Esko Kilpi on Interactive Value Creation

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

Month: February, 2010

Newspapers, Universities and the Internet

Newspapers and universities are really in the same business. They are in information logistics; they are in the research, creation and transfer of information. The Internet now threatens both institutions. The writing on the wall is already very clear for the newspaper business, but not yet for the universities.

Newspapers have been the logistics channel for journalism. But newspapers have been just as much in the print advertising business, as they have been in the business of selling content written by journalists. On the ad side, newspapers have enjoyed a more or less local monopoly over the market. That money is now gone. It is lost to Google, and in the near future to Facebook.

Universities have been the logistics channel for education. As of today, there’s no Google destroying that. Instead of having monopolies over advertising, universities have enjoyed barriers to competition in the form of local language and accreditation. Anyone can use the Internet to blog or to tweet. Not anyone can sell recognized degrees. But the number of people who associate being informed and learning with following experts they recognize on the Internet is soon reaching hundreds of millions. More and more people think that the most valuable learning takes place in bite-sized chunks, every day, through reading the contributions of people we recognize as being worth following.

We know that degrees don’t signal competence and thus they have less and less true human capital value. However, learning, as a way of life, without beginnings and ends, is becoming more and more valuable.

Leading institutions like Stanford University and MIT are giving lectures on the Internet. Apple iTunes is aggregating those and hundreds more like them into playlists, which may be the new way to see course architectures. The way peer learners have experienced their unique combination of these learning playlists may be the most valuable starting point for any individual learning path. Is the Amazon recommendation system then the way classes should be filled?

Is iTunes the Google challenge for universities?

People will argue that the best university courses are superior to any online offering, and they are often right. There is no substitute for a live meeting of minds. But that’s far from the experience of the student sitting in a lecture hall.  All she’s getting is a live version of what iTunes offers, without the ability to rate, to discuss with peers, rewind, bookmark, return to later and forward to others.

People in the traditional print media have dismissed online writing because of its low average quality. The average quality of the writing online isn’t what the print media are competing against. They’re competing against the best writing online. And they’re losing. This is what is going to happen next with teaching. Universities are going to compete against the best bloggers and the very best curators of learning content. The sad truth, both when it comes to the newspapers and to the universities, is that if you are used to being a monopoly, you create habits that are hard to overcome when you suddenly face competition. The Internet is now transforming the consumption habits of newspaper customers. There is an even bigger change happening in the learning related habits of people. Hopefully, the universities won’t fight as much against their customers’ new habits as the newspapers do!


Thank you Riel Miller. Special thanks to Kevin Carey. Mimi Ito and Paul Graham

Leadership in the time of Social Media

We are used to thinking that what happens in organizations is the realization of the choices of powerful people. They are supposed to know what is going on as they make those choices. However, the stories about decision making during wartime, or during the recent financial crises, make it very clear that politicians and executives are far from sure of what has been happening and they simply don’t know what is now happening.

Partially, it is because of corrupted communication. The results of failing communication can be catastrophic. In today’s FT Tim Harford quotes a study on communication and decision making during the Vietnam War: “The joint chiefs of staff were warned that Lyndon Johnson did not like split advice. Robert McNamara also argued that government would be inefficient if department chiefs were to express disagreement with the president.”

The leader who isolates himself from dissenting opinions is bound to make disastrous decisions. The failures in communication in Vietnam continued in Iraq. According to researchers, Donald Rumsfeld and his immediate subordinates made dissent extremely difficult during the first years of the war. It is normal, but costly in corporations and disastrous in politics to filter out information that contradicts preconceptions. Failures of leadership are very often a result from failures in communication.

All organizations are power and communication structures. Very often communication is corrupted just because of power. “If you deliver differing views to your boss, it is highly likely that you are not going to be listened to in the future.” For ambitious people, this is the worst possible fate. What social media try to achieve, is subordinates giving truthful information about what is going on, which they don’t do, and bosses listening attentively, which they don’t.

If this dynamic is taking place at every level of the organization, you are in big trouble. Each organizational level that creates a strong boss, ambitious subordinate relation is a distorting barrier to communication and informed decisions.

