Esko Kilpi on Interactive Value Creation

The art of interaction, the design of digital and the science of social complexity

Work is solving problems and learning is answering questions

Studies predict that nearly half of all jobs and over 70% of low-skill jobs could be susceptible to computerization over the next two decades. Our chances of creating work for human beings in this new, demanding environment will be very limited if old and unjustified assumptions about what people can or can’t do are not examined. If we continue to assume that some people are born intelligent, while most are not, and continue to see intelligence as a fixed, personal possession, the options for large-scale systemic changes will be few.

If, on the other hand, we were to visit recent findings of neurosciences, relational psychology and computational social science, we would see intelligence as something more fluid. Then a whole different set of opportunities would become visible. Perhaps a bigger problem than low-skilled people would be the low-skilled occupations we have created.

There is a misunderstanding of the relationship between “nature” and “nurture” as causes of our intelligence. In most cases, genes do not establish limits that determine the space for personal growth. Recent scientific findings show that everyday life plays a role in defining how and when the genes themselves are expressed in us. Genes, the nature, take their cues from nurture. Environmental influences can be less reversible than genetic ones.

There is another argument than the science of genes about whether intelligence is fixed or can be expandable. Many people tend to think that they live their life with a fixed-capacity. Some people think differently. They have a growth mindset, as Stanford professor Carol Dweck calls it. They think that minds are like bodies: people come in different shapes and sizes, but everyone can benefit from exercise.

Individuals who believe that they can grow, tend to enjoy challenges. They like pushing themselves because they think that struggling leads to something good. People who think that their minds are fixed often see challenges as a threat to their imagined level of ability. They don’t like having to try new things, or making mistakes, because they interpret that as evidence of inadequacy.

These mindsets come from the way people around us respond to our successes and failures. Belief systems are contagious. If, over an extended period of time, people are treated as if they are intelligent, they actually become more so. The opposite can also be true.

Success in life has been seen governed by two concepts: skills and effort; how bright you are and how hard you work. Recently, researchers have claimed that there is a third and decisive concept. It is the practice of lifelong curiosity: “knowing what to do when you don’t know what to do” as Piaget put it.

The collective intelligence of our societies depends on the tools that augment human intelligence. We should welcome the fact that people today are smarter in large measure because they have invented and use smarter tools. Making tools is what human beings have always done. The interactions between tools and human minds are so complex that it is very hard to try to draw a line between humans and technology. Neither is it a zero-sum game where the human brain is losing to technological intelligence, but as technology changes, people and what people do, are necessarily changed.

To benefit from technology, we need resourcefulness. It means to be constantly looking for new tools with which to augment our intelligence. It also means new services: if you have a smartphone in your pocket, you should have an easy access to education in your pocket. Smarter and smarter tools surround us, but if we don’t want to learn the new practices and take up the new roles that the new technologies make possible, they might as well not be there. It is sometimes not easy, because the challenge with new technologies is, what is called “functional fixedness”, our inability to see more than the most obvious use cases.

There is more to being intelligent than using the latest technologies; how we interact with others is a crucial element of how smart we are in practice. Intelligence is social and arises in communities and communication. The world has never been a more networked place, and yet schools and workplaces still focus on individuals. That needs to change.

Human behavior is learned in relations. Our brains are wired to notice and imitate others. Computational social science has proved that behavior can be caught like a disease merely by being exposed to other people. Perhaps you can catch intelligence from others the same way? Learning and also non-learning can be found in communication. It is not that people are intelligent and then socially aware. Social intelligence is not a separate type of intelligence. All intelligence emerges from the efforts of the community.

Work starts from problems and learning starts from questions. Work is creating value and learning is creating knowledge. Both work and learning require the same things: interaction and engagement.

Scientists have discovered that learning is learnable. With the help of modern tools, we can create ways for very large numbers of people to become learners. But learning itself has changed, it is not first acquiring skills and then utilizing those skills at work. Post-industrial work is learning. It is figuring out how to solve a particular problem and then scaling up the solution in a reflective and iterative way — both with technology and with other people.


From the industrial economy to the interactive economy

Over the past years, mobile technologies and the Internet have laid the foundation for a very small size, low-cost enterprise with the potential for managing large numbers of business relationships.

The impact of these new actors has been hard to grasp because we are used to thinking about work from a different perspective. Our thinking arises from a make-and-sell economic model. Most managers still subscribe to this and think that the core of creating value is to plan and manage a supply chain. A supply chain is a system of assets and transactions that in the end make the components of the customer offering. At the beginning of the supply chain are the raw materials and the ideas that start the sequence leading, hopefully, to a sale.

