Esko Kilpi on Interactive Value Creation

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

Tag: Social Media Strategy

A relational view to management

Gregory Bateson argued that humankind’s fall from grace began through separations such as separating the self from the other, separating thought from emotion, separating the sacred from the secular and separating the subject from the object.

Today, there is new thinking that is based on the very latest findings in the sciences of complexity and sociology. These new approaches define a participative, relational perspective: we should speak about subjects interacting with others in the co-evolution of a jointly constructed reality.

In mainstream thinking, managers are understood as the prime originators of what happens in their businesses. The central concern is how the manager/subject gets the follower/object to act in ways that reflect the manager’s perspective. Management continues to see relationships in terms of influence and manipulation. The manager’s perspective is taken for granted in terms of what the facts are, and what is true or false. Employees are treated as instruments. They are less active and less knowledgeable although they can be sources of information for the manager.

In identifying management with science, two concepts were imported, which we now take so much for granted that we hardly notice them. There is the assumption of the autonomous, rational individual which corresponds with the atomistic view of society and the objectification of nature. The second concept that is imported into management is that of the objective observer who identifies causality and tests hypotheses like visions and goals based on these identifications. The objective observer is detached from the phenomena being studied. When this idea is imported into theories of organization, the manager is the objective observer who is supposed to act upon rationally formulated hypotheses about organizational success.

These assumptions have created the still prevailing subject-object understanding of organizational relationships. When a person is understood as a knowing individual she is being viewed as a subject, distinct from others, the objects. Relations are considered from the point of view of the subject and are instrumental in nature.

The social business/relational perspective to management views life and knowing from a different point of view: knowledge is socially constructed. Knowledge is not stuff accumulated and stored by individuals. Contextual interpretation takes the place of the objective fact. When knowledge and truth are viewed as social and temporary then constructions of what we call understanding or knowledge are always a part of what is going on.

Whether the social process is called leadership, management, networking, or communication, knowing is an ongoing process of relating. Social media best produce connectedness and interdependence as processes that construct collective authority and responsibility. Social media are most meaningful when giving voice to multiple perspectives, making it possible to seek out, recognize and respect differences as different but equal. Accordingly, reality in science is no longer viewed as a singular fact of nature but as multiple and socially constructed as David Weinberger writes in his newest book: “Too Big to Know”.

In a relational model identity is constructed from being in relationships, being connected, as contrasted with the mainstream view of identity through separation. Knowledge of self and the other thus becomes viewed as co-constructed.

The relational view sees networking and social media as conversational processes of meaning making. Here, people who network may be regarded as seeking to understand the meanings of the others’ contributions. To do so, they would have to give up the assumption that they and others necessarily mean the same thing by the same terms or expressions. A manager, when networking, would be asking questions that invite others to make explicit what is usually left tacit. In the end it is a process of movement of thought on the basis of multiple perspectives.

For Bateson and many others, re-engagement is essential for recovering wisdom and long-term vitality. This requires re-connecting with participative ways of knowing, with others as part of the self.


Thank you Gregory Bateson, Doug Griffin, Ralph Stacey, Kenneth Gergen, David Weinberger and Katri Saarikivi

Networked thoughts and networked emotions

Since our individual views are always biased and since we cannot experience everything ourselves, other people become the co-creators of information, experience and meaning. Relationships, connections with others, create a networked way of knowing.

Because of more and more specialized, narrow skill sets, new ways of doing things with new definitions are emerging. Nobody can be successful without supporting contributions. One new role definition coming from Barry Nalebuff and Adam Brandenburger is a “complementor”. A complementor is not the same as a supplier. The connection is based on a non-hierarchic, voluntary network relationship, not the hierarchic value chain.

Complementary contributions may be the most important explanation of business success today. A classic example of complements is computer hardware and computer software. The greatest hardware engineers are in dire straits without the greatest software programmers. Though the idea of complements is most apparent in ICT, the principle is universal: you can never have in-house all the specialized skills you need.

