Esko Kilpi on Interactive Value Creation

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

Tag: Architecture of work

A pattern language of post-industrial work

At the core of the post-industrial era is the idea that people should design for themselves. This principle applies also our value creating entities. This may sound radical but comes from the observation that most of the value on global scale is not created by firms but by people. People, then, should learn to be better designers. When designing something we always rely on certain patterns. We are in the midst of a shift from the industrial pattern of supply and demand to social, interactive patterns.

The customer is now seen as being directly and actively involved in the key moments of value creation as opposed to passively consuming value. There are profound implications that result from this change of thinking. Products and services are not reproducible as such any more. Solutions are by default contextual, but they can be starting points for someone else to create value. Creative, connected learning is at the core of the post-industrial business.

The most important principle is to build the organization around three design patterns: (1) Relations, (2) Network effects and (3) Solving problems /Asking questions.

Relations

Cultural homogenization is a theme of our time. It is apparent in fashion, food, music, and many services with a unified user experience. Everything is made to be basically the same everywhere. According to some psychologists, the desire for this sameness arises from anxiety about differences. This is one of the reasons why Gregory Bateson argued that the history of our time can be perceived as the history of malfunctioning relationships. More homogenization leads to more anxiety (when experiencing differences) which leads to more homogenization and the “differences that make a difference”, as Bateson put it, are lost.

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. 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.

To succeed you need relationships and interaction. When customers are identified as individuals in different use contexts, the sales 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 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. The new structures and new designs are about communities continuously organizing themselves around shared contexts, meaning shared interests and shared practices. The focus of industrial management was on the division of labor and the design of vertical/horizontal communication channels. The focus should now be on cooperation and emergent interaction based on transparency, interdependence and responsiveness.

The really big objective of the digital transformation is to reconfigure agency in a way that brings relationships into the center. Success today is increasingly a result of skillful participation: it is about how we are present and how we communicate. Through new technologies, applications and ubiquitous connectivity, we have totally new opportunities for participation and communication — potentially changing the way we work together.

Network effects

The new platforms can be a valuable, shared resource making 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. The effects of Moore’s law on the growth of the ICT industry and computing are well known. A lesser-known but potentially more weighty law is starting to replace Moore’s law in strategic influence. Metcalfe’s law is named after Bob Metcalfe, the inventor of the Ethernet. The law states that the cost of a network expands linearly with increases in the size of the network, but the value of the network increases exponentially. When this is combined with Moore’s law, we are in a world where at the same time as the value of the network goes up with its size the average costs of technology are falling. This is one of the most important business drivers today.

The implication is that there is an ever-widening gap between network-economy companies and those driven by traditional asset leverage models. The industrial economy was based on supply-side economies of scale inside the corporation. The new focus is outside, in demand-side network economies.

The most important model is a network structure where the value of all interactions is raised by all interactions; where every interaction benefits from the total number of interactions. These are the new network businesses. In practice this means that digital services can attain the level of customer reach and network size, required to capture almost any market, even as the size of the company stays relatively small. This is why network-economy based start-ups have such a huge advantage over asset leverage based incumbents. The key understanding is that it is now the customers or members of the network who create value, not the network owner. The customer will be transformed from being an audience to an actor.

The central aggregator of enterprise value will no longer be a value chain. The Internet is a viable model for making sense of the value creating constellations of tomorrow. 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.

Solving problems /Asking questions

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.

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. 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.

The new design patterns create new opportunities. 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.

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.

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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.”

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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.

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From jobs to tasks and from the value chain to the Internet

Economic theories are derived from the era of the production of tangible goods and high-cost communications. These mind-sets are not only unhelpful, but wrong in a world of information products and ubiquitous, low-cost/high-quality connectivity.

New communication technologies have always had a strong impact on industries and the logistics around production. But this time, with information products, the societal changes are potentially even bigger than before.

The Internet is the first communication environment that decentralizes the financial capital requirements of production. Much of the capital is not only distributed, but also largely owned by the workers, the individuals, who themselves own the smartphones and other smart devices, the new machines of work. When computers were expensive, the economics of mass industrialization and its centralized management structures ruled them. Not any more!

The factory logic of mass production forced people to come to where the machines were. In knowledge work, the machines are where the people are making it possible to distribute work to where they are. Architectures of work differ in the degree to which their components are loosely or tightly coupled. Coupling is a measure of the degree to which communication between the components is predetermined and fixed or not. It was relatively easy to define in repetitive work what needed to be done and by whom as a definition of the quantity of labor and quality of capabilities. As a result, management theory and practice created two communication designs: the hierarchy and the process chart.

