Organization is a process, not a structure
May 6, 2012
The way in which companies organize themselves and define their internal boundaries has essentially been determined by the way in which communication between people is planned and transfer of information is designed. The classic hierarchical 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. A narrowing of interaction always marked operational boundaries. Thus you did not want people to cross functional silos. This was the infamous trade-off between richness and reach.
An increasing number of companies trying to become social businesses are now becoming aware of the technical barriers and structural bottlenecks that hinder or totally prevent cooperation that is not planned in advance.
It is time to rethink. 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.
The accumulating failures of attempts at organizational agility can be traced to the fundamental but mistaken assumption that organizations are structures that guide and, as a consequence, limit interaction. An organization as a structure is a seventeenth century notion from a time when philosophers began to describe the universe as a giant piece of clockwork. Our beliefs in prediction and organizational design originate from these same ideas.
A different ideal is emerging today. We want to be agile and resilient and we want to learn effectively and fast. The tension of our time is that we want our firms to be flexible and creative but we only know how to treat them as systems of boxes (or network nodes, where the shapes are round instead of square), with a fixed number of lines between them.
It is time to change the way we think about organizations. It is not about hierarchies vs. networks, but about a much deeper change. Organizations are creative, responsive processes and emergent patterns in time. All creative, responsive processes have the capacity to constantly self-organize and re-organize all the time. Change is not a problem or anomaly. Change is the organizing input rather than the typical managerial re-design process. All solutions are always temporary.
Gregory Bateson wrote: “information is a difference which makes a difference”. Information is the energy of organizing. When information is transparent to everybody, people can organize effectively around changes and differences, around customers, new technologies and competitors.
What we have still not understood is that people need to have access to information that no one could predict they would want to know. Even they themselves did not know they needed it – before they needed it. Thus an organization can never be fully planned in advance. When information is transparent, different people see different things and new interdependencies are created, thus changing the organization. The context matters more than ever. The easier the access that people have to one another and to (different) information is, the more possibilities there are.
We seek organization, but organization is a continuous process, not a structure.
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Thank you Ken Gergen for a great evening and great conversations
More on Gregory Bateson. On social business. Narrative work.
Networks of learning and networks of products
April 1, 2012
Products that are manufactured in the same way and with the same product features are often used differently by different customers. Just because a product is a commodity doesn’t mean that customers can’t be diverse in their needs and the way they use the product.
Companies used to have no mechanisms for connecting with the end users in order to understand and influence this. Social media and mobile technologies are now changing the model.
The relationship between a customer and an enterprise can get smarter with every interaction. Consider a service as routine as grocery shopping. Suppose that you could turn to your mobile phone and come up with a graph of last month’s or last year’s grocery purchases. Every time a customer buys her groceries, she is not only showing herself and the firm the products she buys, but also teaching the firm the pattern with which she consumes/uses them and implicitly the complementary products she perhaps does not yet know of. The service is creating a history of this particular customer that is virtually impossible for a competing shopping service to replicate.
Interactive value creation is about two new capabilities: the firm needs to be capable of networking with individual customers, and behaving somewhat differently towards a particular customer on the basis of communication and learning.
If a firm wants to create learning relationships with its customers, it must first create links to end users. The starting point is not a company site any more. Linking needs to start from where the people already are and what they already do: the main starting/connecting points are social media platforms, stores and ads. Also every product needs to be seen as a network node. By listening to customers individually, interacting with them, and then treating different customers differently, the modern retail firm can change the nature of competition and generate customer loyalty as well as higher unit margins.
What often happens is that enterprises view customers through the lens of a fairly uniform set of products leading to their seeing customers as having relatively uniform needs. But even commodity products are always a bundle of use contexts, buying patterns, complementary goods and delivery options.
A product or a service should be pictured as a node in a network with links to ancillary services and complementary features surrounding the product. The more relevant links are considered, the richer the product will become. The task is to visualize the product in the broadest sense possible.
As the customer’s need set is expanded beyond a single item, the definition of the product changes and becomes more complex. The more complex the product, the more possibilities there are for the company to remember something that will later make a difference. When a customer teaches a firm what she wants or how she wants it, the customer and the firm are cooperating on the sale of a product. It is about interactive value creation.
A learning relationship ensures that it is always in the customer’s self-interest to remain with the firm that developed the relationship to begin with. Loyalty then creates more value and is more convenient than non-loyalty.
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More on the topic: “Smart disclosure“. Smartphones as health aids. Everyday health.
Markets, networks and management
March 18, 2012
The claim is that the best way to understand complicated systems is to investigate the workings of each of the parts. If a car does not start, the mechanic looks for the problem and finds a dead battery. In a similar way a doctor finds a wounded muscle. The idea is that the best way to understand life is to investigate the workings of the parts separately from those of other parts.