This is now being supplanted by a different paradigm; a relational, network approach enabled by new coordination technologies. The manufacturer may even be just one of the nodes in the network and the customer is not a passive consumer but an active part of the plan.

The old model companies are ill equipped for this digital transformation. Mass-production and mass media organizations are still much more prepared to talk to customers than to hear from them, not realizing that one-way communication was just a fleeting accident of technological development. It is not that customers didn’t have needs and reflections they would have liked to communicate.

We are passing through a technological discontinuity of huge proportions. The rules of competition may even be rewritten for the interactive age. The new interactive economy demands new skills: managing the supply-chain is less important than building networks and enabling trust in relations. You could perhaps call the new reversed sequence an on-demand-chain. It is the opposite of the make-and-sell model. It is a chain of relationships and links that starts from interaction with the customer and leads up to the creation of the on-demand offering. As Steve Jobs put it in a different context: “you start with the customer experience and work backwards to the technology. You can’t start with the technology and try to figure out where you’re going to try to sell it.”

Adapting the interactive model is not as easy as identifying customer segments or a niche market because communication can no longer be confined to sales and marketing, or to the ad agency, as in the make-and-sell model. Also to talk about a “segment of one” is misleading because one-way communication changes here to true two-way dialogue. The interactive enterprise must be able to integrate its entire network around the needs of each individual customer context. The on-demand-chain means continuous on-demand learning and continuous change. Your dialogue with an individual customer will change your behavior toward her and change that customer’s behavior toward you. People develop together in interaction.

A learning relationship potentially makes the whole network smarter with every individual interaction creating network effects. Accordingly, the enterprise increases customer retention by making loyalty more convenient than non-loyalty as a result of learning. The goal is to create more value for the customer and to lower her transaction costs. This kind of relationship ensures that it is always in the customer’s self-interest to remain with the people who have developed the relationship to begin with. The main benefit for the network partners may not be financial. The most valuable thing is to have access to “community knowledge”, a common movement of thought. It means to be part of a network where learning takes place faster than somewhere else.

In the mass-market economy, the focus was to create a quality product. With increased global competition and with so many quality products around that is not enough any more. To succeed you need high-quality relationships. When customers are identified as individuals in different use contexts, the marketing process is really a joint process of solving problems. You and your customer necessarily then become cooperators. You are together trying to solve the customer’s problem in a way that both satisfies the customer and ensures a profit for you.

The relational approach is the third way to work. It is not about having a fixed job role as an employee or having tasks given to you as a contractor. The most inspiring and energizing future of work may be in solving problems and spotting opportunities in creative interaction with your customers.

The industrial make-and-sell model required expert skills. The decisive thing was your individual knowledge. Today you work more from your network than your skills. The decisive thing is your relations.


Not firms but commons and market networks

Many people see peer-to-peer platforms as game changers in the world of work with the potential of reinventing the economy and giving individuals the power of the corporation. Others are sceptical and warn that the new architectures of participation and choice are in reality architectures of exploitation, giving rise to a new class of workers, “the precariat”, people who endure insecure conditions, very short-term work and low wages with no collective bargaining power, abandoned by the employee unions, rendering them atomized and powerless.

I have just finished reading “PEERS INC”, an excellent book by Robin Chase. It is both a practical guide and a textbook that explains what is happening today in the (almost) zero transaction cost economy, the digitally enabled new world that has given rise to peer-to-peer platforms as the most modern iteration of the firm.

Robin Chase explains well how the patterns of work and the roles of workers are becoming very different from what we are used to: the industrial production of physical goods was financial capital-intensive, leading to centralized management and manufacturing facilities where you needed to be during predetermined hours. The industrial era created the employers, the employees and the shareholder capitalism we now experience.

In the network economy, individuals, interacting voluntarily with each other by utilizing the new platforms/apps and relatively cheap mobile devices they own themselves, can create value, and, even more importantly, utilize resources and available “excess capacity” as Robin Chase calls it, in a much more sustainable way than was possible during the industrial era.

Work systems differ in the degree to which their components are loosely or tightly coupled. Coupling is a measure of the degree to which communication and power relation between the components are predetermined and fixed or not. Hierarchies and processes were based on tight couplings. The new post-industrial platforms are based on loose couplings following the logic of the Internet. Some people will work on one platform every now and then, while others will work simultaneously and continuously on many different platforms. The worker makes the decision about where, with whom and how much to work. The old dichotomy of employers and employees is a thing of the past.

