Esko Kilpi on Interactive Value Creation

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

Tag: Paul Graham

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.


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

Management at the time of social media

A manager recently voiced his concerns to me: “Many employees prefer being told what to do. They are willing to accept being treated like children in exchange for reduced stress. They are also willing to obey authority in exchange for job security.”

That is the way we have seen it: managers inspire, motivate and control employees who need to be inspired, motivated and controlled. These dynamics create the system of management and justify its continuation. If we want to change the system, both parties would need to transform themselves simultaneously.

The workers changing their role is often seen as a matter of the extent to which the managers are willing to give up responsibility. In reality it is as much a matter of how much the workers are willing to grow their capacity and take responsibility. The problem is that most management education is targeted at managers, not at workers. When employees are not given opportunities to develop and act responsibly, they are in the worst case infantilized and stripped of initiative. They lose their capacity for self-control and self-management. The inability of employees to act responsibly then creates a justification for managers to do so for them.

Historians claim that management emerged as a profession as a result of the rise of slaves in agricultural labour. As the number of slaves increased, the owners created a privileged class of foremen/managers drawn from the ranks of the slaves. The task was to control them and to make sure they did not run away.

The number of managers grew during the time of the Babylonian Empire. They were also mentioned in the Hammurabi code of laws. Aristotle made reference to the need for management not only to control slaves, but in the household to control domestic servants, animals and women.

The tasks of management evolved into motivational issues as a result of the steady decline in the motivation and loyalty of slaves. Successful motivation was typically built on fear together with dreams of upward mobility and sometimes identification with the owners. From this perspective, management and involuntary work always belonged together. What made employees slaves was the fact that they did not have a voice in their work process. The place and time of work was forced on them. They were not viewed as human beings, but as an instrumental resource. One might claim that slavery, in this sense, has not died. It lives on in new clothes.

A few researchers have started to dispute the assumption that management is a fact of life that will always be with us. Perhaps it is time for us to question whether the recent problems created by bad management are isolated and occasional and should be tolerated. Perhaps the problem is a much larger systemic challenge than just kicking out the bad manager and inviting a new, better manager in. Perhaps the problem is not at all employee compliance or management incompetence. What if it is the system itself that is problematic, as it separates employees from responsibility and leaves organizations unable to fully utilize the potential of human beings.

The dysfunctional relationship between managers and employees creates a self-fulfilling prophecy and a systemic failure. Both sides are trapped in a negative, self-reinforcing loop that they just want to get out of as soon as retirement is possible.

What is tragic is that neither side normally understands the predictability of what is going on. The pattern is a mutually reinforcing self-destructive process that manifests itself as a steady decline in the power and authority of management. The process is accelerating: young professionals don’t want to be managers any more.

Luckily management theory and practice are slowly starting to catch up with the dramatic changes brought about by the ideas economy, cloud computing, interactive, task-based work, Internet-based connectivity and smart devices.

For the first time in history it is not profitable to simply think that managers manage and workers work. Creativity and the need for intrinsic inspiration and risk taking demand individual responsibility and rich interaction between interdependent, equal peers. Top-down, one-way communication or separating thinking and acting don’t produce results any more.

In the past we located intention, or thought, apart from or before the action. We assumed a world of cause and effect where the outcomes of our actions can be known before actions are taken. Now we know that intentions arise as much in the actions and outcomes cannot be fully known in advance. This is why a new, different, view of management is required to serve the creative, learning-intensive economy.

It is time to rethink the principle that individual managers are blamed when things go wrong and rewarded when things go right. The rest of us used to be allocated to passive roles when it comes to responsibility, coordination of actions and communication.

That has changed forever!

Thank you Paul Graham, Doug Griffin, Mary Parker-Follett, Kenneth Cloke, Kenneth Gergen, Joan Goldsmith and Riel Miller


Gary Hamel video on this topic

The changing media ecosystem: from channels to contexts

The Internet is disaggregating media content and media logistics. To get to the desired content, you don’t need to go through a channel or subscribe to a newspaper. The number of people going to a newspaper or a TV channel is going down because more and more people don’t get any value from this detour, turning the channel into an extra transaction cost as Paul Graham has pointed out. In this situation what you do, is go straight to the source following the easiest and most direct route, which is what all kids do. However, the traditional role of the channel was not only delivery, but to charge for the content and pay the authors. This creates the problems we have today.

For decades, media companies enjoyed a geographically defined monopoly over the ad market. The iPad and the efficient Apple sales people prolonged the situation and supported the false idea of a digital channel. This is still evident as newspapers are trying to cling to their earnings models, and now try to force customers back to outdated modes of user experience.

The earnings model crisis has been emphasized because of the criticism of the inefficiency of the sales funnel. Advertisers claim that they have overpaid the channels and been under served by them. So is the challenge of the Internet really about people not wanting to pay for content, or what is going on?

The future-oriented alternative would be following what young people do and learning from that. The information related habits of digitally native people are much more efficient and create much more value than the models we were forced to in the past.

There is a fundamental change taking place that is perhaps not fully understood yet.  Aggregation, meaning the decisions on what to include and what to exclude, why and when, is changing from the server-side to the client-side, typically to the smartphone and the user. The context the customer is in matters more than who the customer is. The server-side aggregation/editorial process was largely about decisions on servicing defined customer segments. But because what really matters is the context, the situation the customer is in, the reader/viewer is becoming the editor and wants to decide for herself what to bring together in a bundle. This means that the buyer, not the seller, makes the editorial decisions. Again, why then pay for something that you do yourself?

The Internet is not about channels and sites but contexts and purposes. The concept of a digital channel is not only unhelpful but wrong. For media organizations this means that the unit of competition is changing. For example, newspapers don’t only compete against other newspapers. The articles about a given topic are in competition with writers outside of channels writing about the same issue. Newspaper articles compete against the best stories on the Web and newspaper staff members compete against the best writers on the Net.

People are willing to pay for content, but it has to be good content. The relevance of an article is easy to measure on the Net: how often is it recommended or linked to? Channels can turn into a network also for newspapers, radio and TV. “Social Proof” is the new content filter and an example of future media logistics. Why pay for content of lesser quality when a recommended alternative is available, and often much easier, with fewer clicks, and for free?

The Internet makes the traditional, institutional model of journalism harder to sustain but not impossible. However, if media organizations don’t see what is happening around them, and don’t change their content and channel based focus towards understanding the purposes of people and contexts people find themselves in, we are going to see an irreversible shift from the old types of institutions to a very different information ecosystem.


Thank you Paul Graham, Ralf Blomqvist and Clay Shirky