In the economic world, the concept of markets is based on the same idea: autonomous sellers and buyers engage in discrete transactions where each agent is independent from the other agents and each transaction is separate from other transactions. The unit of analysis is the individual agent.
Network scientists have recently made very different claims. They say that all human systems are connected and that connected systems cannot be understood in terms of isolated parts. The study of isolated parts offers little help in understanding how the parts work in combination and what emerges as the result of network connections. The notion of emergence is central. Their aim is to discover emergent patterns: is it really so that individual greed turns into a pattern that can be called public good, as proponents of free markets have suggested following the rhetoric of Adam Smith?
The suggested unit of analysis is now communication and emergence, not entities.
This changes many of the beliefs we have taken for granted. The first change deals with the assumption of a knowing individual, the basic idea of Cartesian philosophy. The individual was understood as having a knowing mind. Individuals were thus treated as if they possessed properties such as expert knowledge. On the bases of her personal properties the knowing individual is then understood as the designer and controller of an internal and external world.
The perspective of network science views knowledge as socially created and socially re-created not as stuff of the mind that can be shared and stored by individuals. Knowing is a process of relating. From the network-based, relational perspective knowing is viewed as an ongoing and, never-ending process of making meaning in communication.
Management literature typically emphasizes individuals and locates explanatory power in their personal properties. Leaders are the sources of motivation, control and direction. The manager’s perspective is taken for granted as setting the limits of action and what is thought of as right or wrong.
Management theory is based on the same Cartesian assumptions of the self as subject, the other as object and relationships as influence and manipulation. This is why the present management thinking severely restricts what is thinkable and doable in the world of networks.
The potential of social media cannot be realized without a very different epistemological grounding, a relational perspective. Independently existing people and things then become viewed as co-constructed in coordinated networked action. Accordingly, the role of management is different, opening up new possibilities: power in networks is about “power to” or “power with”, and not “power over”.
The emergent pattern changes when the local interactions change. Self-interest in the network economy looks different from self-interest in the market economy; individual success is likely to take place through enriching relationships and being part of networked interaction aiming to facilitate both the individual and the collective effort.
Cooperation is the new competition.
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Thank you Dian Marie Hosking for great conversations
More: Reid Hoffman interview.
Social media and the change from information to formation
February 25, 2012
The change towards the creative economy has major implications for the nature of what we have called assets. In the industrial age, the assets were physical resources, plant and equipment. Most of the resources were traded in markets and could thus be valued. Taking care of the value of an organization could be understood as managing physical assets and resources.
Now knowledge and people are seen as the major assets. But since neither of them are efficiently traded in markets, their value cannot easily be measured. Neither can knowledge be understood as an asset that can be managed like a physical asset. This is what many people within the Knowledge Management community learned the hard way. Knowledge is not a thing! Thus it cannot be stored, measured or shared.
From a more modern point of view, knowledge creation is understood as an active process of communication between people. Knowledge cannot be stored but is constantly constructed and re-constructed in interaction. Knowledge cannot be shared but arises in action. Knowledge is the process of relating.
The assumption was that learning and knowledge management involve processes that transmit content. This notion derived from the information theory/model of communication developed by Claude Shannon and Warren Weaver. Their theory created a sender-receiver model of communication according to which person A sends a signal (message/content) to person B, who receives it and then perhaps sends a responding feedback signal back to A. From this perspective, learning and knowledge creation are processes that resemble transmission or the sharing of content. This is why schools and other educational institutions still look the way they do.
But Shannon & Weaver’s concept was meant to be purely technical. They were interested in whether a byte sent was a byte received in a technical sense. They said nothing about the meaning of the bytes. For a human being a message can evoke a very wide range of associations and interpretations depending on the experience and emotional state of the individual. One person’s interpretation is never quite the same as another person’s interpretation. There is no linear causality in the world of human beings.
If learning was understood from a more modern relational perspective it would resemble a process of many voices interacting at the same time. In this way, each comes to know the context in which the other makes meaning. The progression of B’s understanding of A’s story also constitutes a change to A’s story – creating new meaning, learning, for both.
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.
All stories continue, meaning that learning takes place, as participants create a more shared understanding of what the other means. Knowledge which used to be regarded as existing independently in people and things – becomes viewed as co-constructed in communication.
Communication does not represent things in the world. It brings people and things into being in constantly surprising ways.
Supportive, energizing and enabling patterns of interaction are the most important “assets” of a modern organization. That is what should be nurtured and taken care of. Communication either accelerates and opens up possibilities or slows down and limits what would be possible. Communication either creates value or creates waste. Communication either creates energy and inspiration or demeans and demotivates.
Information theory is not only unhelpful but harmful, when trying to understand communication between human beings. Communication is not about sharing information but a process of formation.