A complement to an offering is another offering that makes it more attractive. People value sausages more when they have mustard. Because work is specialized, it does not pay to try to make both. The new strategic imperative is to identify complementors and to be inviting to them. To be competitive, is to be selfishly collaborative.

In the world of complementary competences, information becomes a process of continuous iteration and networked negotiation. Information networks are the architecture of work and a valuable, shared resource making the interactive movement of thought possible. These networks are the new commons.

Sociologists call such shared resources public goods. A private good is one that the owners can exclude others from using. Private has been valuable and public without much value during the era of scarcity economics. This is now changing in a dramatic way. On the new commons people with many ties and many complementors are better informed and have more signaling power, while those outside the commons and with few ties may be left behind. This may even be the new digital divide.

Network inequality creates and reinforces inequality of opportunity.

Emotional contagion is a fact of life. It means that not only information but our moods and even physical health are created in interaction with other people. We tilt either to the positive or tilt to the negative as a result of our relations, and the further relations, the people that we relate with have. It is a chain of contagion that goes far beyond the horizon.

We could, in theory, make an inventory that evaluates the “richness” of our relationships. My friend Marcial Losada has made breakthrough findings on interaction. The thought-provoking model he has created, which is based on decades of research, has three variables and three parameters. The variables are inquiry-advocacy, positivity-negativity, and other-self or external-internal orientation. The three parameters are connectivity, which is the critical control parameter, negativity bias and resistance to change.

According to Marcial, people are most successful when they are well connected, positive, and are able to balance external vs. internal orientation as well as inquiry vs. advocacy. John Gottman on the other hand, has found that in an enduring, happy relationship, a couple experience five times more positivity than negativity in interaction. If we take the work of Nalebuff/Brandenburger, Losada and Gottman seriously, as we should, it would mean that there is a golden mean for any ongoing relationship in our lives.

Organizations are patterns of relating between people. The critical success factor for a social business is to understand that we share feelings much more than we share information.


Thank you Barry Nalebuff, Adam Brandenburger, Marcial Losada, John Gottman and Kenneth Gergen

Responsiveness, emergence and self-organization

I gave keynote speeches at two conferences this week. The organizers of the events did not suggest a (#) hashtag to be used by the delegates. There wasn’t any backchannel Twitter discussion going on in the audience. I felt strange.

I wasn’t able to listen and respond to real-time feedback. I was missing the self-regulation and self-organizing that social media make possible. This is what I have grown so accustomed to. I started to ponder on two questions: Is it becoming more common for responsiveness to be the missing ingredient in many communities? And can there be rules for responsiveness that help to create viable communities?

I know that there are problems with two-way communication. There are the people with a pre-set interpretative model. We all know the people who are grinding their axe at the back of the room. They are the know-alls and the one-point-of-view evangelists, the people who insist on bringing all conversations round to their particular issue.

I know that there are even bigger issues: All participants are never visible. Any given conversation on the Web may have a few active participants and several silent ones. This creates a fundamental imbalance in the system and gives the oddballs the opportunity to dominate the space in a way that would be much harder to do off-line.

What I felt at the conferences was a crucial disparity: they hear me talking, but I don’t hear them. The audience was both present and absent at the same time. A conference with a Twitter backchannel creates inputs from the official speakers and responses coming from the audience that is present, but also the online audiences elsewhere. The most important thing is that the primary inputs can then be further adjusted on the basis of the responses from the group. There is real-time emergent self-organizing going on.

Information flows are far too often unidirectional. The audience is present but in a passive, invisible way. The tyranny of the hatemonger results from this one-way flow and scarcity of feedback.

The volume is too high for any single individual to filter out the useless or plain repulsive. There are, however, ways to filter out the irrelevant and the obnoxious, but it requires people to respond. If you are a participant, you are also a moderator.