In creative, knowledge-based work it is increasingly difficult to know the best mix of capabilities and tasks in advance. Recruiting is becoming a matter of expensive guesswork. Matching the patterns of work with the capabilities of individuals beforehand is getting close to impossible. What, then, is the use of the organizational theater when it is literally impossible to define the organization before we actually do something? What if the organization really should be a process of emergent self-organizing in the way the platforms make possible?

Instead of thinking about the organization let’s think about organizing as an ongoing thing. Then the managerial task is to make possible very easy and very fast emergent responsive interaction and group formation. It has to be as easy as possible for the best contributions from the whole network to find the applicable contextual needs and people.

Instead of the topology or organizational boxes that are often the visual representation of work, the picture of work is a live social graph. In markets the signalling may change; It is not just a system of prices that brings people together, but purposes, capabilities and reputation .

If you follow the valuations of firms today there is an ever-widening gap between the network-economy platforms and those companies driven by traditional asset leverage models. Investors and markets have voted very clearly. Traditional business economics focus on economies of scale derived from the resource base of the company, which scales much more slowly than the network effects the new firms are built on. The start-ups have a huge advantage over the incumbents.

In practice this means that the peer-to-peer platforms can attain the level of customer reach and network size required to capture almost any market, even as the size of the core (firm) stays relatively small.

The principles behind these trends are crucially important for the future of firms and society. It used to be argued that goods for which the marginal costs, the cost of producing one more unit of customer value, were close to zero were inherently public goods and should be made publicly available. Before the digital era, roads and bridges were commonly used as examples of these platforms. The maximum societal benefit from the initial investment is gained only if the use is as unrestricted as possible. People should have free, or almost free access to the – “platform”. Once the capital costs have been incurred, the more people there are sharing the benefits, the better it is for the whole value system.

This was the economic explanation for why roads were, and still are, under public ownership. The same logic applied to public libraries: a book can be read repeatedly at almost no extra cost.

A platform (company) should therefore be as open, as accessible and as supportive as possible to as many users as possible. This is unequivocally the route to optimum value creation. The scale of the Internet can create almost boundless returns without the core company growing at all. And against mainstream thinking, services do scale now as much as products did yesterday. One person can have a million customers and ten people can have a hundred million customers. The sheer size of an enterprise will tend to mean less in the digital network business than in the world of physical goods. The flip side is that companies don’t grow and create jobs in the way they used to. It is the networks that grow creating new earnings opportunities for people who are part of the network!

The central aggregator of enterprise value will no longer be a value chain, but a network space, where these new firms are fully market-facing and the customer experience is defined by apps. Our management thinking is slowly shifting towards understanding the new kernel of work: participative, self-organizing responsiveness.

Platforms are a valuable, shared resource making interactive value creation possible through organizing and simplifying participation. Sociologists have called such shared resources public goods. A private good is one that the owners can exclude others from using. Private was valuable and public without much value during the era of scarcity economics. This is now changing in a dramatic way, creating the intellectual confusion we are in the midst of today. The physical commons were, and still often are, over-exploited but the new commons follow a different logic. The more they are used, the more valuable they are for each participant.

The ongoing vogue of business design transforms asset-based firms to network-based platforms. Perhaps the next evolutionary step in the life of the firms is a transformation from platforms to open commons with shared protocols. Perhaps Bitcoin/Blockchain is going to be part of the new stack, the TCP/IP of business.

In the new commons and market networks, people with more potential ties become better informed and have more signalling power, while those outside and with fewer ties may be left behind. This is the new digital divide. Network inequality creates and reinforces inequality of opportunity.

In the age of abundance economics, public is much more valuable than private. Governments have always been platform creators. I sincerely hope they understand the tremendous opportunity we all face. The old demarcation line between public and private does not make any sense any more.

The principles of digital peer-to-peer commons can also enable the massive multi-stakeholder participation that is urgently needed to meet the challenge of climate change, as Robin Chase writes in her important book “PEERS INC”.

Collaborative and Competitive Creativity

Pablo Picasso visited Henri Matisse often during the spring of 1946. Matisse was pleased to see him. Matisse was 76 and had endured arduous colon surgery. Much of his work was now done either in bed or from a wheelchair. Simon Schama tells the story that after one of these visits Henri Matisse wrote to his son Pierre: “Picasso came to see me with a very pretty young woman. He could not have been more friendly and said he would come back and have a lot of things to tell me. But he saw what he wanted to see, my works in cut paper, my new paintings. That’s all he wanted. He will put it all to good use in time.”

Art historians claim that the relationship between Picasso and Matisse was by turns collaborative and competitive. It was a kind of an on going sparring match between two great masters.

The new technological environment of business has something in common with the world of Picasso and Matisse. It is marked by conflicting constraints, variables that shift very rapidly and value-creating relationships that change constantly. It is a complex environment.

