We call companies organizations because it’s a place where we organize work. We’ve split organizations into departments, departments into sections, sections into teams, and teams into roles. That is why you have an accounting department, a sales department, a marketing department, and an IT department etc.
It works because it organizes how work should be done. It clarifies what people have to do. The bigger the company, the more departments, levels and also the more specialized the people.
But it only works as long as the organization structure reflects the very nature of the business. The problem is that the interdependency between departments has dramatically increased while departments themselves have remained fairly isolated, focusing solely on their mission.
Technology in particular, used to (and still is) siloed into an IT department. The problem is, IT is embedded in every part of the organization. Should the implementation of new software used for Hiring fall under the Human Resources department or the IT department?
Instead of a hierarchy leading to organizations that look like trees, shouldn’t organization become more like a network? A network is interconnected (hierarchy is relative, not absolute), and its structure evolves as the needs dictate. These seem to be characteristics that the 21st century companies need to embrace, to eventually become "web organizations".
But for the transition to take place, people at the top of the hierarchy will need to let go of a lot of their power and influence. The larger the organization, the more power at the top, and thus the bigger the resistance.
Success in transitioning to a web organization then, will lie on companies' capacity to reallocate their power at the top.