Business leaders try to know what is going on in the corporation through employee surveys and 360-degree appraisals. Organizations are full of local knowledge, but if bosses need to ask outsiders to tell them how their organization really works, there is trouble in store. If organizations want to be relevant and effective, they will need to incorporate elements of bottom-up, real-time information delivery and real-time listening into their management thinking. Be that pushing real-time updates or subscribing to people who matter.

The role of the effective leader during the time of social media is to widen and deepen communication. Leadership is participating and exercising skills of conversation which uncorrupts information, keeps the necessary paradoxes alive, and keeps on opening up the possibility of new meaning rather than closing down the further development of thought.


Thank you Tim Harford

Productivity and mobile devices

Lenovo unveiled their new tablet-capable business laptop last Monday. The company made a conscious decision not to bring out an iPad like tablet PC. They said customers don’t want it. “The feedback was that for our customers it would not work because of the need to have a physical keyboard.”

The discussion around a virtual or physical keyboard caught my attention. The purpose of a keyboard is fairly straightforward: to get words onto the recording medium. The ability to capture a symbolic representation of spoken language for storage or transfer frees information from the limits of individual memory or location. But do we need a physical keyboard for that?

The patent for the typewriter was awarded in 1868 to Christopher Sholes. An early problem of the typewriter was the jamming of the type bars when certain combinations of keys were struck in a very close sequence. As a solution to the problem, Sholes arranged his keyboard in such a way that the keys most likely to be struck in close succession were approaching the type point from opposite sides of the machine. The keyboard is actually configured to minimize speed of input. At the time, reducing the speed of the typewriter was the best way to prevent it from jamming. The QWERTY keyboard was designed to accomplish a now obsolete mechanical requirement. It can be claimed that it is very unproductive to use a keyboard as an interface to productivity tools. The situation would of course be different if we all used ten fingers and did not need to look at the keyboard as we type.

Mobile phones are still mainly associated with communication, not productivity software. As a result a knowledge worker needs two devices: a laptop and a mobile phone.

No mobile phone has created as much of a buzz as the Google Nexus One since Apple launched the iPhone. As in other Android-based mobile devices, there is no physical keyboard. Text input relies on a virtual keyboard. But there is also a voice-to-text input functionality. We could use our voice and video instead of a keyboard! And additionally the camera is paving the way towards augmented reality!

The third device category is tablets: bigger than mobile phones but smaller than laptops – and often without a physical keyboard. The critiques claim that tablets like the iPad are just laptops without keyboards, while others are really mobile phones with proper-sized keyboards, without any definition of a real market need. At least the Lenovo customers don’t want them. Hopefully the Lenovo case is not  a matter of history repeating itself, as when Ken Olsen was explaining that DEC customers didn’t want PC’s.

The question here is not only how we think about the means of input. In the corporate context, it is even more about how we think about productivity and what kind of software can be called productivity software.

Productivity is a function of interaction

Instead of thinking about productivity as if it were associated with certain types of documents, it is closer to experience to think that productivity emerges or does not, in people’s interaction with each other and in interaction with the devices we use. Productivity is a function of interaction. Interaction is the content of social media! Therefore, it may not be a very good idea to bring the old document-based productivity software to mobile phones, or use Lilliputian keyboards.

The key productivity focus should be on widening and deepening interaction and reflection. This leads to a new perspective on information-related practices and productivity tools. Rising productivity requires changes in the way we communicate. Can there be a richer and easier way to use our devices? This, by the way, is the main sales argument behind the iPad.

The fastest immediate increase in productivity comes from either learning touch typing or using voice and video as means of input. Perhaps the keyboard of the future is speech combined with transcription? Anyway, the productivity software of tomorrow needs to be interaction-based. The most efficient productivity suit of tomorrow may well be a combination of Twitter, blogs and Facebook.


Thank you Kuutti Lavonen


Mobile data

Cognitive and social presence

Have you ever wondered why you don’t see anyone reading a book when you visit companies? We associate reading with finding information and learning, but we also involve qualities such as contemplation, solitude and mental privacy when we think about books.

There is a mental framework that is used when dealing with books, and another distinct mental framework regarding information related practices in the corporate world. Basically, you are not allowed to read a book but you can read a document.

