Esko Kilpi on Interactive Value Creation

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

Tag: Design

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.

The two faces of digital transformation

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 include 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 framework of management today. Documents were born from the needs of a hierarchical, systemic approach to management. Top-down information was in the form of PowerPoint slide decks containing vision statements, Excel sheets with goals and Word documents explaining corporate procedures. Bottom-up information 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.

Computerized word processing is associated with terms such as 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.

Are you still asking why you can read a document but you are not allowed to use Facebook?

Instead of predictive process flows, creative work follows a different logic. Work is about community-based cognitive presence. But cognition is just part of the answer. Work tomorrow will be even more about social presence. To work and to manage is to participate in live conversations. A dramatic shift is needed in the mental framework of information, communication and work. Without this changing mindset, no efficient digital transformations can be made in the corporate world. Work is communication. Conversations and narratives are the new documents.

The first face of digital transformation is about new ways to be present and new ways to communicate

You cannot design live interaction. Conversations cannot be controlled. The only way to influence conversations is to take part in them. You cannot plan in the traditional sense of specifying a structure or a process and then implementing it. As many have experienced, communities seldom grow beyond the group that initiated the conversation, because they fail to attract enough participants. Many business communities also fall apart soon after their launch because they don’t have the energy to sustain themselves.

Communities, unlike business units need to continuously invite the interaction that makes them alive.

Community design is closer to iterative, creative learning than to traditional organizational design. Live communities reflect and redesign themselves throughout their life cycle. This is why design should always start with very light structures and very few elements.

What is also different is that a good community architecture invites many kinds of participation. We used to think that we should encourage all the community members to participate equally. Now we know that a large number of the network members are, and should be, peripheral. In a traditional meeting we would consider this type of participation half-hearted, but in a network a large percentage of the members are always peripheral and rarely contribute. Because the boundaries of a live community are always fluid, even those on the outer edges can become involved for a time as the focus shifts to their area of particular interest.

Because conversations and communities need to be alive to create value, we need an approach to management that appreciates passion, relationships and voluntary participation. Rather than focusing on accountability, community design should concentrate on energizing, enriching participation.

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 social side of digital transformation is to reconfigure agency in a way that brings relationships into the center. Success today is increasingly a result of skilful 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.

The customer of the industrial age was seen as a recipient of value, or a consumer of value. Enterprises also 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. Different customers use products that are manufactured in the same way, with the same product features, differently. This is why customers are today understood to be active contributors to value creation. Without their part, the value of the product could not exist.

Companies used to have no mechanisms for connecting with the end users in order to understand and influence what was going on. Digital technologies are now changing this. When a customer teaches a firm 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 into every part of the organization. The customer of tomorrow will interact with, and should influence, every process.

As the goal is to create more value together, a critically important new element is embedded computing, the integrated intelligence that is attached to the “things”, the offerings, the products.

It is about creating new software code. It is about two new digital layers for all products: (1) an algorithmic layer, which can mean sensors or location and usage data allowing totally new kinds of data analytics and (2) a network layer.

As the customer’s need set is expanded beyond the pre-set features of the physical offering through software, the definition of the product changes and becomes more complex. The more complex the product, the more opportunities there are for the company to learn something that will later make a difference.

The value of the code 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 and how it increases the users options for value creation. A product or a service should be pictured as a node in a network with links to other use cases, supplementary services and complementary features surrounding the product. The more relevant the links are considered to be, the richer the product will become. The task today is to visualize the product in the broadest sense possible.

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. What new relational technologies are making possible for manufacturing industries is a much, much richer repertoire of potential futures 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 other relevant parts and actors. If interdependent links are few, poor, or constraining, the activity and value potential will be limited.

Interestingly, the same principle applies both to things and to human beings!

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More: The product is the medium.

Designing for sociability

Interactive technologies like smartphones have been with us long enough to become familiar and find their present dominant designs. The explosion of the mobile Internet and location based services have added the potential of connectivity for objects, places and services in ways that very few companies still grasp. There is a new design dimension to everything: designing for sociability.

Most of us are aware of the direct effect we have on our friends and relatives. Our actions can make them happy or sad. But we very rarely consider that things we do or say can spread beyond the people we connect with. Conversely, our friends and family serve as conduits for us to be influenced by people we don’t know. We can be deeply and surprisingly affected by events we don’t take part in, that happen to people we don’t know.