The quality control has to be handed to the community itself without any single individual being in control. The solution is fairly simple in theory. It is about responsiveness and a mix of negative and positive feedback.

You always rate what you see. The ratings coalesce algorithmically into something that is called karma in Slashdot. If your contributions are highly rated you get karma points. The karma you have earned means that your subsequent posts begin life at a higher level than posts by others. Your ratings also have a higher value than ratings given by people with fewer karma points. Dynamic rating is to posts what links are to websites.

The people worth following, the leaders, raise bottom up. Hierarchies in network architectures are natural and dynamic heterarchies. In fact this is the only way that there can be leaders in democratic systems. One “algorithm” tracks the value of contributions; the other tracks the value of contributors.

The Web 2.0 gave the audience a voice. What is happening at the moment is much more radical. It is not about representation but gestures and responses leading to emergence and self-organization. It is not about the message or the media any more. It is more about the rules of responsiveness. In a simplified way, you can express those rules as constant positive and negative feedback moving the whole system towards a particular direction based on the behaviour of the participants.

The definition of what is quality and what is crap is a result of the responsive interaction. It is not group think however, because the ratings of people with high “karma points” weigh more than the assessments of the average members. The huge problem is that the majority viewpoints get amplified, while minority opinions get silenced. This is why we need a new category to support quality. It is diversity.

Changing the algorithm to reward diversity of opinion means the emergence of a system that looks totally different. Instead of highlighting posts with high average ratings, the system could highlight posts that have triggered a high divergence of ratings. There are many +5 responses, but also many -5 responses. The posts that inspire strong responses either way, both positive and negative, could then rise to higher visibility. The system can thus reward controversial voices, not only popular ones.

A viable system needs to reward perspectives that deviate from the mainstream. We need perspectives that don’t aim to please everyone. The oddballs would still be marginalized but the thoughtful minorities who attract both admirers and critics would have a visible place in the ongoing process of creating the future in responsive collaboration.


Thank you Steven Johnson

Networked knowledge requires new habits of participation and new habits of communication

Most of the information on the Internet is worthless to the majority of people. This obscures the transformative change going on at the moment. People are storing less and less information “inside”, inside computers, in private folders or in their memory because there is a new, better alternative: in the always on, always connected world, information is available “outside” on the Internet, more easily and more cheaply, with considerably smaller search costs. This is causing a fundamental shift in the way we manage information, use our ICT tools, or understand the competencies needed in the knowledge-intensive economy.

Before the Internet and efficient mobile communication 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. Our whole education system is still very largely based on independent individual learning and knowing.

The cognitive load of work has increased as a result of manufacturing giving way to knowledge-intensive work. As a consequence, the content of work is changing from generic, 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 innovation. Knowledge work is not performed by independent individuals but by interdependent people in interaction. A new way to understanding work and competencies is unfolding: many knowledge workers claim that today they can know, on demand, by communicating with their network and retrieving answers from the Internet, more easily than from their own “inside” sources.

Knowledge used to be understood as the internal property of an individual. Today knowledge should be seen as networked communication. This requires us to learn new ways of talking about education, competencies and work itself. What is also needed is to unlearn the reductionist organizing principles that are still the mainstream. Work is communication and the network is the amplifier of knowledge.

The process of communication is the process of knowing. You can only know what you are doing in conversation. If we want to influence the process of knowing we need to develop new habits of participation and new habits of communication. This is what the new interaction technologies and tools allow us to do. This is also where agile practices impact on knowledge work in a similar way to that in which lean practices impacted on manufacturing. The creation of new habits of agile participation and new habits of communication is the primary focus of my research and my practice.


Thank you Doug Griffin for thinking and working on this with me.

Contextual Leadership

Information overload and distractions have been understood as something that knowledge management takes care of. The task of knowing what to pay attention to has been tried to solve through corporate guidelines. Companies have also worked on information processes to mine nuggets worth the attention of knowledge workers. None of the approaches have really helped because it is really not about knowledge management, but about leadership, understood very differently than before.