In a hierarchy the most important communication and dependence exists between the employer and the employee, the manager and the worker.

Manufacturing work is perhaps amazingly not about hierarchical, but horizontal, sequential dependence. 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. Communication typically resembles one-way signals.

Creative, highly contextual work creates a third design. It is about loose couplings and modularity, about networked tasks. In creative work, any node in the network should be able to communicate with any other node on the basis of contextual interdependence and creative, participative engagement.

The architecture of the Internet is based on the very same principle of loose couplings and modularity. Modularity is the only design principle that intentionally makes nodes of the network able to be highly responsive. The logic of modularity and ubiquitous communication make it possible for the first time to create truly network-based organizations.

Creative network-based work in the future is not about jobs, but about modular tasks and interdependence between people. You don’t need to be present in a factory any more, or in an office, but you need to be present for other people.

In an economy, people essentially produce goods and services for people. Companies are theoretically intermediary organizational forms that arrange the development, production and delivery processes. Companies can perhaps be in some cases be replaced by apps? Or managers can be replaced by apps? Or perhaps the new companies look a lot like apps like Uber or Airbnb already do. Many of these new companies see themselves as market makers rather than as service providers.

The modern firm has developed into a perfect vehicle for financial contributions and as a toolkit serves the needs of financial investors well, at least in good times. As creativity and knowledge define success today, access to capabilities is at least as important for a firm as access to money. The Internet may prove to be an extinction-level event for the corporations as we have known them. In the network economy, individuals, interacting with each other by utilizing the new apps together with relatively cheap mobile, smart devices, can now create information products.

But many things need to change!

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. This image of work is easy to grasp because it has been taught at school where the model is the same.

In contrast to the above, creative, digital work and the Internet have brought about circumstances in which the employee in effect chooses the purpose of work, voluntarily selects the tasks, determines the modes and timing of engagement, and designs the outcomes. The worker might be said to be largely independent of some other person’s management, but is in effect interdependent. Interdependence here means that the worker is free to choose what tasks to take up, and when to take them up, but is not independent in the sense that she would not need to make the choice.

The interdependent, task-based worker negotiates her work based on her own purposes, not the goals of somebody else, and negotiates who her fellow workers are based on cognitive complementarity and her personal network, not a given organization.

The architecture of work is not the structure of a corporation, but the structure of the network. The organization is not a given hierarchy or a predictive process, but an ongoing process of organizing. The Internet-based firm sees work and cognitive capability as networked communication.

The effects of Moore’s law on the growth of the ICT industry and computing are well known. A lesser-known but potentially more weighty law is starting to replace Moore’s law in strategic influence. Metcalfe’s law is named after Bob Metcalfe, the inventor of the Ethernet. The law states that the cost of a network expands linearly with increases in the size of the network, but the value of the network increases exponentially. When this is combined with Moore’s law, we are in a world where at the same time as the value of the network goes up with its size the average costs of technology are falling. This is one of the most important business drivers today. The implication is that there is an ever-widening gap between network-economy companies and those driven by traditional asset leverage models. The industrial economy was based on economies of scale inside the corporation. The new focus is outside, in network economies.

The most important model is a network structure where the value of all interactions is raised by all interactions; where every interaction benefits from the total number of interactions. These are the new network businesses.

In practice this means that digital services can attain the level of customer reach and network size, required to capture almost any market, even as the size of the company stays relatively small. This is why network-economy based start-ups have such a huge advantage over asset leverage based incumbents.

The key understanding is that it is now the customers or members of the network who create value, not the network owner.

Yes, customer focus has been the dominant mantra in business. Up to now, business has focused on the customer as an audience for products, services and marketing communications. In the world of digital networks, the customer will be transformed from being an audience to an actor.

The central aggregator of enterprise value will no longer be a value chain. The Internet is a viable model for making sense of the value creating constellations of tomorrow.

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The wiki way of working

Physical tasks can normally be broken up in a reductionist way. Bigger tasks can be divided by assigning people to different smaller parts of the whole. For intellectual tasks, it is much harder to find parts that make for an efficient workflow. Intellectual tasks are by default complex and linked. Knowledge work is a social construct.

