Table of Contents
A novel use of blockchain technology has the potential to transform the structure of contemporary corporations and open up fresh opportunities for innovation and entrepreneurship while highlighting both their benefits and drawbacks.
What is Decentralization?
It refers to a management style in which power and authority are distributed around an organization instead of being concentrated at the top. Middle and lower-level employees are left to make day-to-day decisions that affect them. It leaves company leaders with more time to devote to making important choices.
Benefits of Decentralization
Quick Decision-Making
By delegating decision-making power to the operational level, decisions that are most directly relevant to the operation may be made in a way that is both more expeditious and productive.
Executive Development
Due to the high degree of delegation, the leaders have time to pay attention to the most important things, in order to ensure that the organization continues to function effectively.
Development of Managerial Skills
The decentralized system allows lower-level workers to be given greater responsibility and autonomy. When individuals who have shown their value are promoted, a pool of qualified workers is created. The workers may be allocated to more demanding tasks, which assist in developing growth & accountability.
Relieves Top Management
It allows the superior to spend less time monitoring their subordinates, and upper-level management has more time at their disposal with which to make strategic decisions.
Facilitates Growth
It encourages every department to compete with one another to achieve the highest level of success in the organization. Because of this, productivity rises, which will lead to increased profitability.
Better Control
It allows each employee tier’s performance to be tracked, ensuring that each division’s output is scrutinized independently. A measurement of how well the corp. as a whole performs and how significantly each division contributes can be made.
Effective Communication
The communication system will improve as a result of decentralization. In addition, it helps to strengthen the relationship between superiors and subordinates.
What is Centralization?
When the responsibility for planning/decision-making within an organization is given to a single person, these functions are referred to as being ‘centralized’. Under a centralized government structure, all decisions are taken at the highest possible level, and all lower levels are tasked with doing nothing more than carrying out the instructions given by that level. Because of limited resources/workforce, small biz need to centralize their management.
Advantages of Centralization
- A Clear Chain of Command: people can carry out their jobs more effectively if they know who should be reporting to. It is useful to have a clear chain of command in situations when decisions need to be executed quickly and in a manner that is coherent.
- Focused Vision: the capacity to accomplish its goals and achieve its vision is significantly aided by the use of a management structure that is centralized. The leaders have the capacity to communicate the vision of the firm to the people effectively and guide them in the right direction.
- Reduced Costs: a centralized organization follows defined principles and procedures that regulate the corporation, saving money on office and management overhead.
- Quick Implementation of Decisions: centralized organizations have a small group of persons who are responsible for making decisions and communicating those decisions to the rest of the management. As a result, choices will be reached more rapidly since there are just a few people engaged, and they are able to discuss all of the nuances of problems at a small meeting.
- Improved Quality of Work: a centralized organization has the advantage of strict guidelines and increased levels of oversight, both of which contribute to better work quality.
Disadvantages of Centralization
- Bureaucratic Leadership: under a centralized management system, the management is somewhat comparable to a totalitarian. Employees are not allowed to participate in the decision-making process of the business.
- Remote Control: leaders do not have enough time to adequately supervise the implementation of the decisions, and they may run the danger of making lots of decisions that are either carried out improperly or ignored by workers.
- Delays in Work: productivity suffers if everything needs to be sent from a single person/location.
- Lack of Employee Loyalty: in a workplace that is highly centralized, people have limited opportunities to take the initiative since they are obliged to implement the leader’s instructions. Their commitment/loyalty to the company suffers as a result of the monotony of their work, which inhibits their capacity to think creatively and logically outside of the box.
Centralization and Decentralization
- Centralization refers to the practice of bestowing most of the decision-making in an organization to members of top management. While decentralization refers to the process of handing down decision-making power to junior levels of management.
- The act of concentrating authority on a small number of people/organizations is referred to as centralization, it is better for a small business. Decentralization refers to the intentional distribution of authority among many personnel within an organization, it is preferable for a huge corporation.
- Lines of communication may be formed in a system that is organized in a hierarchical fashion. While decentralization results in info being dispersed in a variety of different places.
- Under a centralized system, the time to make decisions is increased because it relies on a single person. Decentralization is more effective when decisions are taken.
- When activities are coordinated via a centralized organization, there is only a single point of contact and one set of directions to follow. Decentralization results in the distribution of leadership tasks among a wider group of people.
How Decentralization is Creating a New Business Model
- The Rise of the sharing company: It refers to the companies such as Airbnb, Uber, and others.
- Trust in a decentralized network: a decentralized network enables participation from any location in the world by requiring each participant to have their own copy of the transaction ledger. In essence, authorization is not necessary in any way.
- Tokens and cryptocurrencies: as a result of the widespread adoption of Bitcoin, it became apparent that cryptographic tokens might be used to convey more than just monetary value between individuals.
- Tokenizing the transport industry: the mobility industry, which includes public transportation, private vehicles, and bicycles, is ripe for tokenization.
Major Biz Models in Decentralized Finance
Decentralized Currencies, Decentralized Payment Services/Fundraising/Contracting.