Our attention is a result of the filters we use. These filters can be a mix of habits, media and tools. Increasingly these filters are social. They are the people in our network who we recognize as experts. Our most valuable guides to useful bits of insight are trusted people, people whose activities we can follow to help us advance and make sense.

Leading, then, is not position-based but recognition-based

There can hardly be a follower without a leader. A lot of management research has focused on the leadership attributes of an individual in the hierarchical organization. Leading and following in the traditional corporate sense have seen the leader making people follow him or her through motivation and rewards. The leader also decided who the followers should be.

Leading and following when seen as a two-sided relationship, not as attributes of individuals, follow a very different dynamic. Leading in this new sense is not position-based, but contextual and recognition based.

People, the followers, decide who to follow, why and when. The leader is someone people trust to be at the forefront in the area, the context, which is temporally meaningful for them. People recognize as the leader someone who inspires and enables them in the present. Another difference from traditional management is that because of the diversity of contexts people necessarily link to, there can never be just one “boss”. Thus, an individual always has many leaders as a default state. 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.

We are now at the very beginning of trying to understand leadership in the new contextual, temporal, framework. The relational processes of leading and following should be seen as temporal and responsive, not only on the Internet but also inside companies.

These patterns can be restricting or enabling. Knowledge work is not about acquiring facts or consuming information. It is about associations. Links are more important than information. Knowing in the brain is a set of neural connections that correspond to our patterns of communication. We don’t only connect with people; we link with topics, with contexts. The challenge is to see all the filters and linkages as communication patterns that are either keeping us stuck or open up new possibilities. We need new skills of dynamically connecting to people, topics and places. This is a growing challenge for our tools. Social media tools have developed tremendously on the publishing and sharing side. The next developments need to take place on the sense making side.

Following is at best a process of learning through observing and simulating desired practices. It is about growing the network and filtering at the same time. Leading is doing one’s work in an inviting and transparent way and being reflective. Leading is thus helping people link to information, filter information and to make sense of the world.


Thank you Stephen Downes

The death of the sales funnel

The perspective behind the mainstream approach to marketing and accordingly to digital marketing is to create attention, to create eyeballs to feed the sales funnel. That perspective is heavily biased towards the selling side. Its point of view starts with sellers, not buyers. Everybody knows the old saying in advertising: half of the money spent on advertising is wasted. We just don’t know which half. Google has radically reduced the amount of money wasted. But it too produces a lot of wasted expenses because of the inherent, systemic inefficiency of the sales funnel process transforming attention only marginally to leads, and leads only marginally to buyers. The high cost of this process is not normally questioned because the low-returns nature of sales and the sales funnel are taken for granted.

Digital marketing is really about reversing the sales funnel

Digital marketing could reverse the sales funnel and develop business, starting in a people-/context-centric way from the intentions of the buyers, and not from the intentions of the sellers. If you are present on Facebook and if you listen to what people say via Twitter, you hear buyers notifying the market of their intention to buy all the time. It is called demand-side advertising. Unfortunately, and unbelievably, there are still very few sellers who think that it is worthwhile to have a social media presence and to be attentive to this reverse advertising: the digital demand funnel. They are stuck with the sales paradigm of yesterday, the physical world.

But the digital demand funnel does matter. Markets are essentially digital networks of communication. The nodes of the network are people and the links between the nodes are conversations. This is where reputations are earned and reputations are lost. Brands are more about reputations earned in those live, everyday conversations than about the messages bought from advertising agencies to transmit brand promises.

Digital marketing succeeds best if the old ideas of attention are complemented with new ideas of participation. Every company today should know where the conversations that matter take place, and how to take part in a value-creating way. Digital marketing should not only be about creating company sites and marketing messages. It should be about participation in social media.

The challenge is to be where your customers are and to join the conversation.

