Esko Kilpi on Interactive Value Creation

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

Tag: Social business

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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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 foundations of social business: pull communication

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In mainstream thinking, managers are understood as the prime originators of what happens in their businesses. The central concern is how the active manager/subject gets the passive follower/object to act in ways that reflect the manager’s perspective. Management continues to see communication in terms of influence and manipulation.

The social business view sees relations and communication as conversational processes of meaning making. It is a movement of thought on the basis of multiple perspectives that you invite or you pull. A person, when networking, would be subscribing to contextually relevant topics and people. Push transforms to pull.

Interaction starts with recognition. It is about granting attention to people and information and making room for them in our lives.  Leading and following in the traditional corporate sense have seen the leader making people follow him through motivation and rewards. The leader also decided who the followers should be.

When seen through the logic of social business and social tools, leading and following have a very different dynamic. Leading in this new business sense is not position-based, but recognition-based. People, the followers, decide who to follow and what topics to follow.  You pull information from someone you trust to be at the forefront in an area, which is temporarily meaningful for you.

Another huge difference from traditional management thinking is that because of the diversity of contexts people link to, there can never be just one source of information. Thus, an individual always has many topics and people that she follows. You might even claim that from the point of view taken here, it is highly problematic if a person only has one “leader”. It would mean attention blindness as a default state.

Pull communication is at best a process of active following, creative learning through observing and simulating desired practices. Leading on the other hand, is doing one’s work in a transparent, inspiring and reflective way.

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Thank you John Hagel, Stowe Boyd and Stephen Downes

More on the subject: Stowe Boyd.

Social business and the changing theory of management

A manager recently voiced his concerns: “Most 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 meet the challenges of the post-industrial world, this relationship needs to change. The workers changing their role is often seen as a matter of the extent to which the managers are willing to allow it and give up responsibility. In reality it is as much a matter of how much the workers are willing to develop their (management) capacity and take more and wider responsibility.

The dysfunctional relationship between managers and employees creates a self-fulfilling prophecy and a systemic failure in creative, knowledge-based work. 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 authority of management and productivity of work.

A few researchers have started to dispute the assumption that the present system of management is a fact of life that will always be with us. It may be time for us to question whether the recent problems created by bad management are isolated and should be tolerated. Or to ask whether the fault is in the system itself and not in individual managers?

Luckily, management theory and practice are slowly starting to catch up with the dramatic changes brought about by the loosely coupled, modular nature of creative work and the ideals of social business.

A social business does not behave in the way our dominant management thinking assumes. What is it, then, that has changed?

Organizations are always assemblies of interacting people. The reason for an organization to exist is to simplify, support, and enrich interaction.

At present, there are three types of organizational cultures depending on the type of management and the alternative mechanisms for the coordination of tasks. The different task interdependencies accordingly place different and increasing burdens on our communication practices .

I call these the administrative culture, the industrial culture and the creative, social culture.

The administrative culture, which is found in most governmental organizations is about function-specific independent activities. Two functions or tasks are independent if it is believed that they don’t affect each other. The most important communication exists between the employer and the employee, the manager and the worker. The principle is that the execution of two independent tasks does not require communication between the tasks. The architecture consists of black boxes that are not coupled directly, but in an indirect way by higher-level managers, who coordinate the work. Work as interaction is mainly communication between hierarchical levels.

The industrial culture of process-based organizations is about dependent and sequential activities. Manufacturing work is about dependent tasks. Being dependent means that the output of one task is the input of another. The reverse cannot normally take place. In sequential dependence, those performing the following task must comply with the constraints imposed by the execution of the preceding task. Since the process architecture is typically quite clear, management coordination is mostly about measuring and controlling whether the execution conforms to the planned requirements. The architecture consists of tightly coupled tasks and predetermined, repeating activities. Work as interaction is a sequential process with one-way signals.

A creative, social culture is different. It is about loose couplings and modularity, about interdependent people and interdependent tasks. Two people/tasks are interdependent if they affect each another mutually and in parallel. Interdependent tasks call for peer-level responsiveness and coordination by mutual adjustments, not coordination by an outside party such as a manager.

Most of the information that is relevant will be discovered and created during the execution of the task, not before. As a result it is not always possible for a manager and a worker to agree on a coherent approach in advance. Nor is it normally possible to follow a predetermined process map.

The basic unit of corporate information in creative, social work is not content in the form of documents but interaction in the form of conversations. Knowledge is perpetually constructed in interaction. Work as interaction is complex, situational communication between loosely connected nodes of the network! The structure of work resembles the structure of Internet.

The three cultures and corresponding architectures 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 fixed or not. In most creative work, and always in a social business, any node in the network should be able to communicate with any other node on the basis of contextual interdependence and creative participative engagement.

As organizations want to be more creative and social, the focus of management theory should shift towards understanding participative, self-organizing responsibility and the equality of peers. It is a systemic change, much more than just kicking out the bad managers and inviting new, better managers in. It is not about hierarchies vs. networks, but about how all people want to be present and how all people want to communicate in a way that was earlier reserved only for the people we called managers.

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Eric Brynjolfsson video on TED. Steven Johnson video on peer networks. Gary Hamel interview.