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Thank you Karl-Erik Sveiby and Doug Griffin. What a great meeting!
Contributions from many to participate with one
February 23, 2012
The nature of the relationship between customers and firms has changed dramatically. For over a hundred years, companies have assumed that consumers are an undifferentiated mass. Lately, we have moved through different degrees of market segmentation. Today, we have reached a point where the latest interaction technologies are creating an entirely new dynamic between the firm and the people we used to call consumers. Tomorrow firms will compete in making unique customer experiences possible.
The traditional approach was that the firm created value and then exchanged it with its customers. This firm-centric view of value creation is now being replaced by customers’ contextual experiences and co-created value. Value is created in interaction, but outside the corporate firewall. Even if a company is dealing with a very, very large number of customers, the firm must focus on one customer at a time.
We are in a world in which value is determined by co-created experiences – all a bit alike but all a bit different.
During the still (mentally) prevailing industrial era, most firms were vertically integrated. It was only around twenty-something years ago that firms started to source components from outside, from suppliers on a large scale. Today it is natural to rely on global supply chains. This is because the business goal is to access the most competent, knowledgeable sources and paradoxically, at the same time the lowest-cost producers. Access to resources and resource allocation is today by default multi-vendor, crowdsourced and global.
The changing relationships with customers and vendors are the main drivers behind the new ecosystems for communication and participation.
These trends also explain the situation we are in at the moment. The network is the architecture of work. People need to communicate and participate in order to invite contributions and to co-create unique experiences. It is about the relational view. It is not necessary to own the contributing parties. Capacity to connect and cooperate is what is needed. Collaboration is the new competition.
The world we live in today is in many ways the polar opposite of what we have been used to. The management challenge in the era of social media is to invite and combine the contributions of many in order to participate with one (at a time).
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Thank you C K
A relational view to management
February 19, 2012
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 media/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’ conversational 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 other words, networking is understood as moving around the stories that others are referencing for meaning making. 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.
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Thank you Gregory Bateson, Doug Griffin, Ralph Stacey, Kenneth Gergen, David Weinberger and Katri Saarikivi
The idea of co-working spaces
February 4, 2012
Although work today is primarily digital, most organizations still have a spatial dimension, and most of those spaces have a designated organizational role. Even in the digital age we still think in terms of space. The key thing is that both the organizational structure and space greatly influence the patterns of work. A few years ago, the typical organizational design meant that work was divided into multiple parts that were simply added together to create the product. Individual workers did not need to know much more than what was specific to their individual tasks to complete their jobs.
Today, the results of work are not brought together at the end but are communicated throughout the process. A growing number of people are involved in generating ideas and information and bringing those ideas together in collaborative sense making. Work is interaction. Communication is not talking about work. Communication is work.
There are three archetypes of communication in firms. The first type is communication for responsiveness and coordination. This creates the need for transparency. The right hand knows what the left is doing. The second type is asymmetric following. It is about a Twitter type of information sharing to help people keep up with new developments. The third type is serendipitous inspiration. It is spontaneous and helps people to come upon the unexpected. The third type of interaction often occurs between people who work on different things and draw on different disciplines. These people don’t often meet in traditional work arrangements. They don’t normally have a lot to do with each other.
Most managers will acknowledge the role played by the organizational structure, but few understand that physical space is equally important. Structure and space both influence how we work and where communication takes place when we meet.
The goal is paradoxically to increase the value of work and at the same time save costs. This means that you can expect to see more of the clubhouse type of co-working spaces. Clubs are places where only members and their guests are allowed in. The rooms are defined according to a function, such as eating, reading, and meeting. These rooms are open to all, rather than being assigned to a single worker. You can book a more private room for a specific purpose, but in a clubhouse, you cannot put your name on the door.
Members of future organizations will use these new co-working spaces for networking and for concentrated individual work but they are not going to have spaces to fill with their personal belongings.
Many people bemoan the loss of a personal designated space. However, I believe that they are going to learn to appreciate the value of freedom of choice and the escape from the control system of being seen in the office nine-to-five.
If you are in the middle of a conversation with someone, you seldom pause to talk about the conversation itself. But today, it is time to pause and consider how we work together and where we meet to do that. Although work is digital, we are still going to meet, also physically!
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The inspiration for writing this came from meeting my good friend @elsua face-to-face for the first time a few days ago. Thank you @villepeltola and @sakuidealist
Advice on how to manage off-site workers
New structures – new designs
January 29, 2012
When we think about business structures, many of us picture an organizational chart or the layout of an office building. A structure often refers to the physical arrangement of things, the parts making the whole. What we have missed so far is an understanding of the business structures that can foster faster learning and help us work better with information. Conventional structures don’t address knowledge-related challenges as effectively as they do problems of measuring input and output or accountability.