The machine metaphor led to the belief that if we can only arrange the parts in the right way, we optimize efficiency. The demands of work are different now: how efficient an organization is reflects the number of links people have and the quality of the links they have to the contexts of value, the things that matter.

How many handshakes separate them from one another and from the things that matter most? We are beginning to see the world in terms of  relations.

We have examples of new social architectures that redefine some basic beliefs about work and cooperation between people.

At the moment the wiki is the best departure from the division of labor and workflows. Wikis let people work digitally together in the very same way they would work face-to-face. In a physical meeting, there are always more or less the wrong people present and the transaction costs are very high. Unlike email, which pushes copies of the same information to people to work on or edit separately, a wiki pulls non co-located people together to work cooperatively, and with very low transaction costs. Email and physical meetings are methods which exclude. They always leave people out. A wiki, depending on the topic, the context and the people taking part, is always inviting and including. The goal is to enable groups to form around shared contexts without preset organizational walls, or rules of engagement.

In 1995 Ward Cunningham described his invention as the simplest online database that could possibly work. An important principle of the wiki is the conscious emphasis on using as little structure as possible to get the job done. A wiki does not force a hierarchy on people. In this case, less structure and less hierarchy mean lower transaction costs. A wiki always starts out flat, with all the pages on the same level. This allows people to dynamically create the organization and, yes, also the hierarchy that makes most sense in the situation at hand.

People work together to reach a balance of different viewpoints through interaction as they iterate the content of work. The wiki way of working is essentially a digital and more advanced version of a meeting or a workshop. It enables multiple people to inhabit the same space, see the same thing and participate freely. Some might just listen, some make comments or small edits, while others might make more significant contributions and draw more significant conclusions.

New work is about responsive, free and voluntary participation by people who contribute as little, or as much as they like, and who are motivated by something much more elusive than only money. Society has moved away from the era of boxes to the time of networks and linked, social individualism. Being connected to people, also from elsewhere, is a cultural necessity and links, not boxes, are the new texture of value creation.

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Architectures of work and Internet-based firms

The characteristics of work 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 where you needed to be at during predetermined hours. The industrial era also created the shareholder capitalism we now experience. In the network economy, individuals, interacting with each other by utilizing free or low cost social platforms and relatively cheap mobile, smart devices, can now create information products.

The production of information goods requires more human capital than financial capital. And the good news is that you are not limited to the local supply. Because of the Internet, work on information products does not need to be co-located. The infrastructure of work does not resemble a factory but a network.

Decentralized action plays a much more important role today than ever before.

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 between the components is predetermined and fixed or not. The architecture of the Internet is based on loose couplings and modularity. Modularity is the design principle that intentionally makes nodes of the network able to be highly responsive.

The Internet-based firm sees work and cognitive capability as networked communication. Any node in the network should be able to communicate with any other node on the basis of contextual interdependence and creative participative engagement. Work takes place in a transparent digital environment.

As organizations want to be more creative and knowledge-based, the focus of management thinking should shift towards understanding participative, self-organizing responsiveness.

The Internet is a viable model for making sense of the new value creating constellations of tomorrow.

But something crucially important needs to change:

The taken for granted assumption is that it is the independent employer/manager who exercises freedom of choice in choosing what is done and by whom. The employees of the organization are not seen autonomous, with a choice of their own, but are seen as rule-following, dependent entities. People are resources.

Dependence is the opposite of taking responsibility. It is getting the daily tasks that are given to you done, or at least out of the way. 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.

In contrast to the above, digital work and the Internet have brought about circumstances in which the employee in effect chooses the purpose of work, voluntarily selects the tasks, determines the modes and timing of engagement, and designs the outcomes. The worker here might be said to be largely independent of some other person’s management, but is in effect interdependent. Interdependence here means that the worker is free to choose what tasks to take up, and when to take them up, but is not independent in the sense that she would not need to make the choice.

The interdependent, task-based worker negotiates her work based on her own purposes, not the goals of somebody else, and chooses her fellow workers based on her network, not a given organization. The aim is to do meaningful things with meaningful people in meaningful ways utilizing networks and voluntary participation.

It is not the corporation that is in the center, but the intentions and choices of individuals. This view of work focuses attention on the way ordinary, everyday work-tasks enrich life and perpetually create the future we truly want through continuous learning.

The architecture of work is not the structure of a corporation, but the structure of the network. The organization is not a given hierarchy, but an ongoing process of organizing. The main motivation of work is not financial self-interest, but people’s different and yet, complementary expectations of the future.