Documents and word processing are part of the mental framework of management today. Documents were born from the needs of a hierarchical, systemic approach to management. Information flowed down from the top in the form of PowerPoint slide decks containing vision statements, Excel sheets with goals and Word documents explaining corporate procedures. Information, which flowed up from the bottom, was used mainly to provide reports and data for managers, helping them to keep their employees accountable and to ensure the smooth operation of the business process.

The framework of computerized word processing is associated with terms like information flows and the sharing of information. This is not something you normally talk about when discussing a book. While a book provides a view of the contemplative mind, documents create a view of controlled content. Do you still ask why you can read a document but you are not allowed to use Facebook?

Instead of predictive process flows, knowledge work in practice follows a very different logic. A senior executive in one of the most successful multinational corporations in the world explained what was going on:

  • There may be a triggering event that needs to be explored.
  • The exploration is performed most efficiently through transparency, wide area engagement and a communal process of distributing the cognitive load of the case.
  • People don’t perform job roles. People participate in tasks. You don’t delegate, you invite!
  • People from the whole community should participate through voluntary self-organization as widely as possible at the same time, not sequentially.
  • The industrial process was long, sequential and divided. The knowledge based process is short, parallel and interactive.
  • As many people as possible with applicable skills should contribute, each spending as little time as possible.
  • Finally, the contributions and comments that are received should integrate into a modular solution than can be iterated.

Knowledge work is about a community-based cognitive presence. But cognition is just part of the answer. Work today is even more about social presence. To manage is to participate in the live conversations.

There cannot be management without a social presence.

A dramatic shift is needed in the mental framework of information, communication and work. Without this changing mindset, no efficient implementation of social media can be made in the corporate world. Work is communication. Conversations and narratives are the new documents. Conversations cannot be controlled. The only way to influence conversations is to take part in them. The most meaningful conversations are the ones where customers voice their views. Those conversations take place outside of the firewall in the new world of mass communication.

As much as we need to associate Facebook with work, we need moments of slower pace. We need to combine the qualities of contemplation, solitude and mental privacy with work.


Thank you Walter Ong. The photo is of an interior detail of the Alvar Aalto architecture in the Academic Bookstore in Helsinki

Communication revolutions

The printing press constituted a true revolution in communication. But what really happened as a wider consequence of that revolution? Let’s try to reconstruct the circumstances that preceded printing. We know that there was a strong, although very divergent scribal culture before the printing press. The cultural texture was quite thin outside of monasteries, libraries, and towns like Bologna. That led to a heavy reliance on the vocal transmission of information, on storytelling. The information culture was half-spoken, half-written. The most interesting era was the hundred years before Gutenberg. Historians say that the availability of paper led to the literate man becoming his own scribe.

The influence of the scribe was greatly enhanced because of a complementary character, the copyist. At first, the shift from script to print produced a social culture that was not very different from the culture produced by scribes. The writer – printer process was not very different from the scribe – copyist process, if looked at from the outside. Of course there was a huge increase in the output of books and a drastic reduction in the man-hours required to turn them out. The first change was a remarkable increase in productivity.

But then, the communications revolution of print caused remarkable changes in information-related practices: the well-informed man had to spend a part of each day in a temporary isolation from his fellow men – reading. Another development was the Sunday papers replacing church going.  Sermons used to be coupled with news about local and foreign affairs. News gathering and circulation were now handled much more efficiently by the new players. You could even get the newspaper every day! Concerns were voiced that the new technology of print is going to destroy peoples’ brains; You don’t need to remember any more. You just look up things in the newspaper!

The most noteworthy social change was taking place on the community level. To hear, you have to come together. To read, encourages you to draw apart. The notion that the society can be regarded as a bundle of discrete units supported the principle that detached people can be represented through a system of disconnected political parties . The reading public was very different from the one before. It was not only dispersed, it was very atomistic and individualistic.

Learning, which used to take place in vocal interaction in groups, was now the activity of a solitary, independent individual. The picture of the student in the library reading room was transferred to classrooms and the architectures of education.