In complex environments, the way to proficiency is to recombine successful elements to create new versions, some of which may thrive.

As a result, not just the user interfaces, but the operating system of work is starting to change in a radical way. The traditional industrial approach to work was to require each worker to assume a predetermined responsibility for a specific role. The new approach represents a different logic of organizing based on neither the traditional market nor a process. Whereas processes involve relations based on dependence and markets involve relations based on independence, the new networks involve relations of dynamic interdependence. A bit like the relationship between Matisse and Picasso. Minimal hierarchy, organizational diversity and responsiveness characterize these architectures. They are a necessary response to the increasing fuzziness of strategic horizons and short half-life of designs. Because of greater complexity, coordination cannot be planned in advance. Authority needs to be distributed; it is no longer delegated vertically but emerges horizontally. Under distributed authority work teams and knowledge workers need to be accountable to other work teams and other knowledge workers. Achievement depends on learning by mutual accountability and responsiveness.

Management and strategy used to be about rational choice between a set of known options and variables. The variables of creative work and complex environments have increased beyond systems thinking and process design. Under circumstances of rapid technological change, the management challenge is to create openness to possibilities and plausible options.

Success is based on continuous redefinition of the organization itself. It is about recombining options and contributions in a competitive and cooperative environment. Creativity is the default state of all human work. Even the most creative people are more remixers of other peoples’ ideas than lone inventors. Technology and development in general are not isolated acts by independent thinkers, but a complex storyline.

The democratization of technology that is taking place at the moment does not determine social and organizational change, but does create new opportunity spaces for new social practices. The opportunity we have is in new relational forms that don’t mimic the governance models of industrial firms. Network theory suggests that what the system becomes emerges from the complex, responsive relationships of its members, continuously developing in communication.

Like Henri Matisse and Pablo Picasso.


Thank you Simon Schama

Are markets the future of firms?

Amazon has joined Uber, Lyft and many others in redrawing the lines between independent contractors and employees. On March 30th Amazon announced an expansion into the “on-demand” economy. Amazon Home Services is a service marketplace that connects customers with builders, plumbers, cleaners and even teachers. Amazon has successfully made it very easy to buy books and goods. It now plans to do the same for professional services. It does so through (1) standardizing offerings so that prices can be agreed in advance, through (2) promising that the workers are trustworthy. Amazon scrutinizes workers through searches, interviews and reference checks and (3) providing a great interface experience for employers to a world that is very cumbersome: one-click hiring of workers and easy payments through Amazon.

Businesses are concluding more and more often that there are no reasons why certain activities should be performed by employees rather than contractors. The skills of these workers are seen as generic, making it easy for non-permanent workers to fit in quickly. This has created the Internet-based service platforms, the new job markets and the huge trend of on-demand work.

But hold on. A firm is essentially about creating long-term contracts when short-term contracts are too costly, or don’t make sense for other reasons. So is there a place for long-term contracts in the world of the Internet and these new markets? Is there a role for the firm, as we have known it?

One way to understand a firm is as a contracting mechanism between providers of financial capital (the principals) and managers (the agents). Principal-agent models are still extremely influential in corporate governance and  in reality continue to form the basis of mainstream compensation structures up to this day. In principal-agent thinking, employees are viewed as generic labor and agents for the managers. The managers are understood as having firm-specific skills and are viewed as agents of the shareholders.

The economist Brian Arthur from the Santa Fe Institute argues that the ever-increasing role of knowledge in value creation makes the foundations of economics and our thinking around firms badly outdated. Likewise, Peter Drucker predicted that “knowledge may come to occupy the place in the society which property occupied over the last three centuries.” As early as 1964 Gary Becker coined the term “human capital” to refer to the fact that many of the skills and knowledge required to do knowledge work could only be acquired if “some investment was made in time and resources”.

In his seminal work, Becker also considered the implications of the fact that some of the knowledge and skills acquired by employees have a much higher value in some relationships, some contexts, than they do in others. The labor services of employees with specialized skills thus cannot be modeled as undifferentiated generic market inputs, for which wages and quantity, the number of people, and the number of hours of work are determined. With context-specific human capital, the creativity and productivity of a particular individual depends on being part of a particular group of people engaged in particular assignments. Knowledge work is relation-specific and contextual.

More importantly, once acquired, knowledge and skills that are specialized are assets that are at risk following the very same logic as that by which financial assets are at risk. In practice, this would mean that knowledge workers should explicitly bear the long-term entrepreneurial accountability for the success or failure of the company, and additionally benefit from any possible upside, just as shareholders do today. From the point of view of corporate governance, it would mean that companies should be run in the interests of all their investors.

