Esko Kilpi on Interactive Value Creation

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

Tag: Internet-based business

Bitcoin represents a novel form of organization

The Internet can be seen as the combination of two much earlier innovations. The first was the telegraph, which allowed information to be transmitted electronically. With the advent of the telegraph, people could communicate instantaneously across long distances, which was unimaginable before that time.

The second innovation was the computer, which allowed information to be processed and stored with unimaginable speed and almost limitless storage capacity. Both the telegraph and the computer solved huge problems by themselves, but combining the two facilitated truly new and transformative social innovations that led to the network era we now live.

Our present understanding of the logic of networks is largely a result of the work of Duncan Watts and Steve Strogatz, who connected the research done by Mark Granovetter and Stanley Milgram.

Following their findings, let’s think of people instead of computers and links of acquaintance as telegraph lines connecting them. This social world has not been designed by anyone. It has evolved through countless connections between chance and choice: people meeting people. Our social network is neither ordered nor random, but something in-between.

The potential of the network we are part of is mostly invisible to us in our ordinary social lives. We can only see as far as those to whom we are directly linked. We do not normally know, or think about, the people our friends know. But in a network-science sense these people are important to us. The friends of our friends act as ties that sew the larger social network together. They are the shortcuts to people far away. They make the world small for us. You typically have strong links to family members, friends and co-workers. The weak links, the connections of our connections, and the people we have met only once or meet very seldom, are bridges between worlds. An example of this may be the person from New Zealand whom you met at a conference a few years ago. Without that link you might not be connected to anyone in New Zealand. But because of it, you are linked in two steps to his friends and in three steps to everyone they know. This is called a small-world network.

Order, design, strong links and local proximity have been the leading principles of the world of work, but what if easier and more valuable work were in effect based on dynamic connections and interaction with people in the larger network? Finding these people is now possible with the help of digital social networks. The small-world geometry offers a way to see order and design in these apparently disordered networks. Digital, purpose-driven proximity may replace local proximity in the future world of work.

But the way we work needs to change. As people do their own thing, they also need to act as links for others. That is the new role in all work. People need to be fluent in connecting, curating and re-publishing.

What kind of technology would enable this to happen? I don’t believe the future of digital work is built on platforms like Facebook or LinkedIn.

The “Blockchain”, the engine on which Bitcoin is built, is a new distributed consensus/authority system that allows transactions, or other data, to be securely stored and verified without any centralized authority at all, because the entire network validates them. Those transactions don’t have to be financial and the data doesn’t have to be money.

The future of work may be built on connecting small-world networks and the Blockchain technology. The network is then the market and commons for exploration, coordination and value creation without any central authority. The importance of Bitcoin may not lie in digital currency. It represents a novel form of network-based organization.

This kind of work, I think, may be unimaginable today.


Thank you Rob Wile, Mark Buchanan and Mike Hearn

More: The future of Blockchain.

Changing the way we work together

Many organizations are trying to ease into the social business environment. They take parts of the agenda in piecemeal fashion following an “easy steps” logic. Often this, in the end, means some additional communication tools inside the organization, or additional content through some additional new channels for customers. Nothing really changes what comes to the way people work together.

The way in which companies organize themselves and define their boundaries has essentially been determined by the way in which communication between people is planned and access to information is designed. The classic organizational structure was based on the assumption that a manager or worker could have rich interaction and exchange of information only with a limited number of predetermined people.

Our mainstream management theories are derived from the era of the production of tangible goods and high-cost/low-quality 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 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 largely owned by the workers, the individuals, who themselves own the smart devices, the machines of work.

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. The logic of ubiquitous communication makes it possible for the first time to distribute work to where the willing people are, no matter where on the globe they may be. Knowledge work is not about jobs, but about tasks and interdependence between people. You don’t need to be present in a factory, or an office, but you need to connect with, and be present for other people.

Work is communication and cooperation, and there are so many new ways to do that.

We are living in a world that is built on the centrality of information and radically distributed contributions. As a result, the organization is not a given entity or structure, but an ongoing process of organizing. The accumulating failures of attempts at organizational resilience can be traced to the fundamental but mistaken assumption that organizations are vertical and/or horizontal arrangements, that guide and, as a consequence, limit interaction.

Information is the power plant that has the ability to change the organization. When information is transparent, people can organize effectively around changes and differences, around customers and new opportunities. Different people see different things and new interdependencies are created, thus changing the organization.  The easier the access that people have to one another and to information is, the more possibilities there are.

Rather than thinking of organization as an imposed structure, plan or design, organization arises from the interactions of interdependent individuals who need to come together. Sometimes people stay together for a long time, sometimes for a very, very short time. This is because any higher-value activity involves complementary and parallel contributions from more than one person, team, function, or a firm.

The focus of industrial management was on 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.

What comes to the productivity of work, these may be the most important points on the social business agenda. The really big objective of social business is to reconfigure agency in a way that brings relationships into the center.

Success today is increasingly a result from 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.


More: the trend from routine to nonroutine work.

People, purposes and participation

The quantity and quality of knowledge workers output is correlated with the amount of well-being they get form their work. For this reason the quality of working life has received increased attention lately. We were asked to study well-being in the context of knowledge-work and social business technologies.

The most important thing that came up was that participation in relevant decision-making needs to be increased at the same time as social technologies are introduced. If this is not done successfully, other changes, such as improving generic communication practices, are only temporary and less effective. At every level of the organization, the quality of a person’s working life is proportional to that person’s participation, first and foremost, in the making of decisions by which she or he is affected.

The need for such participation is unsurprisingly also related to the age, competence and educational level of the individual. The younger the worker is, the greater the need to participate is.

Managers cannot be successful anymore unless they understand the difference between “power over people” and “power with people”. Power over was seen as the ability to get people to do things they would not do voluntarily. It is thinking that is based on the outdated and false motivational theory of rewards and punishments.

Everybody we interviewed recognized examples of decisions that were diluted or compromised because those who had to do the implementing did not buy into the rulings. Educated people do not respond well to commands or to somebody who tries to exercise dominance through the power their position gives them. Hierarchy does not work that well any more. Managers must depend on the willingness of their subordinates to act voluntarily. Managers who want authority for its own sake do not fit well into knowledge-based organizations.

Power with is different. It is the ability to connect people, purposes and participation. It is about co-creation and cooperation: doing meaningful things, with meaningful people, in meaningful ways.

In industrial settings, and in principal–agent hierarchy structures in general, this did not matter. Subordinates were dependent on the managers, never the other way round. As a consequence many managers now lack support from their subordinates resulting in low productivity, dismal creativity and slow learning.

Just as subordinates can make their managers look bad, they can also make them look good. This means that managers cannot hold their positions without the approval of both their bosses and their subordinates.

In modern work, leaders create the followers, and, at the same time, followers create the leaders. It is about power with. Equality and efficiency are not opposites; in fact, they become more and more closely connected as the educational and competence level of the workforce increases and as knowledge work becomes the norm.

The social revolution continues. This revolution, as many before it, may be about equality.


On power and status. “Power over and power with“.