According to some researchers, print “silenced” the spoken word. The orators of Rome gave way to the men of letters. Newspapers became stronger than broadcasting companies. Information technologies and communication technologies have since been seen as two separate domains, not only for technological reasons, but because of the historical developments described above.

Today, we are going through another revolution in communication. Digitalization and the Internet are providing new means for the new scribes to contribute. We call the scribes Bloggers, and we call the copyists Tweeters. The Internet is providing us with much faster and much more efficient means to be informed than the mainstream media players can provide. This time it is about real time! Furthermore, we can achieve two major quick wins. First, if we combine communication technologies and storytelling we can create a much richer information tapestry than present IT systems are capable of.  Second, instead of drawing apart, we can now come together. The way written word is used on Twitter or on Facebook is much closer to the vocal transmission of information than to writing. The culture is again half-spoken, half-written.The printing press separated information and communication. Social media are converging the two.

The real promise of the Internet is however in the social changes that are still ahead of us. The revolution is just about to begin.


Thank you Bo Carpelan

The financial system of the world and the curious case of the Hakkar

Jeremy Grant and Michael Mackenzie write in today’s Financial Times about the software driven trading of shares. Software codes, algorithms, have become a common way of trading shares and derivatives. A string of code decides when, how and where to buy and sell financial instruments such as options and futures. No human intervention is needed.

Stock exchanges are at the moment building data centers where traders can place their computers containing their trading software. The exchange has a matching system that takes in and connects the “buy” and “sell” orders. The reason for the computers being at the same server farm is to save time. Buyers and sellers can now save milliseconds from the time it took to complete a trade over the network.

Technology has advanced so rapidly that financial markets are largely driven by computers instead of human beings.

The way many algorithms work is that some event, such as a news article, triggers the decision to trade. Another string of code seeks where in the world the best price can be found. The software technology behind this is so advanced that literally thousands of orders can be sent to the matching engines in a fraction of a second.

The technology has brought with it high frequency traders. They seek to make a profit from the opportunities that are presented by very small price changes lasting less than a second.

On September 13, 2005 World of Warcraft opened up a new area for advanced players. It was inhabited by a massive winged serpent called Hakkar. One of the tricks Hakkar had was the capability to spread a contagious disease called “corrupted blood”. The special thing was that when a player was infected, other players nearby also caught the disease. This was intended as a minor hindrance to the skilled players who had teamed together to fight Hakkar. Anyway the avatars in the World of Warcraft live in the virtual world of software. When they die during a combat, they return to their homes to come back to life and resume playing. No big deal.

This time however, things were different. The players responded to the new string of code in an unanticipated way. Rather than continuing to fight in the closed area, where Hakkar lived, some players teleported themselves to other areas of the game. As a result the infection spread widely through the whole virtual world. What the programmers intended to be a new challenge for advanced, powerful players in a localized area turned into a global epidemic that rapidly killed hundreds of thousands of weaker players. The programmers had no idea what was going on. Nothing seemed to work as they tried to regain control. Ultimately, the programmers resorted to a strategy that may not be an option for the global financial system. They pulled the plug on the whole world. They rebooted the servers and the epidemic died out.

The virtual financial system of the world affects the physical world outside the digital areas reserved for powerful, advanced players. It is a pity there is no plug to pull when hundreds of thousands of weaker companies start to die as a result of “unforeseen programming issues“.


Thank you Jeremy Grant and Michael Mackenzie

More on the subject:

On algorithmic stock trading

The Sixth Competitive Force

The terms “Knowledge Worker” and “Knowledge Society” are around fifty years old. Peter Drucker and Fritz Machlup, a less known Princeton economist, coined them at roughly the same time around 1960.

Although the concepts have now been around for a long time, it seems that the implications for corporations are not clear yet and don’t show in the way competitive strategies are made. What is quite evident is that the emerging society is different in many ways from the industrial society.

There are some things we know about knowledge work.

Effective skills are always specialized, as regards both, successful companies and effective people. This means that highly knowledge-based companies are always, by definition, only a partial answer to the opportunities available. Michael Porter made us to think that the players in the game of business were (1) companies, (2) customers and (3) suppliers together with old and new (4) competitors coming with alternative (5) offerings. This was called the five forces model. The company was seen as an independent, self-contained unit of competition.