Business and complexity

Up to now, we have seen the world around us as systems that, we thought, could be described and understood by identifying rational causal links between things: if I choose X, then it will lead to Y. If, on the other hand, I choose A, it will lead to B. We are accustomed to drawing boxes and arrows between those boxes. We try to model the world as predictable processes based on knowing how things are and how they will be. We want to be certain, and we think we are.

Management thinking is based on the sciences of certainty. The whole system of strategic choice, goal setting and choosing actions to reach the given goals in a controlled way depends on predictability. The problem is that this familiar causal foundation cannot explain the reality we face. Almost daily, we experience the inability of leaders to choose what happens to them, to their organizations – or to their countries. Things may appear orderly over time, but are inherently unpredictable. We live in a complex world.

Complex systems are, as their name implies, hard to understand. Social systems, like organizations consisting of people, are accordingly complex and hard to understand. There is no linearity in the world of human beings. There are no arrows and people are not boxes, or fit inside of boxes. This is why our thinking needs to develop from the sciences of certainty to something more applicable, the sciences of uncertainty, the sciences of complexity.

Complexity refers to a pattern, a movement in time that is, at the same time, predictable and unpredictable, knowable and unknowable. Chaos theory explains how these patterns form. A parameter might be the flow of information in the system. At low rates, meaning no input or more of the same input, the system moves forward displaying a repetitive, stuck behavior. At higher rates and more diversity the pattern changes. At very high rates the system displays a totally random behavior. The pattern is highly unstable. However, there is a level between repetition/stability and randomness/instability. This level where simultaneous coherence and novelty are experienced is called the edge of chaos.

Classical physics took individual entities and their separate movement (trajectories) as the unit of analysis in the same way we have analyzed and rewarded individuals. Henri Poincaré was the first scientist to find that there are two distinct kinds of energy. The first was the kinetic energy in the movement of the particle itself. The second was the energy arising from the interaction between particles. When this second energy is not there, the system is in a state of non-dynamism. When there is interactive energy, the system is dynamic and capable of novelty and renewal.

Interaction creates resonance between the particles. Resonance is the result of coupling the frequencies of particles leading to an increase in the amplitude. Resonance makes it impossible to identify individual movement in interactive environments because the individual’s trajectory depends more on the resonance with others than on the kinetic energy contained by the individual itself.

We are the result of our interaction. We are our relations.

The conclusions are important for us: firstly, novelty always emerges in a radically unpredictable way. The smallest overlooked variable or the tiniest change can escalate by non-linear iterations into a major transformative change in the later life of the system.

Secondly, the patterns are not caused by competitive selection or independent choices made by independent agents. Instead, what is happening happens in interaction, not by chance or by choice, but as a result of the interaction itself.

The new social technologies have the potential to influence connectivity and interaction as much as the sciences of complexity are going to influence our thinking. The task today is to understand what both social business and complexity mean. The next management paradigm is going to be based on those two, at the same time.

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John Hagel on “harnessing the power of randomness” and “resilience

Communication and cognition

Economic growth is about value added. In manufacturing adding value was a transformation process from physical raw materials to physical goods. Economic growth is still today about value added. The difference is that the generic, homogeneous raw materials of the industrial era are now unique ideas and the transformation process is an iterative, interactive, non-linear movement, rather than a linear, sequential chain of acts.

The worlds of manufacturing-based added value and creativity-based added value require very different skills. Before the Internet and smart devices, most professional occupations required individual competencies that in most cases had accumulated over years. This experience base, often called tacit knowledge, was used to retrieve answers from memory and to independently solve situations arising at work. Knowledge was situated in the individual. In order to help individuals cope with the challenges of everyday life, individual competencies needed to be developed. This is why our whole education system is still based on independent individuals learning and, as a consequence,  knowing.

The cognitive load of work has increased as a result of manufacturing giving way to creative, knowledge-intensive work. The content of work is changing from repetitive practices to contextual, creative practices. This makes the individual experience base, by default, too narrow a starting point for efficient work. Experiences can be a huge asset but experiences can also be a liability, creating recurrence where there should be novelty and innovation.

Creative work is not performed by independent individuals but by interdependent people in interaction. A new way to understanding work and competencies is unfolding: knowledge that used to be understood as the internal property of an individual is seen as networked communication. This requires us to learn new ways of talking about education and competencies. What is also needed is to unlearn the reductionist organizing principles of industrial work. Work is communication and the network is the amplifier of creativity.

People have always networked. Scholars depended largely on correspondence networks for the exchange of ideas before the time of the universities. These communities, known as the “Republic of Letters” were the social media of the era, following the communication patterns of today astonishingly closely. The better-networked scientist was often the better scientist. The better-networked worker is today usually the better worker. The better-networked student in the future is always the better student.

The main difference from the time of the Republic of Letters is the efficiency of our tools for communication, meaning thinking together. A “man of letters” may today be a man of tweets, blog posts and Facebook, but the principle is the same: the size and quality of the network matters. What matters even more than the network, is networking, the way we are present and interact. It is time to acknowledge the inherently creative commons nature of thinking, creativity and economic growth.

Life is a temporal pattern of emotional and intellectual interaction. We are our interaction.

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Noam Chomsky interview.

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.

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More: the trend from routine to nonroutine work.