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.
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
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“
Winning games
December 20, 2011
In most games who wins and who loses is the whole point of playing. It would be hard to imagine a more unpopular outcome in a reality TV series, than an announcement that all the players ended up as winners! It is, of course, beneficial that better-motivated and more enterprising players take the place of the lazy, the incompetent, and the unmotivated.
But zero-sum thinking and the winner-takes-all philosophy do not serve us any more. As there are more losers than winners in our games losers multiply as winning behaviours are replicated in the smaller winners’ circles and losing behaviours are replicated in the bigger losers’ circles.
The biggest problem is that as losers are excluded from the game, they are not allowed to learn. The divide between winners and losers grows constantly. This is why, in the end, the winners have to pay the price of winning in one way or another. The bigger the divide is, the bigger the price that has to be paid. The winners end up having to take care of the losers, or two totally different cultures start to form, as is happening today in many developed countries and cities.
Psychologically, competitive games create shadow games of losers competing at losing.
The games we play have been played under the assumption that the unit of survival is the individual, a team of people or a company. However, the reality is that the unit of survival is the players in the game being played. Following Darwinian rhetoric, the unit of survival is the species in its environment. Who wins and who loses is of minor importance compared to the decay of the (game) environment as a result of the competition.
We need a new concept of games in the creative economy. The players and their contributions in the real world are, and should be, too qualitatively different to be compared quantitatively. Unless all the players are comparable and want the very same thing, there cannot be a genuine contest.
Zero-sum games were the offspring of scarcity. In the era of creativity and abundance, new approaches are desperately needed.
As there simply cannot be pre-existing rules for every conceivable situation that might arise, we have to move beyond seeing the players and the rule-makers as separate parties. Real-life games are too complex to be governed totally from outside. We need participation based on values- and strong ethics as a prerequisite for taking part.
The players have the responsibility not only for adhering to the existing rules, but also for developing the rules further – specifically when the game (environment) decays as a result of the actions of the players.
In creative games the winners would be all those whose participation, comments and contributions were incorporated into the development of the game.
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High performance (social) business
December 10, 2011
In our view of the world, we often think that competition creates and secures efficiency. But it may be that high performance is incorrectly attributed to competition and is more a result of diversity, self-organizing communication and non-competitive processes of cooperation. Competitive processes lead to a handicapping of the higher-level system that these processes are part of. This is because competitive selection leads to exclusion: something is left out. Leaving something out means a reduction of diversity. The resulting less diverse system is efficient in the very short term, but always at the expense of longer-term agility and viability.
Our assumption has also been that by understanding the parts of a system in detail, we understand the whole. This is simply not possible! What happens in the interaction between the parts is much more important than the parts. The whole is the emergent pattern of the interaction, not the sum of the parts. The focus of the high performance organization should be on communicative interaction: what is going on?
Enriching interaction and interactive energy
Higher performance patterns may occur through the very simple combination of different experiences and enriching interaction.
Chaos theory explains how the 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 movement (trajectories) as the unit of analysis in the same way we have lately analyzed individuals and firms. 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.
Interactive energy may be the single most important factor in business performance.
Every interaction is meaningful
Interaction creates resonance between the particles. Resonance is the result of coupling the frequencies of particles leading to an increase in the amplitude of motion. 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.
The lesson is that every interaction of all of the particles is thus potentially meaningful and can lead to the amplification of the slightest variation. Interactive systems with even the smallest variations take on a life of their own. The future form and direction of the system is not visible in the system at any given time. The future is not in the system and it cannot be chosen or planned by anyone.
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 of healthy behaviour 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 competitive/collaborative interaction itself.
The new social technologies have the potential to change the patterns of connectivity as much as the sciences of complexity have changed our perspective and thinking.
Richer, more challenging, more exploratory conversations leave people feeling more alive, more inspired and capable of far more creative action. The focus of the high performance organization should be on communicative interaction creating the continuously developing pattern - a life at the edge of chaos.
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Thank you Pekka Himanen and Doug Griffin
It is not uncommon to think that knowing is something that goes on in the brain. Yet the evidence that it is really so is not quite clear. Some scientists have expressed doubts. The mind, they have argued, is not a thing to which a place can be allocated. Intellectual life is essentially social and interactive, they say. Life is carried on through communication between people. These researchers claim that interactions are not secondary by-products of thinking. They are the primary sites of that activity.
Industrial manufacturing was a fairly straightforward transformation process from physical raw materials to physical goods. Economic growth today is still about value added. The difference is that the generic, homogeneous raw materials and mass products of the industrial era are today different ideas and contextual, co-created solutions. The transformation process is also very different. In creative work, it is an iterative, unpredictable, non-linear movement, rather than a linear, sequential chain of predictable acts.