Seven years ago, Bill Gates spoke often of the pet project of his. It was going to change computing for millions of people. It was the touch screen tablet PC. The device is still on sale, but it never raised a fraction of the interest that the iPad is now generating. Was it because Microsoft did the project alone?

Because of specialized, narrow skill sets, a new role with a new role definition is needed in knowledge work. Nobody, not even Microsoft, can be successful without supporting contributions from network partners. The new role is a “complementor”. A complementor is not the same as a supplier. The connection is based on a non-hierarchic network relation, not the hierarchic value chain. Complementary contributions may be the most important explanation of business success today. What would the iPad or the iPhone be without the applications made by people outside Apple?

A classic example of complements is computer hardware and computer software. The greatest hardware engineers are in dire straits without the greatest software programmers, as Nokia has found out. Though the idea of complements is most apparent in ICT, the principle is universal: you can never have in-house all the specialized skills you need. A complement to an offering is another offering that makes it more attractive. People value hot dogs more when they have mustard. Because knowledge work is specialized, it never pays to try to make both.

The new strategic imperative is to identify complementors and to be inviting to them. To be competitive, is to be “selfishly” cooperative.


Thank you Barry Nalebuff

The Google lesson for management

Eugene Garfield founded the Institute for Scientific Information in 1960.  His pioneering work was in citation indexing. This allows a researcher to identify which articles have been cited most frequently and who has cited them. Garfield’s studies demonstrated that the number of citable items, i.e. the number of papers, together with the frequency of their citation, meaning how many scientists link to the paper, is a good measure of scientific success. Nobel laureates write more papers than other scientists and these papers are more linked to than other papers. The system effectively measures quantity and quality at the same time.

Links on the Web are also citations, or votes, as the founders of Google realized. The whole Web is a densely interconnected network of references. It is no different to the age-old practice of academic publishing and citation indexing.

The observation of Larry Page and Sergey Brin that links are citations seems commonplace today, but it was a breakthrough at the time Google started on September 7, 1998.

What Google did was essentially the same as had been done in academic publishing by Eugene Garfield. At this time, relevance and importance were measured through counting the number of other sites linking to a Web site, as well as the number of sites linking to those sites. The PageRank algorithm includes other variables as well, but the measurement of links is still the core functionality of the system.

What Google has proved to managers is that people’s individual actions, if those actions are performed in a transparent way, and if those actions can be linked, are capable of managing unmanageable tasks.

Collaboration and collective work are best expressed through transparency and emergent, responsive linking. The mainstream business approach to value creation is still a predictive process designed and controlled by the expert/manager. This is based on the presuppositions that we know (1) all the linkages that are needed beforehand, and (2) what the right sequential order in linking and acting is. Neither of these beliefs is correct any more. The variables of creative work have increased beyond systemic models of process design.

It is time to learn from the Web.

By relying on the uncoordinated actions of millions of people instead of experts/managers to classify content on the net, Google democratized scientific citation indexing. To be able to manage the increasingly complex organizations of today, the same kind of democratization needs to take place in the corporate world. Companies are transforming themselves from industrial mass production to creating value in wide area networks of mass communication. The transparency of tasks is the corporate equivalent of publishing academic articles. Responsive linking, rather than predictive linking, acts as a measure of relevance and is the guarantee of quality. This has served the academic community well. It made Sergey Brin and Larry Page billionaires. Now is the time to do the same in the corporate world. Complex, creative, knowledge-based work requires new approaches. The Google lesson for management is, that the more work is based on responsive processes of relating and the more organizing is an ongoing process in time, the more value we create!


Thank you Jeff Howe and Ralph Stacey

The importance of a tweet

Eli Whitney invented the cotton gin to replace the laborious hand cleaning of cotton in 1794. James Watt invented the steam engine in 1769 to solve the problem of pumping water out of British coal mines. Most inventions however, are not responses to voiced needs. In many cases the work of the inventors produce a solution that needs to seek a problem.This is still the case today. Inventions in search of a use are the norm when it comes to most technological breakthroughs. When Thomas Edison built his first phonograph in 1877, he suggested ten uses to which his invention would be suited. At the top of the list were preserving the last words of dying people and announcing the time of the day.