Interactive value creation

The division of labor reduces organizational effort and the cost of work. The division of labor also increases the quality of efforts through specialization. For this reason all societies and all enterprises are heading, at least to some extent, towards specialism. The assumption has been that the further the division is carried, the greater are the savings and the better the quality of the contributions. This has led managers to focus on the efficiency of activities separated from other activities and organizational design and management are seen as the planning and execution of a collection of independent activities forming the organizational system.

The function of the line manager was accordingly to be the representative of his box, his domain of action and resources. The manager enjoyed a high degree of autonomy and was accountable only for that domain. The grounding principle in practice was: “Don’t tread on my grass, and I won’t tread on yours”.

As demands for higher value and creativity are the norm today and the complexity of offerings has grown, we have begun to see that the division of labor has reached its point of diminishing returns. What managers have learnt is that the division of labor always implies a scheme of interaction by which the different divided activities are made to work together. The lines between the boxes are starting to matter more than the boxes! Complex value creation is impossible without interaction. This is because any higher-value activity involves complementary, often parallel, contributions from more than one person or one team. In fact, the more complex the offering is and the more specialized the resources needed, the greater the demand for the amount, quality and efficiency of communication, because of the inherent interdependence of the activities.

One-dimensional approaches to interaction have involved top-down command-and-control or sequential workflow-based communication, where the action of one part is meant to set off the action of another. Interaction has thus been seen as one-way signals, a system of senders and receivers (Shannon and Weaver 1948). These approaches seemed to work in simple, low-value environments, but are not creating the desired results any more. What managers have lately found out is that in the pursuit of higher value and when facing the growing demands of complex offerings the value of actions is limited by the value of the interaction. The two are mutually dependent

A system of partial activities that go into the completion of the total offering always implies a scheme of interaction among the persons concerned. If the scheme of activities changes, even somewhat, the scheme of interaction should change too. As the two are mutually dependent, it means accordingly that if there are changes in interaction, so the activities will change.

The mainstream management paradigm is based on the presupposition that activities are the independent, governing factors and the scheme of interaction conforms to the planned division of labor as a secondary feature. The organizational structure, as a number of independent activities, comes first. Then an appropriate system of co-ordination and communication is put into effect. If, however, action and interaction are mutually dependent, it means that low-quality interaction leads to activities that are poorer than planned, just as enriching, high-quality interaction may lead to higher-value activities than planned.

We need to understand how the present ways of dividing labor have been historically based on a very different communications environment than the one we are living in at present. The earlier high cost of coordination and communication is the reason behind many of the organizational forms that are taken for granted and which we still experience. The digital world we live in today is totally different when it comes to the transaction costs associated with coordination and communication and allows us to experiment with totally new value creation architectures.

The activity systems and units of activity can no longer be seen as a collection of independent activities and independent high-performing specialists. There are, however, many challenges ahead if we adopt the way of thinking of seeing interaction as the governing factor in organizations. One of the challenges is our language. That is the way we speak about work following the system of subjects and predicates. Our language of work is geared towards handling one independent factor and one dependent factor at a time: “someone is doing something to somebody”. Linear causes and effects, rather than thinking in terms of mutual interdependence and non-linearity, are built into our management speech. And yet, a situation that can be described accurately in terms of linear, rational causes and effects is the least common one in social contexts. An organization consisting of people is always a social network following a different logic – complex causality. Organizations as social activity processes are about interdependent people working in complex interaction.

If we take this view, it means that people and actions are simultaneously forming and being formed by each other at the same time, all the time, in interaction. Instead of thinking in terms of spatial metaphors, of organizational levels, boxes and lines, this explanation focuses attention on how the actions of people create patterns in time following a very different approach to communication than the sender receiver model.

