Esko Kilpi on Interactive Value Creation

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

Tag: business

The changing system of skills and responsibilities

We have so far followed a very crude pyramid-like classification in work: skilled work was what highly educated individuals would do. Semi-skilled work was possible for trained people. Unspecified labor was what almost everybody could do after onboarding. This classification of work led to the unintended consequence that the most economical design of mass-era organizations reduces the amount of skilled work and increases the amount of less-skilled work, thus reducing costs. A bigger problem than low-skilled people is the low-skilled occupations we have created.

Classification of work as different bundles of skills and responsibility has been very easy to grasp and easy to follow in compensation schemes. More skills and/or more responsibility — more pay. Managers, who are responsible people, are given responsibilities — and higher wages. Workers are given less demanding tasks, less responsibility — and lower wages. The argument behind is a circular, self-fulfilling prophecy. People who are not made responsible tend to avoid responsibilities and therefore never become responsible. Skilled people acquire more skills because of the higher cognitive demands of their work. Less-skilled work roles give less opportunities for learning, leading in fact to a slow but certain de-skilling. This is something we see in many industries today. The phenomena and the causes of the problem become the same.

The organizational system of skills and responsibilities has been made on the assumption that all that has to be done can be known and managed with efficiency and insight. In mass-production, work corresponds mainly with what has been planned and budgeted. But today, in more contextual problem solving, work corresponds mainly with complex engagements with the customers.

The focus changes from generic skills to contextual presence, empathy and interaction.

The most modern definition of work is “an exchange in which the participants benefit from the interaction”. Interestingly, cooperation is also described as “an exchange in which the participants benefit from the interaction”.

The technological environment of work has changed fundamentally, but we haven’t yet developed a new mode of economic space design, neither have we escaped the pull of the traditional industrial system. Our relations at work are still asymmetrical involving status differences based on systems of responsibility and systems of skills. This inbuilt systemic fault generates increasing social distance and inequality, as we have now seen.

Due to the variety of contexts people work in, work requires interpretation, exploration and negotiation. The interpreter with the best situational awareness is the worker, working together with the customer, not a manager. The relations are built on symmetry.

What defines most problems today is that they are not isolated and independent. To solve them, a person has to think not only about what he believes the right answer is, but also about what other people think the right answers might be. Work, then, is exploration both what comes to defining the problems and finding the solutions. Again, the relations need to be based on symmetry.

Most decision makers are still unaware of the implications of the complex, responsive properties of the world we live in. Enterprises are not organized to facilitate interactions, only the actions of parts taken separately. Even more, compensation structures normally reward improving the actions of parts, not their interactions. This is why conventional jobs are increasingly inhibiting flexibility and contextual responses to new problem definitions or new technological solutions to old problems.

To succeed in the new economic spaces we need symmetric relationships, open assets and very open organizations.

When customers are identified as individuals in different use contexts, also the sales process is in fact 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 (explicit) skills as we still know them. The decisive thing was your individual knowledge and individual education. Today, in new economic spaces you work more from your presence and network than your skills. Work is interaction.

The really big objective of digital transformation is to reconfigure agency in a way that brings these relationships into the center. Success today is increasingly a result of skillful presence: it is about empathy and interaction. Through new technologies and ubiquitous connectivity, we have totally new opportunities for participation and communication in the new economic spaces

These economic spaces are about interdependent individuals and groups defining and solving problems in shared contexts utilizing smart contracts.

Individuals competing on job markets may be one of the historic mistakes we have inherited from the early industrial era. It made sense a very long time ago but now we should think differently.

Interaction creates capability beyond individuals. Cooperative performance can be more than what could ever be predicted just by looking at the performance of the parties involved. It is not about individual skills any more. Skills, performance and resilience are emergent properties of cooperative interaction. They are not attributable to any individuals. Higher performance is more a result from the quality of interaction than the quantity of training and education.

Networks provide problem-solving capability that results directly from the richness of communication and the amount of connectivity. What happens in interaction between the parts creates a reality that cannot be seen in the parts or even seen in all of the parts.

This is why it does not make sense any more to talk about skill levels and just managers being responsible. Either you are present in a relevant way or not. Neither can responsibility be somewhere else. You can only be present and contribute if you are response able.

Credits Nick Hanauer and Katri Saarikivi

The core of the social business

We are in the midst of a shift from the industrial system of supply and demand to social, co-production models. 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 and personalized, but they can be starting points for someone else to create value.

Creative, connected learning is at the core of the social business.