What social media have helped us to do is to link and coordinate unconnected activities or initiatives addressing a similar information domain. There have also been great successes in diagnosing recurring business problems whose root causes cross unit boundaries. We know that the problems we face today are too complex to be managed by one person or one unit. It requires more than one brain, one point of view, to solve them.
Sharing a practice or sharing an information domain requires regular interaction. Work is interaction and the new business structures should be built on interdependence and communication.
Almost all business communities started among people who worked at the same place or lived nearby. But co-location is not necessary any more. The Internet has changed that. Interdependent people forming a community can be distributed over wide areas. What then allows people to work together is not the choice of a specific form of communication, face-to-face as opposed to email or social platforms, but the existence of a shared practice, a common set of situations. What lies at the core of those situations is the need for different perspectives requiring interaction.
When you design for live interaction, you cannot dictate it. You cannot design it in the traditional sense of specifying a structure or a process and then implementing it. As many have experienced, communities seldom grow beyond the group that initiated the conversation, because they fail to attract enough participants. Many business communities also fall apart soon after their launch because they don’t have the energy to sustain themselves.
Communities, unlike business units need to continuously invite the interaction that makes them alive.
Community design is closer to iterative learning than traditional organizational design. Live communities reflect and redesign themselves throughout their life cycle. The design should always start with very light structures and very few elements.
What is also different is that good community architecture invites many kinds of participation. We used to think that we should encourage all the community members to participate equally. Now we know that a large portion of the network members are and should be peripheral. In a traditional meeting we would consider this type of participation half-hearted, but in a network a large portion of the members are always peripheral and rarely contribute. Because the boundaries of a live community are always fluid, even those on the outer edges can become involved for a time as the focus shifts to their area of particular interest.
Because conversations and communities need to be alive to create value, we need an approach to management that appreciates passion, relationships and voluntary participation. Rather than focusing on accountability, community design should concentrate on energizing, enriching participation.
The new structures and new designs are about communities continuously organizing themselves around shared information, shared interests and shared practices. Business is about doing meaningful things with meaningful people in a meaningful way.
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More: “Lead like the great conductors“
Designing a beautiful business
December 31, 2011
I have recently heard people say: “I have a great job.”; “I love what I am doing here.”; “He did it in a beautiful way.”; “I work in lovely surroundings.”; “I work with nice people.” Conventional analysis of organizations is dominated by a rational tradition that ignores aesthetics, yet life is pervaded with beauty as these people proved.
Aesthetic considerations can sometimes be of decisive importance. Apple products and the new Nokia N9 attract people the same way that the theory of Einstein attracts scientists – by virtue of their sheer elegance.
Organizations are social constructs. They are nothing but constructs to which people are drawn in pursuit of some purpose. Healthy organizations are a concept of relationships to which people are drawn by beauty, values and meaning, along with the freedom to pursue them cooperatively. Healthy organizations enable more than constrain.
Unhealthy organizations are a concept of relationships into which people are forced by birth, necessity or manipulation. Unhealthy organizations constrain more than they enable.
The concept of the social organization has intensified the debate as to whether competition or cooperation should rule in business. But competition and cooperation are not mutually contradictory. In the new design of work they don’t have opposite meanings. They need to be complementary. In every aspect of a healthy life we paradoxically do both at the same time. No successful social endeavor has existed without combining the two.
But sometimes things have not worked out.
The idea of cooperation went mad in socialism leading to an unhealthy and false pursuit of equality and left us with centralized, totalitarian governments enslaving their own citizens. Competition has also gone mad in many capitalist countries, which has led to mindless self-interest and left us now to cope with the results of the irresponsible abuse of people and natural resources.
We need new thinking beyond the old dichotomy: The political left lacks any convincing narrative in the post-socialist world. The right tells a story in which greed is the dominant human motivation and markets actually mean gambling.
The Internet era has proven that we are capable of working together competitively/cooperatively and building social communities that some time ago many would have dismissed as impossible dreams. Thus we don’t yet have a good idea of what cannot be done by connected people working together in new ways. Changes in existing organizations and the evolution of new ones will have characteristics in common. Just as natural systems like the human body are not vertical hierarchies with each part superior to another in ascending linear order, neither will organizations of the future be structured that way. This is not to say that all present industrial organizations are doomed but the models we use to describe the world around us are.
We need a new vocabulary beyond the models of industrial production and separatist, mechanistic concepts of a corporation.
The emerging organizations cannot be portrayed in two dimensions on a traditional organizational chart. They are closer to the networked organization of neurons in the brain. Yet, even these dimensions are not enough without the aesthetic dimension of doing a beautiful work.
The next challenge is to design a beautiful business.
Happy, Beautiful New Year!
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Thank you Dee Hock and Thomas Kuhn.