In firms where employees embody the critical capabilities, they must be encouraged to make creative decisions about how to act, interact, learn and innovate. One way to do that is to give them sufficient claims on the long-term returns, in other words to give them ownership rights and responsibilities.

The puzzling thing about the on-demand trend is that when it comes to actual work practices, there is really nothing new despite the powerful technologies and great new interfaces. It is a replication of the industrial model that separated labor, management and shareholders. If we believe Gary Becker, the big societal problem we are about to face is that on-demand work limits the value potential of human effort.

But there is an alternative conceptualization. Knowledge work is defined as creative work we do in interaction. The price of technology is going down rapidly and the cost of starting a company has decreased dramatically. These trends give knowledge workers more power relative to employers. If knowledge is more important than money, it gives human capital more power relative to financial capital, potentially changing the concept of the corporation.

The future of capitalism depends on whether firms create a much larger number of capitalists than they do today. Everybody will benefit if, in the future, a larger number of workers think like owners and act like long-term investors. A sense of ownership could be and should be the difference between firms and markets.

We should use the Internet to create the new, not to repeat the old.

The future of jobs: not being an employee, but not quite like being a contractor either

Just as industrial society became a society of corporations, it developed into a society of employers and employees. These were two different ways of looking at the same phenomenon, jobs. Almost all economic theories have made, and still make, the same assumption: the employer — employee relationship is necessary to create jobs. We have taken that relationship as given.

Traditional management thinking sets employee goals and business goals against each other. The manager is free to choose the goals, but the employee is only free to follow or not to follow the given goals. This is why employee advocates mainly want responsible firms, nothing else, and the management of those firms wants skilled employees who do what they are told, nothing else.

The other assumption that is taken for granted is that it is the independentemployer/manager who exercises freedom of choice in choosing the goals and designing the rules that the members of the organization are to follow. The employees of the organization are not seen as being autonomous, with a choice of their own, but are seen as rule-following, dependent, entities. People are not really people, but resources.

We are as used to the employer choosing the work objectives as we are used to the teacher choosing the learning objectives. The manager directs the way in which the employee engages with work, and manages the timing and duration of the work. This image of work is easy to grasp because it has been taught at school, where the model is the same.

We should ask whether the current social construct of jobs is inevitable, or whether it is a social artefact that is over 100 years old, and should be redesigned.

Industrial workers used to do as they were told. This now creates a systemic inefficiency. Today, knowledge workers should negotiate solutions in active interaction with their peers. We also used to think that organizations outlived workers. The organization came first, and people served the organization. Today, workers’ careers outlive organizations, profoundly challenging our thinking.

We need a new agenda connecting people and businesses. The aim should not be a set of shared goals, but complementary goals and a co-created narrative for both.

We need to study the intersection of corporate strategy and personal narrative. Work needs whole human beings. People who are more fully present, people with responsibility and ownership.

This is where the biggest changes are taking place in the world of work. Instead of the industrial era’s generalizations and abstractions about what skills everybody should have, or what steps everybody should take, it is now time to cultivate a deep understanding of the context, the unique, particular situation you are in. Who are you and where do you come from? What kind of relations are the building blocks of your life?

Reflecting on your reality should be the starting point of any effort to find a job or to create work. Unfortunately, this is where we are often at our weakest. It did not matter in the past because most decisions were made for us. But now people can, and must, choose. Companies are not managing their employees’ long-term careers any more. Workers must be their own HRD professionals. With opportunity comes new responsibility. It is up to the worker to construct the narrative of (working) life, to know what to contribute, when to change course, and how to keep engaged  for much longer than we have been used to. It may be a life that is not quite like being an employee, but not quite like being a contractor either. To make the right decisions, you have to develop a new understanding of yourself and what you are actually up to in life.

The new task is to choose work commitments on the basis of our own particular strengths and our own sense of purpose and belonging, not just on having some free time and wanting to earn some extra money for Uber. That is not what being independent, being your own boss, really means.

We are accustomed to taking work home, but what would the opposite be? Perhaps following your unique intentions, hopes, and wishes for the future, in everything you do? Instead of thinking about what employers want, you’re better off conceiving a match between what you want and what customers want.

Disrupting Unemployment

The concepts that govern our thinking and language in relation to work are not just semantic entities, but influence what we perceive and what we think is possible or not possible. Usually we are not aware of how these concepts prime our thinking. We simply think and act along certain lines.

A seminal concept related to how we perceive work is the division of labor, the notion of work as activities separated from other activities, as jobs. The industrial management paradigm is based on the presupposition that activities are the independent governing factors of creating value. The organizational structure of jobs comes first. Then an appropriate system of co-ordination and communication is put into effect. The scheme of interaction conforms to the planned division of labor as a secondary feature.