Organizations can be described as patterns of communicative interaction between interdependent individuals. All interacting imposes constraints on those relating, while at the same time enabling those people to do what they could not otherwise do. Supportive, inspirational, energizing and enabling patterns of interaction are the most important raison d´être of working and being together. If we see interaction as the governing factor and see organizations and organizing as relationships between interdependent people, our methods of sense making need to change. Social interaction does not follow linear causality, seen as a system of senders and receivers, but is fundamentally non-linear, responsive and complex. Following this logic, organizations today and information-based value creation in general can only be understood if seen as complex, communicative patterns of mainly digital interaction.

Resource allocation has always been one of the main tasks of management: planning what is to be done by whom and by when. In integrated systems and with homogeneous resources, this allocation can easily be performed top-down and in advance. Planning can take place separately from action. When knowledge resources are the decisive factors of value creation and when work takes place in digital, global, decentralized environments, this top-down process is increasingly inefficient. A manager cannot know who knows best or where the most valuable contributions could come from. The solution has been so far to try to “know what we know”, and, even more importantly, try to “know who knows”. Neither of these approaches has quite fulfilled expectations. Knowledge databases have not met the situational needs of their users. Accordingly, people have not been able to explain what they know to others or even to themselves in a meaningful way

Because of the aforementioned growing needs in daily organizational life a new, different approach has to be adopted. One could even claim that a new mode of knowledge based production is now emerging in, and because of, the digital networked environments. The most important platforms for the new production systems are social media platforms.

This new production method refers to a new economic phenomenon: people from the whole network contribute pieces of their time and expertise to tasks, emergently, according to their interests, availability and experience, working in a transparent, open environment. This method has systemic advantages over traditional production hierarchies when the work in progress is mainly immaterial in nature and the capital investment involved can be distributed. For most knowledge-based products and services, this kind of production is the most efficient method of creating value from a resource allocation point of view.

The system is developed as much in a bottom-up manner as a top-down one. In a top-down system everything is created and provided by the organization to the user. The user has no or very little control over what services, information and people are available to him. Instead of forcing people into predetermined groups in the way groupware does, social media facilitate the natural formation of groups based on spontaneous, contextual needs for interaction. In social media, people affiliate through personal choice and need. Understanding this difference in community formation is crucial for building self-sustaining, dynamic communities.

A Wiki is a typical knowledge production medium, a platform for interdependent people to work in parallel interaction. A Wiki provides the most efficient way for a group of people to contribute, edit and interact with information that is meant to be shared. A Wiki can be seen as a way to create and iterate collective information, thus developing shared iterative learning. It’s about making visible what has been learnt and the road that leads to it. This leads to a better sharing of experiences, use of skills and utilization of the total number of brains in the network.

The primary goals are increasing the value and quality of information and the value and quality of interaction and at the same time lowering the transaction costs associated with information and interaction. Even more importantly, open interaction platforms such as Wikis are a medium for sharing what we would like to know next, where we would like to go, and what we would like to explore. A Wiki is a medium for continuous, creative learning. This thinking is based on a belief that everything can and should develop in iterative interaction among the network of users. In practice it means voicing questions and concerns for others to answer of their own free will: the small deviations, the small questions that we don’t normally pay much attention to or have time to explore. These are, however, the starting points for change, improvements and learning. There is a shift in thinking from sharing what we know to sharing what we don’t know.

All organizations essentially operate like Wikis. Every organization has it’s own language, resulting in a unique, iterative understanding of concepts, terms and ongoing sense making. There is always a lot of information that is continuously evolving in the “encyclopaedia” of an organization. The articles are things like strategies, customer databases, product information and manuals.

In these kinds of contexts, information artifacts that don’t connect with ongoing live conversations are often of less value, even obsolete and most probably out of date. Because of this, we are now moving away from a focus on content to a focus on conversations. Content should be seen as the by-product of conversation. Perhaps in the future of digital work IT will not mean Information Technologies, but Interaction Technologies.

This view focuses attention on the way in which daily, mainly digitally mediated communication between people organises value creation and, at the same time, creates value. An organisation should today be understood as complex, self-organising, iterative patterns of interaction, through which both continuity and innovation emerge as patterns in time.