The factory logic of mass production forced people to come to where the work is. The crowdsourcing logic of mass communication makes it possible to distribute work/tasks to where the right/willing/inspired people are, no matter where on the globe they may be.

Knowledge work is not about jobs or job roles but about tasks. Most importantly knowledge work can, if we want, be human-centric. Through mobile smart devices and ubiquitous connectivity, we can also create new opportunities and a better future for millions of presently unemployed people.

It is possible!

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The Social Graph of Work

The approach of the industrial era to getting something done is first to create an organization. If something new and different needs to be done, a new and different kind of organizational form needs to be put into effect. Changing the lines of accountability and reporting is the epitome of change in firms. When a new manager enters the picture, the organizational outline is typically changed into a “new” organization. But does changing the organization really change what is done? Does the change actually change anything?

An organization is metaphorically still a picture of walls defining who is inside and who is outside a particular box. 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.

As a result, organizational design created two things: the process chart and reporting lines, the hierarchy.

In creative, knowledge based work it is increasingly difficult to know the best mix of people, capabilities and tasks in advance. In many firms reporting routines are the least important part of communication. Much more flexibility than the process maps allow is needed. 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 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 the 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, without knowing beforehand who knows.

The focal point in 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 cause of interdependence and group formation?

It is a picture of an organization without walls, rather like contextual magnetic fields defined by gradually fading rings of attraction.

Instead of the topology of organizational boxes that are still often the visual representation of work, the architecture of work is a live social graph of networked interdependence and accountability. One of the most promising features of social technologies is the easy and efficient group formation that makes this kind of organizing possible for the first time!

It is just our thinking that is in the way of bringing down the walls.

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A Christmas Letter

Gregory Bateson wrote that the major problems in the world are the result of the difference between how nature works and how people think. Mainstream economics still sees the economy and society as ultimately predictable and controllable (machines), although the repeated financial crises have shown how deeply flawed this view of the world is.

Luckily, during 2013, more scholars than ever before saw organizations as being more analogous to nature. There, it is not about predictions and control, but about perpetual co-creation, complex responsive processes and fundamental interdependence. Their claim is that we should study links and interactions. Many aspects of our social and economic world would start to look completely different from this complex network perspective.

2013 also brought us closer to understanding how work itself is changing.

Knowledge work is creative work we do in interaction. Unlike the business processes we know so well, where tangible inputs are acted on in some predictable, structured way and converted into outputs, the inputs and outputs of knowledge work are ideas, information and decisions. Even more, there are no predetermined task sequences that, if executed, would guarantee success. Knowledge work is characterized by variety and exception rather than routine. It is thus impossible to separate a knowledge process from its outcomes. Knowledge work is not “just work”, a means to doing something else! Knowledge work is about human beings being more intensely present. Thus, a business today needs to be human-centric – by definition.

The good news then, is the advances during 2013 in network theory and knowledge work practices. The bad news, as we now look ahead to 2014, is that today we are as far from being human-centric, as we have been for ages. As one example, people still tend to see their work and personal lives as two separate spheres. Although this conflict is widely recognized, it is seen as an individual challenge, a private responsibility to manage.

It is now time to challenge this and see the conflict as a systemic problem. It is a result of the factory logic, which saw human beings as controllable resources and interchangeable parts of the main thing, the production machinery. The context and logic of work are dramatically different today. In knowledge work we need to create an explicit, new connection between work and personal life. We talked earlier about balancing work and life. Here we are talking about connecting work and life in a new way, with a new agenda. Human beings are the main thing.

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 socially responsible firms, nothing else, and the management of those firms wants committed employees who come to work with enthusiasm and energy. Must we then choose between the goals of the people or the goals of the business, or can the two sides be connected? As we know, passion and commitment are best mobilized in response to personal aspirations, not financial rewards. We need a new agenda connecting people and businesses! The aim, however, is not to have a single set of common goals, but complementary goals and a co-created narrative for both!

Linking personal lives with corporate issues may seem like an unexpected, or even unnecessary connection. But if we don’t learn from network theory and knowledge work practices, and continue to deal with each area separately, both individuals and organizations will suffer. The lack of a connecting agenda may also be one of the big challenges facing the emerging post-industrial society.