What if the increasing global competition, the Internet and the huge advances in communication technologies made it possible, or even necessary, to think differently? What if interaction was seen as the governing factor? The smartphone has now become information technology’s key product. Surely, then, it has an impact on the way we work. As jobs and communication are mutually dependent, it means that if there are changes in interaction, so the activities will change.

In the mainstream conceptual model of communication (Shannon & Weaver 1948) a thought arising within one individual is translated into words, which are then transmitted to another individual. At the receiving end, the words translate back into the same thought, if the formulation of the words and the transmission of those words are good enough. The meaning is in the words.

Amazingly, our conceptualization of value creation has followed the very same model. Companies transform ideas into offerings that are delivered to customers. At the receiving end, the products translate back into the same value that the company has created. The meaning is in the product.

Management scholars have lately made interesting claims saying that although the product is the same, different customers experience the value potential of the product differently. They say that it is in fact wrong to say that companies create value. It is the way the offering is contextually experienced and used that creates value, more value or less value. The bad news is that our present conceptualizations of work make it very hard to do anything about it. The good news is that for the first time in history we can do something about it. Companies can connect with users and be digitally present when and where their products are used.

Tor Arne

But we need a new conceptualization of communication if we want to have a new conceptualization of work. Luckily, there is one. A completely different approach to communication exists. The alternative view is based on the work of George Herbert Mead. This model does not see communication as messages that are transmitted between senders and receivers, but as complex social action.

In the social act model, communication takes the form of a gesture made by an individual that evokes a response from someone else. The meaning of the gesture can only be known from the response, not from the words. There is no deterministic causality, no transmission, from the gesture to the response. If I smile at you and you respond with a smile, the meaning of the gesture is friendly, but if you respond with a cold stare, the meaning of the gesture is contempt. Gestures and responses cannot be separated but constitute one social act, from which meaning emerges.

Gestures call forth responses and products call forth and evoke responses. Value lies not in the product but in the (customer) response. Accordingly, work should then be conceptualized as an interactive process, a social act, because the value of work cannot be known in the separate “job” activity or be understood through the capabilities of the worker.

If we subscribe to this relational view, it means that people and actions are simultaneously forming and being formed by each other at the same time, all the time, in interaction. Perhaps in the future it will not be meaningful to conceptualize work as jobs or even as organizational (activity) structures like the firms of today. Work will be described as complex patterns of communicative interaction between interdependent individuals.

All interacting imposes constraints on those relating, while at the same time enabling those people to do what they could not otherwise do. Enabling and energizing patterns of interaction may be the most important raison d’être of work.

The relational view is a new conceptualization of work, potentially opening up new opportunities to disrupt unemployment. Perhaps it is time to change the focus from creating jobs to creating customers – in new, innovative ways. To quote Max Planck: “If you change the way you look at things, the things that you look at change.”


Thank you Katri Saarikivi

Work in the Machine Age  –  Humans Need to Apply

The oft-quoted proof of the rise of machines making human work obsolete is games in which humans lose to computers. This happened in checkers in 1994. It happened in chess 1997. Now computers match humans in Scrabble, backgammon, poker, and even Jeopardy. There is still one exception, “Go”. Why is that? What is so special about Go? The game is similar to Chess in many ways, it is a “deterministic, perfect information game”, meaning a game where no information is hidden from either player, and there are no built-in elements of chance, such as throwing a die. But there are some interesting differences.

For the first move in chess, the player has twenty choices. In typical chess positions there will be around 30-plus possible moves. A typical game lasts about 40 moves before the resignation of one party.

Go players begin with a choice of 55 possible moves. This number rises quickly and soon almost all of the 361 points of the board must be evaluated. Some are much more popular than others, some are almost never played, but all are possible. That makes for 129,960 possible board positions after just the first round of moves. A typical game of Go lasts about 200 moves. As a game of chess progresses, as well as in many other games such as checkers, pieces disappear from the board, simplifying the game. Go begins with an empty board. Each new Go move adds new complexities and possibilities to the situation. The key here is the number of choices available.

The more choices there are, the harder it gets for computers.

The industrial logic was most vividly captured in the idea of the value chain. Value-creating activities were sequential, unidirectional and linear. Those performing the following task must comply with the constraints imposed by the execution of the preceding task. The reverse cannot normally take place. The architecture consists of tightly coupled tasks and predetermined, repeating activities. The output of one task was the input of another. If-this-then-that. Work was algorithmic.

