study shows that community formation depends on collaborative domain mapping, problem exploration, agenda setting, and informal learning processes that are uncommon in many teams. Firms should carefully assess their readiness for community organizing approaches before making commitments to apply them.

Business firms now thrive in a macro-social climate that has evolved over 150 years to provide the legal, cultural, intellectual, and technical infrastructure to support them. It is likely that many firms will resist the threat of a new source of countervailing power–one that could become even more powerful than unions or government agencies ever were. Furthermore, communities of interest such as the one described in this case will confront many of the organizing obstacles faced today by more traditional residential communities: lack of surplus time to provide leadership; insufficient organizing skills to conduct "future searches" (Weisbord, 1992) or "open-space planning" (Owen, 1997) events that help focus community efforts; inadequate social trust or willingness to reciprocate outside family or friendship circles; and no shared mindset or cultural value about what it means to participate in a community where accountability is not measured and performance is not managed. These communities may not thrive until they are supported by formal social institutions whose purpose is to cultivate and maintain them (as NGO’s foster citizenship in recovering countries such as Cambodia [Mydans, 1999]); or until exemplary analogue communities (in other regions or in related domains) show the way. The development of CIs may depend on emerging "social entrepreneurs" (Leadbeater, 1997) or genuine business entrepreneurs who see their challenge as changing cultural practice, not merely selling products to make money (Spinosa, Flores, & Dreyfus, 1997).

Transaction cost economic theory emphasizes the control of "shirking" behavior and economies of scale to explain firm boundaries while conventional "free-market" economic theory argues that prices and markets are shaped by independent, rational economic players (Ghoshal & Moran; 1996). Both theories are supported by conventional research but have become increasingly anachronistic as the problems they solve become more trivial while others become salient. New economic theory must address the conditions under which communities of interest (such as the one described in the Gaia’s case) will form and the degree to which they will proactively influence product design, price, and management policies of firms. Moreover, new theory must address to what extent the boundaries of firms will be defined largely by domains of knowledge (vs. conventional economies of scale) and the communities of practice that govern these domains–and when these communities will be highly permeable (as in the case of academic networks) or formally defined and highly restrictive (as in the case of a legal or consulting practice). Research should be conducted to show in which situations the old economic rules apply and where new ones must be developed.

Ultimately, all members of society must participate to define societal goals, cultural values, and norms of behavior regarding social and economic activities–and these agreements must be negotiated and aligned across societies and nations worldwide. So where do we start? Over the last century, we have depended on government intervention and regulation, formal non-governmental organizations, foundations, and non-profits at the state, nation, and international levels. But these efforts have made little headway as the complexity and depth of problems such as overpopulation, environmental degradation, poverty, sickness, and cultural disintegration have increased apace.

The Gaia’s case suggests a different kind of strategy for "world design": First, systematically identify core societal functions such as parenting, health and wellbeing, personal development, education, housing, household management, citizenship, vocational development, arts & leisure, and spiritual practice. Then foster local communities of interest and practice that act in ways illustrated in this case study:

1. Build capability in a particular societal function;
2. Spawn or support business (and non-profit and public-sector) partners whose mission and values are consistent with social goals;
3. Link with similar CIs and CPs nationally and globally–and with complementary communities locally;
4. Foster learning among members and in "markets for expertise"; and
5. Develop underlying resources of social capital by providing meaningful, engaging ways for core, peripheral, and transactional members to participate in an interconnected network of real and "virtual" communities of various types.

These communities should focus most of all on learning, building capability, and contributing to meaning, creativity, and competence in members’ lives. They should not be bound by ideology or hierarchy or resource dependencies (although less effective ones will be). Communities of interest and practice provide new degrees of freedom that open up unprecedented ways to address current problems by encouraging the development of "moral markets" and accelerating the formation of local, competent firms led by people who meaningfully align commercial and societal goals.