We need to study the intersection of business strategy and personal narrative and use the new agenda to challenge our industrial age practices and flawed ways of thinking. Knowledge work needs whole human beings. People who are more fully present, people with responsibility and ownership. We are accustomed to taking work home, but what would the opposite be? This may be the next frontier of social business. More on this next year!

Christmas is a special time for family and friends. Perhaps the rest of the year can also be made very special through rethinking and reinventing some of the basic beliefs we have about work!

Happy New Year!

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Thank you Deborah Kolb, Lotte Bailyn, Paul Ormerod, Ken Gergen, Ralph Stacey, Joyce K Fletcher, Doug Griffin, Kim Weckström and Katri Saarikivi

More on the subject:

Futurice. A company that is already in the future. HBR: “To Optimize Talent Management, Question Everything” HBR: “The Ideas that Shaped Management in 2013” “Essential Zen Habits” “The Third Way of Work” “a way of working where the people doing the work matter as much as the work being done” “Bring Your Own Device is really Bring Your Own Mind” “work is you, you are the work. So what is the future of You?

The Internet of Things

Industrial era enterprises viewed customers through the lens of a fairly uniform set of features, leading to customers being seen as having relatively uniform needs. But even commodity products are always a bundle of use contexts, buying patterns, complementary goods and delivery options. Just because a product is a commodity doesn’t mean that customers can’t be diverse in the ways they use the product.

All use cases are somewhat the same and somewhat different. This means that different customers and processes use products that are manufactured in the same way, with the same product features, differently. It is contextual. Customers and the way products are used, are today understood to be active contributors to value creation. The word “consumption” really means value creation, not value destruction. Companies don’t create value for customers, the way the products are used creates value, more value or less value.

The parties explicitly or implicitly “help each other to help each other”. Value creation is a process of interaction. As the goal is to create more value together, a critically important element would be to implant context aware intelligence and interaction capability to a product.

The Internet of Things refers to embedded computing power and networking capability of the physical objects through the use of sensors, microprocessors and software that can collect, actuate and transmit data about the products and their environment. The gathered data can then be analyzed to optimize, develop and design products, processes and customer services. IoT is often about two new digital “layers” for all products: (1) an algorithmic layer and (2) a network layer.

The algorithmic layer “teaches” the customer and the product itself to create more value in a context-aware way, and accordingly teaches the maker the product to develop. As a result, the customer’s need set is expanded beyond the pre-set physical features of the offering. This changes the conceptual definition of the product and it becomes more complex. The more complex the product, the more opportunities there are for the maker to learn something that will later make a difference.

From a marketing standpoint, when a customer teaches the firm behind the product how she uses the product, what she wants or how she wants it, the customer and the firm are also cooperating on the sale of a product, changing the industrial approach to sales and marketing. The marketing and sales departments used to be the customer’s proxy, with the exclusive role of interpreting changing customer needs. Internet-based business necessarily transforms the marketing function and sales specialists by formally integrating the customer use case into every part of the organization. Thus the customer of tomorrow interacts with, and should influence, every process of the maker through the connected, intelligent products.

In the age of the Internet of Things, all products are software products. The value of the code, computing power and connectivity, may determine the value potential of a product more than the physical product itself. The effectiveness of an offering is related to how well it packages the learning from past activities, other use cases and from other similar products and how it increases the users options for value creation through network connections in the present. The offering actuates data via algorithmic smartness and through live presence (in the Internet). Connectivity also enables some functions of the product to exist outside the physical product in the product system, the cloud.

A product or a service should today be pictured as a node in a network with links to supplementary services and complementary features surrounding the product. The task today is to visualize the product in the broadest sense possible.

Visualizing these connections changes the strategic opportunity space dramatically. The study of isolated parts offers little help in understanding how connected parts work in combination and what emerges as the result of network connections. Every link and relationship serves as a model for what might be possible in the future. What new relational technologies are making possible for manufacturing industries is a much, much richer repertoire of business opportunities than what we were used to in a traditional industrial firm.

The ability to create value in a remarkably more efficient and resource-wise way corresponds to possibilities for interaction with relevant actors, information and products. If interdependent links are few, poor, or constraining, the activity and value potential will be limited.

The Internet of Things and technological intelligence in general, create transformative opportunities for more efficient and more sustainable, resource-wise, practices and also higher margins!

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Thank you Rafael Ramirez

More on the subject: Ford’s OpenXC. Bosch. Kari A. Hintikka (In Finnish)