Workers in industrial-age firms were used to the rules that limited choices. The burden of decision making, with the consequent need to communicate and gather costly information, was minimized. Furthermore, by narrowing the scope of choices, the learning requirements for workers were limited. In part, the efficiency-enhancing contribution of mass-production was derived from these lower learning costs.

Work has been designed as a very, very simple game.

Is it then fair to draw the conclusion that the microchip may well replace the human race? Or have we just designed human work plain wrong? Could we, and should we, change the rules of our game?

The most important reason why we need a new concept of work/games is because the players and their contributions in the real world are, at best, too diverse to rank. They are, and should be, too qualitatively different to compare quantitatively as labor. Unlike mechanical systems, human systems thrive on variety and diversity. An exact replication of behavior in nature would be disastrous and seen as neurotic in social life.

The problem we face today is not in the capabilities of humans but in the outdated and limiting conceptualization of work. Work as we know it is mainly designed for machines, not for human beings.

Human life is non-deterministic, full of uncertainty, unknowns and surprises. Creative learning is the fundamental process of socialization and being a human. For a human being, the number of choices or moves in the game of life, in any situation, is unlimited. This is the very hard to copy difference between men and machines.


Men and machines

I took part in a meeting on technological intelligence and the future of work. One of the questions raised was: “If machines can replace people’s minds in knowledge work as effectively as machines replaced their muscles in manual work, what will ultimately be left for human beings to do? Are we going to run out of jobs?” My answer was that this concern is based on a totally incorrect assumption. Working life does not consist of a finite number of things to which the human mind and human effort can be applied.

The challenges that confront us every day are unlimited. Every solution to a problem generates several new problems and unforeseen opportunities. No matter how many are solved, there will always be an infinite number ahead of us. Although modern technology has reduced the number of things that in the past had to be dealt with by human beings, it increases the complexity of the challenges that require human attention now and in the future.

Technology: robotics, machine intelligence and cognitive computing do change what people should be doing and how organizations come to be what they are. This is why we need to revisit and rethink our conceptualizations of work.

When the Industrial Revolution began, the dominant Newtonian worldview meant that there were no significant uncertainties, or unknowns, messing things up. Physical laws described what things, following a linear, rational causality, would do. Most academic experiments were constructed accordingly, and still are today. The aim was often to study the effect of one known variable on another.

Business enterprises were consequently thought of as algorithmic processes, as machines. Enterprises conceptualized as machines, like all machines, didn’t have a will of their own. They served the intentions of their creator, the owner. Employees were, of course, known to be human beings, but their personal intentions were seen as irrelevant. People were retained as long as they were needed to fulfill the intentions of the creators.

The systemic and biological conceptualization then replaced the notion of an enterprise as a machine. One often overlooked reason for this was the changing structure of ownership. When a firm went public, its creator disappeared. Owners were seen as anonymous, and too numerous to be reachable. The Industrial Revolution turned into the Managerial Revolution we are still living through today.

The Managerial Revolution changed the thinking around the purpose of the firm. Like any biological entity, the enterprise now had fitness and longevity as raisons d’être of its very own. Profit came to be thought of as a means, not an end in itself. Success came to be measured by growth. It was seen as essential, just like in nature.

The systemic view was a profound change in thinking compared with the mechanistic view. A biological organism is not goal-oriented in the sense of serving external purposes or moving towards an external goal. The movement is toward a more fit or more mature form of itself in a particular environment. An organism can adapt, but cannot leave or choose to be something else.

But humans are creative and humans can choose and you never know what they will do next.

This is why things are changing again. The sciences of uncertainty and complexity have helped us to understand that organizations are patterns of interaction between human beings. These patterns emerge in the interplay of the intentions, choices and actions of absolutely all the parties involved. No one party can plan or control the interplay of these intentions. But even without being able to plan exact outcomes, or control what others do, people can accomplish great things together.

The thing is that people can only accomplish their work in the necessarily uncertain and ambiguous conditions through ongoing conversations with each other. Work is negotiation. This is why the next revolution is dawning.

The social revolution, the human-centric revolution, is about deeply rethinking the value of human effort. An increase in value can only occur if people can do something in interaction that they cannot do alone. Social business may be more about complementarity and coordination than collaboration.

An enterprise that is conceptualized as a social business, should (1) serve the purposes, the will, of all its constituents. It should (2) enable its parts to participate in the selection of both the ends and the means that are relevant to them personally. If the parts of a system are (3) treated as purposeful, they must (4) have the freedom to choose and to act, not independently, but interdependently. This is because the basic unit of work is (5) interaction between interdependent people.