These eight hypotheses only begin to speculate on the implications of community-based organizing methods. They suggest, however, some important areas for further inquiry, which may be summarized by the following questions:

1. How are social, economic, and ecological objectives congruent and what are ways to organize communities to foster increased convergence?
2. What new social contracts are implied by community participation for employees, vendors, customers, and firms?
3. To what extent will the capacity to form and access communities of interest and practice become a basis of competitive advantage?
4. How should the domain scope and content for communities of interest be defined and by whom?
5. What skills, attitudes, and other culture or capability preconditions should exist before business or civic leaders commit themselves to community-based organizing strategies?
6. What social legitimization or political or cultural institutional support will be required to foster and sustain robust communities of interest and practice in markets and firms?
7. What are the rules of a "new economy" where value is based not only on knowledge and competence, but on community formation and participation?
8. How should we "design the world" if formal, legalistic methods have not kept pace with emerging challenges and if new ways to organize, develop, and link communities are viable and promising?

The "Gaia’s hypotheses" suggest several issues for researchers themselves to consider as they explore this emerging domain: 1) How should we frame and select problems to study? 2) How can we best help practitioners solve important problems? 3) What institutional structures do we need to address these problems? In this post-modern, "reflexive age" (Giddens, 1976) our capacity to imagine and enact new kinds of organizations depends on new levels of competence among researchers and educators–we and our topics, methods, and structures are an important part of the world-design problem.

Management science–like any other science–is not value-neutral. We choose our topics often based on tacit assumptions about what is important in life, who is suffering most and why, or because selected problems are the most complicated or have the greatest academic status (Csikszentmihalyi, 1996; Knorr-Cetina, 1981; Latour, 1987; Mitroff, 1998; Polanyi, 1966). This paper argues that the "Gaia’s hypotheses" are important not because they address established, canonical questions in our discipline, but because they have the potential to expand the scope of our discipline beyond conventional definitions of the firm towards community-oriented constructs. Although these hypotheses are drawn from a single case, there is increasing evidence of the prevalence of community-based organizing approaches in the new economy. We should explore these hypotheses not only because they are interesting, but also because they may be key to alleviating painful social, economic, and ecological problems.

Management scholars can best explore these complex, community organizing issues through action-research methods that enable organizations to experiment with new approaches while they learn which work best and why. Social scientists can legitimize and enable competent practice by documenting cases and co-creating tools and frameworks that are valid and rigorous as measured by both scientific and action criteria (Argyris, 1993; Argyris, Putnam, & Smith, 1987). There are many precedents for such ground-breaking work, including Taylor’s work on "scientific management"; Chandler’s and Drucker’s work on the multidivisional firm; and the work of Argyris, Bennis, Lawler, and Hackman on the theory and practice of participative management and leadership development (Lawler, Mohrman, Mohrman, Ledford, & Cummings, 1985). Many of these scholars are lauded for their emphasis on practice; they used action-research, values-driven research methods that bridged academic and practice domains–a useful model for those who want to foster the legitimacy and competence of unfamiliar community applications to organizations and markets.

We academics are a community of practice that should not live and work apart from our practice-minded colleagues–managers, consultants, policy makers, and university stakeholders–yet generally we are separated. How can we redesign our "inquiring systems" (Churchman, 1971) to support research about important topics that require immersion in practice domains–that require the interest, participation, and collaboration of both scholars and practitioners? Indeed, is it not hypocritical for us to conduct research on the confluence of firm-based CPs and market-based CIs while maintaining boundaries between ourselves and the practitioners and practice domains that we study? As Trist (1981) said, the ideal research context is pentecostal: All parties speak with tongues. Our inquiring system should look more like a multi-disciplinary, cross-organizational community–including academics, consultants, managers, and other stakeholders (e.g., policy makers, foundations, and universities)–who combine their research and practice skills to increase the competence and legitimacy of community-based organizing initiatives in business and civic domains. The learning community must be capable of pushing the evolution of future practice, not merely the evaluation of past practice.

If we can discover new, more powerful organizing methods, we may be able to alleviate persistent social, economic, and environmental problems. Yet it should be no surprise that this discovery work will require us to transform our own practice, on many levels: how we select research topics, how we conduct research, and how we design our inquiring systems to apply research outcomes that contribute to a shared, sustainable future.