Music was not on his first list of uses. As historians write, It took twenty years for Edison to reluctantly admit that the main use of his phonograph was to record and play music.

It is almost impossible to know beforehand where the primary use for an invention is going to be in the long run. The inventor has in many cases, been totally wrong in his early assessments of where the best combination of a solution to a problem might be. Although James Watt had originally put his steam engine to work in the coalmines, the true revolution of steam power began only after steam had started to be used to propel trains and ships, which he never thought of.

James Watt did not see the future but he saw the past. Researchers claim that Watt actually got the idea for his version of the steam engine while repairing an engine designed by Thomas Newcomen, who had invented it almost sixty years earlier. Over one hundred of these had already been manufactured. Newcomen’s engine was based in turn on the patent awarded to Thomas Savary in 1689. The chain of discovery of the steam engine goes back further to Denis Papin in France, Christian Huygens in Holland and others. Similar histories can be seen in all modern inventions that are well documented.

There are very few isolated geniuses. But there are many bright people who have continued and improved the work of others. There is a need for a new vocabulary for the creative era: all capable people have capable predecessors, who should get the credit they deserve. The key concept  in the knowledge-based future is acknowledgment, giving credit, beyond what we have been used to. In a sense, creative people are more remixers of other peoples’ ideas, than inventors. Technology and development are not isolated acts by great independent thinkers, but a complex storyline, where the storytellers, the developers and remixers, are more important than the heroic inventors, if there ever were any. We never know how the story develops, but it cannot develop unless it continues. The new challenge for the creative economy is to understand the importance of attribution and giving credit. The first thing is to acknowledge the vital role of the curator/messenger and the huge importance of the tweet and the retweet.


Thank you @euan @oscarberg @venessamiemis @Lessig and Jared Diamond

We share feelings much more than we share information

There is one universally agreed-upon feature of a good life: enriching relationships. Researchers claim that we take stock of the people in our lives and the “flourishing” we get through being with them. The strategy people normally follow, mostly unconsciously though, is to try to spend more time with the people we resonate with, and less time with the people we don’t resonate with that well. Beyond this obvious solution, an even better possibility would be to create, and re-create, our relationships to make them more mutually nourishing. Emotional contagion is a fact of life. It means that our moods and even physical health are created in interaction with other people. We tilt either to the positive or tilt to the negative as a result of our relations, and the further relations, the people that we relate with have. It is a chain of contagion that goes far beyond the horizon.

We could, in theory, make an inventory that evaluates the “richness” of our relationships. My dear friend Marcial Losada has made breakthrough findings on interaction. The thought provoking model he has created, which is based on decades of research, has three variables and three parameters. The variables are inquiry-advocacy, positivity-negativity, and other-self or external-internal orientation. The three parameters are connectivity, which is the critical control parameter, negativity bias and resistance to change.

According to Marcial, people are most successful when they are well connected, and are able to balance external vs. internal orientation as well as inquiry and advocacy. The relationship should keep a positivity/negativity ratio within the “Losada Zone”, meaning greater than or equal to about 3:1 and not more than about 11:1.

John Gottman on the other hand, has found that in a happy marriage, a couple experience five times more positivity than negativity in interaction. If we take the work of Losada and Gottman seriously, as we should, it would mean that there is a golden mean for any ongoing relationship in our lives, both private and corporate. If the positivity/negativity ratio is below 3:1 it would mean that there is a need for urgent mending. In situations like this, the way we intuitively behave is to end the relationship. But perhaps we should not. Do we know how WE affect the lives of the people close to us? How do WE impact on others? Do we help others to flourish? If not, should they leave us?

The critical success factor of Enterprise 2.0, is to understand that we share feelings much more than we share information.

The unfortunate reality in enterprises is that there is a negativity bias in most in-house communication. Communication is often about solving problems and giving negative feed-back. Organizations are also optimized for repetition. There is an in built systemic resistance to changing communication patterns. It is very safe to assume to start with, that the positivity/negativity ratio is in the red. Thus, the most important management process is enriching the interaction.


Thank you @pekkahimanen and @ Esa Saarinen for meaningful discussions