This means that the defining characteristic of a social business is the increased, non-algorithmic, variety of behaviors that is available. It is not necessarily about common goals or shared purposes any more. It is a common movement of thought that always surprises us.

The way our organizations are conceptualized has a great effect on what people do, and what they do affects the way organizations are conceptualized. Enterprises have always consisted of people who have ideas, intentions and a will of their own. Now it really matters. All people can be creators. All people are creators!

This, in the end, is what makes people different from machines.

Christmas Letter

The world of work in 2014 still consists of cultural metaphors that have guided the development of industrial firms and societies for the past 100 years. These habitual mindsets act as intellectual and emotional standards for determining what is the right way to think and what are the right things to do.

The characteristics of creative work utilizing technological intelligence in the network economy are different from what we are used to: the industrial production of physical goods was financial capital-intensive, leading to centralized management and manufacturing facilities. The industrial era also created the shareholder capitalism we now experience.

The architecture of work is metaphorically still a picture of walls defining who is employed and inside and who is unemployed and outside. Who is included and who is excluded. Who “we” are and who “they” are. This way of thinking was acceptable in repetitive work where it was relatively easy to define what needed to be done and by whom as a definition of the quantity of labor and quality of capabilities.

In creative, knowledge-based work it is increasingly difficult to know the best mix of people, capabilities and tasks in advance. Interdependence between peers involves, almost by default, crossing boundaries. The walls seem to be in the wrong position or in the way, making work harder to do. What, then, is the use of the organizational theatre when it is literally impossible to define the organization before we actually do something?

What if the organization really should be an ongoing process of emergent self-organizing? Instead of thinking about the organization, let’s think about continuous organizing. If we take this view we don’t think about walls but we think about what we do and how groups are formed around what is actually going on, or what should be going on. The new management task is to make possible very easy and very fast emergent formation of groups and to make it as easy as possible for the best contributions from the whole network to find the applicable tasks.

The focal point in tomorrow’s organizing is not the organizational entity one belongs to, or the manager one reports to, but the reason that brings people together. What purposes, activities and tasks unite us? What is the reason for the formation of groups? The architecture of work is a live social graph of networked interdependence and accountability.

New interaction technologies give individuals and organizations the ability to do this, to reconfigure agency and its form in any way they desire and can imagine. We are not confined to any one structure any more. Sometimes people stay together for a long time, sometimes for a very, very short time. The Internet is no longer about linked pages but connected purposes. We want to do something — with the help of other people and technological intelligence.

Industrial work clearly predetermined the tasks that had to be done. The technology, the machine and the ways to work with the machine were given. Creative work is very different. The first thing for a worker is to answer the questions: What am I here for? What should I achieve? What should I do next? Key questions for a creative worker have to do with how to do things and what tools to use.

Historians claim that the invention of the printing press led to a society of readers, not a society of writers despite the huge potential of the new technology. Access to printing presses was a much, much harder and more expensive thing than access to books. Broadcasting systems such as radio, newspapers and television continued the same pattern. People were not active producers, but passive receivers.

Computer literacy still often follows the same model. In practice it means the capability to use the given tools of a modern workplace. But literacy to just use, to be the consumer of, the technologies and the programs is not what we need. The perspective of the consumer/user was the perspective of the industrial age. That should not be the goal today.

In creative work the machines necessarily have to serve the workers. It is the workers who decide what to do next and how to do it. In the digital world, it is not enough if we know how to use the programs, if we don’t know how to make them.

The underlying capability of the creative era is programming to utilize technological intelligence. It is a change from using things to making things. Creating things for yourself and sharing them. Today the code is the main domain of creativity and innovations. It is a new language and the number one high leverage activity in the digital society.

The task is to combine technological intelligence and creative interaction between interdependent human beings.

What could it look like? In 1996, the chess grandmaster and then world champion Garry Kasparov, was defeated by a computer for the first time. The same thing happened again in a rematch in 1997. The new champion was the famous Deep Blue from IBM. After these world-changing events and after many subsequent matches against computers, Kasparov had the idea of re-writing the rules of the game. He came up with a new form of chess in which humans would be allowed to use computers when playing. This form of chess was named “Advanced Chess”. The key insights are that today the best chess player is not a computer or an individual assisted by a computer, but a team of people making moves and decisions in creative cooperation with one another and in cooperation with computers, in cooperation with technological intelligence.

The really big idea is to reconfigure agency in a way that brings these relationships into the centre. The task is to see action within complex human relationships supported by our relationship with algorithmic technological intelligence.

In 2015 it is time for “Advanced Work”!


More on the subject: “We need to improve the interaction between humans with the support of machine learning


Get every new post delivered to your Inbox.

Join 280 other followers