It is not learning related to meeting the requirements set by someone else, but learning that is motivated and expressed through personal, situational needs. As a result, a new meaning of education and learning is emerging.

Business, more than government, is driving the changes in education that are required for the knowledge-based economy. The government-run education systems are lagging behind the transformation in learning that is evolving outside schools. Businesses are even coming to bear the primary responsibility for the kind of education and learning that is necessary for a country to remain competitive in the future.

Gutenberg’s printing press broke the monopoly of the church on what was taught and by whom. Today’s social technologies are doing the same to schools and universities. The learners decide what is taught and by whom. The new technologies are perhaps not making teachers and schools obsolete, but are definitively redefining their roles and breaking local monopolies.

A learning business is not the same as the learning organization made popular by Peter Senge and many others. It is not about systems thinking, or learning how to use technologies and data.

A learning business is one that leverages the economic value of knowledge.

Producing more value than is used is the characteristic of productivity. True learning businesses must therefore be teaching businesses. This means communicating to customers the additional value of learning in the context of the services and products offered. Learners are teachers and teachers are learners. Creating learning connections is more valuable than creating learning content.

Inside an organization, all people must take responsibility for information and communication. Each person needs to take responsibility for his or her own active contribution. Everyone needs to learn to ask three questions continuously. What information do I need? What information do I owe others? With whom should I communicate?

Each level of management and each process step is a relay. That was OK when the speed of learning was not an issue. It was also OK that businesses were hierarchy-based, because transparency was not possible. In a learning business each relay means cutting the potential for learning in half and doubling the noise. Hierarchy used to speed things up, now it slows down.

The most important principle of a social, learning business is to build the organization around information and communication instead of around a hierarchy.

There is a debate going on that focuses on the distinction between ethical and practical education. There are people who emphasize moral values and those who underline the practical reasons for education. There are voices that are concerned that business-driven learning would mean less moral and ethical education than under government-led learning. But there are also people who stress that in order for any business to thrive in the new economy, it needs to show a new, intense and honest interest in values and sustainable ethics. Some people I know inside the church have been surprised that leading corporations dedicate more time to education about values than they, or schools do.

We have moved to a new economy, but we have yet to develop a new educational paradigm.

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Andrew Ng on the importance of universal access to education. Clayton Christensen on disrupting the education industry. Joi Ito on formal vs. informal education. Clay Shirky on social reading. Paul Graham: “Large organizations will start to do worse now because for the first time in history they are no longer getting the best people

The ten commandments of digital work

Lately I have had a series of conversations with a group of leaders of global high-tech companies. It became very clear during my conversations that their vocabulary reflected a fresh, new way of thinking about work. The executives emphasized that the key to success in the new digital economy is likely to be a new position for knowledge professionals and a wide social acceptance of more sustainable values.

What could this new position look like?

Once acquired, knowledge and skills that are specialized to a given enterprise are assets that are at risk in the very same way that financial assets are at risk. If one can’t continue for some reason, the value of context-specific knowledge and competencies may be much lower somewhere else. Human capital then follows very much the same logic as financial capital and should be treated accordingly.

There is, however, one major difference. Human capital is by definition always social and contextual. The capabilities of the members of a team are worth more together than when applied alone. With context-specific human capital, the productivity of a particular individual depends not just on being part of a community, but on being part of a particular group engaged in a particular task. The contextual and social aspects of business matter much more than we have understood.

The ten principles of digital work, the new standards, that the leaders acknowledged:

  1. informed free choice, rather than compliance, is the basis for decisions
  2. active participation, rather than passively accepting instructions, is the basis of growth and development
  3. work activities are carried out within a framework of personal responsibility and goals for self-direction rather than direction from outside
  4. activities are carried out in a transparent way with the goal of distributing the cognitive load of work rather than work being based on reductionist principles and social isolation
  5. one is responsible for one’s own actions rather than being responsible to someone else
  6. a worker is engaging in complex, responsive activities with others in contrast with engaging in closed repetitions of the same activity
  7. the network, rather than offices or organizational hierarchies, is the main architecture of work
  8. productivity is a result of creative learning rather than doing more of the same. Increasing the quality and speed of learning matter more than increasing the quantitative output of work
  9. knowledge work can be understood as investments of human capital following the same logic we have used to understand financial investments. Workers should share the responsibilities and possible upsides that used to belong only to the investors of financial capital.
  10. knowledge work is about interdependent people in interaction. Intelligence, competence and learning are not any more about the attributes and qualities of individuals but about the attributes and quality of interaction

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The impact of technology on industrial jobs.