It may not be appropriate to think about (digital) action only in terms of spatial metaphors: spaces and walls. Things happen and develop in time.

Focusing attention on the temporal processes of relating between people encourages us to take a special view to what interaction design might mean. Organizations are processes, not things. People are processes, not things. They are reproduced and transformed in interaction.

It is about how we continuously experience being together. The outcomes of organizational interaction are not within the powers of any single individual to choose. Both the outcomes and the dynamics producing the outcomes emerge in the very interaction! You cannot take away the uncertainty and the surprises.

When we shift the focus from spatial to temporal metaphors, the ethics of participation become more important than ever. The experience of being together results less from the technical and functional aspects of interaction and more from the purposes and values of the people taking part –  in ways that are very hard, or impossible to predict.

Perhaps temporal processes and iterative designs are the new dominant ways of designing for sociability.

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Ten Timeframes“. “The Design of Time“. “Dark Matter and Trojan Horses“. “An interview with Nicholas Felton” by Dan Hill

Designing a life

Apple design was not about Steven Jobs alone, but about Steven Jobs and the lead designer Jonathan Ive. The way I see it, their collaboration in Apple followed a bit the story of another design icon, Braun. The key people then were the industrialist Erwin Braun, his brother and the designer Dieter Rams.

Jonathan Ive has described his first encounter with a Dieter Rams design: “No part appeared to be either hidden or celebrated, just perfectly considered and appropriate in the hierarchy of the product’s details. You knew exactly what it was and how to use it.”

“Good design is as little design as possible” is one of Dieter Rams’ most famous phrases. The meaning behind it was that a well-designed product should be so good that it is barely noticeable. By leaving the unnecessary out, the essential factors rise to the foreground. The challenge is that the design may be simple but the path taken to create it highly complex.

Dieter Rams was one of the first people who made the distinction between consumers and users when he talked about the people at whom his designs were aimed. The term “consumer” corresponds to someone who uses things up. Consumption is then a process of reducing the value that is built into the product. Rams preferred to use the German term “Gebraucher”, which translates as someone who uses something. The consumer is turned into the modern notion of a value-creating customer. If the design is useful, if the product facilitates value creation, it makes sense that it lasts as long as possible. For Rams, the term “Verbraucher”, the consumer, had a negative meaning, implying waste and short-term thinking.

Another concept that Dieter Rams suggested was “re-design”. What he meant was to turn away from an addiction to novelty towards iterations, to improving what we already have.

“Less, but better” was the ultimate motto of Dieter Rams. The motto follows the idea of “less is more” of Mies van der Rohe and Peter Behrens. The original idea of Behrens was improvement through reduction, reducing quantity, waste, and excess and at the same time increasing quality, value and the effort to create a better world in a human centric way.

Dieter Rams formulated his ideas about good design into a set of principles to explain what makes a good product:

The first principle was: good design is innovative. Technological developments always offer new opportunities. Innovative design develops in collaboration with innovative technology.

The second principle: good design is about usefulness. A product is bought to be used. Design is about emphasizing usefulness whilst disregarding everything that could be a detraction from it.

The third principle: good design is beautiful. The aesthetic quality of a product is integral to functionality.

The fourth principle: good design makes a product understandable. At best it is self-explanatory.

The fifth principle: a good design is honest and does not try to make a product more innovative or valuable than it is.

The sixth principle: good designs are neither decorative nor independent works of art. Their design should leave room for interaction and the user’s self-expression.

The seventh principle: a good design lasts many years rather than being short-term and fashionable.

The eighth principle: it is about attention to detail. Nothing should be left to chance.

The ninth principle: good design makes an important contribution to the preservation of the environment. It minimizes waste and it minimizes visual and physical pollution.

The tenth principle: good design is “as little as possible”: it is about less but paradoxically at the same time about better, more valuable.

The principles of a good design may be the principles of a good life.

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Thank you Dieter Rams, Sophie Lovell, Marco Steinberg and his team at Sitra. Thank you also @moia

More: San Francisco Museum of Modern Art. The Museum of Modern Art New York. Helsinki Design Lab. Guy Kawasaki on Steve Jobs. Jonah Lehrer on Steve Jobs. John Sculley on Steve Jobs. Technology and social change. Fast Company: 50 Most Influential Designers in America.