Knowledge-based value added is a movement of thought.
Individuals should take part in the onward movement of thinking. People should know what the live, future-creating ideas are and how to take part in the conversation in a value-adding way. This is independent of what people do, or the organizational unit they belong to.
The management task is to understand (1) what is being discussed, (2) the quality of that conversation, and (3) whether there is movement forward or people are running in circles. Are people stuck?
Thinking does not take place inside independent people but in continuous interaction between individuals. The richer the interaction, the more economic value added is created. The poorer the interaction, the more value is destroyed and waste created.
Knowledge used to be seen as the internal property of an individual. Today knowledge should be understood as networked communication. This requires us to learn new ways of talking about learning, 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. The age of the (lone) expert is over. The process of communication is the process of knowing.
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 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.
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Thank you Doug Griffin and Kenneth Gergen
The competitive edge of the social business
November 20, 2011
“In the future, when the history of our time is written from a long-term perspective, it may be that the most important things historians will see are not technological advancements or the Internet, but the fact that for the first time a substantial and rapidly growing number of people had choices.” (Peter Drucker)
The industrial age was about limiting the scope of choices. This was accepted since the need to gather costly information and to communicate with low quality tools was minimized. Furthermore, as the scope of decision-making and action was narrowed, the learning requirements for workers and customers were limited, reducing the transaction costs of work. The efficiency contribution of mass production was in fact derived from these lower information- and communication-related costs.
Today, in contrast to people being content with limited choices, offerings need to be created to meet diverse, unique requirements.
For knowledge workers and customers the task of gaining the input needed for these situations is creating an entirely new environment. Creative learning is becoming the fundamental activity. It is not about consuming pre-determined content, passing tests or something with beginnings and ends. Learning is continuous transformation. It is the foundation for creative action. The ability to meet the needs of a situation better can only exist partially prior to the live moment. You can never be fully prepared in advance: success depends on how you are present and how you communicate.
The new competitive edge comes from interactive capacity: the ability to connect with information and people, as and when needed.
What gives the edge is not what is already known by the individual, as much as the ability to solve problems that require real-time learning through live interaction. In increasingly complex environments learning curricula cannot be effectively designed beforehand. Needs and also solutions emerge responsively.
This view focuses attention on the way everyday conversations between people create the future. Organizations are self-organizing patterns of participation and communication through which coherent action and innovation emerge.
The concept of the social business builds on an agile, iterative framework. Learning is not related to meeting the requirements set by someone else, but is motivated and expressed through personal situational needs and aspirations. The idea of interactive competence also reflects the radical change in thinking that is going on. We are leaving behind the Western preoccupation with the autonomous individual and beginning to appreciate the importance of social processes and interdependence.
This understanding of competence suggests that the capability to act is a social process. The primary learning asset for a knowledge worker is interactive, reflective practice. The network is also a means for signalling: making one’s own learning visible not only to oneself, but also to others, thus creating a platform for comments, conversation, and even formal accreditation.
Learning happens in interaction between interdependent people. Competence, the ability to act more purposefully is the emergent phenomena resulting from that interaction. People are simultaneously forming and being formed by each other at the same time – all the time.
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Thank you Riel Miller, Doug Griffin, Stephen Downes, Kenneth Gergen and Ralph Stacey
The future under construction
October 31, 2011
The approaches of industrial management have given us remarkable material well-being over the last few centuries, but are increasingly being criticized for not being suited to handling the needs of today. Organizations need to excel in innovation. Companies also need to embrace rapid change and uncertainty. Some of the most creative ones have even gone so far as to take a “let’s just do cool things and see what happens” approach, trying to avoid traditional governance systems. Is this yet another sign that management is in crisis?
The industrial theory of management is based on top managers choosing the future of their organization and guiding its development in the right direction. The belief is that managers can make useful forecasts and set goals. Their daily responsibility is to monitor activities to identify gaps between the goals and actual outcomes so that the gaps can be closed. Uncertainty plays a minor role. Managers know what is going on.
Every business is a set of assumptions that are taken as given, thus reducing the perceived uncertainty. The whole plan–execute cycle is a process designed to prove those assumptions correct. But assumptions are never totally right most often not totally wrong, either. Accordingly, it is quite seldom that ideas are turned into a successful business in just the way described in the business plan. Things change.
In conditions of rapid change and uncertainty, there have to be systematic processes indicating progress and new opportunities as they emerge. This is much more important than forecasting or planning. It is about testing the assumptions continuously and signalling which assumptions are helpful and which are not. It is about finding out repeatedly which of the efforts are creating value and which are wasteful. Are we on the right track? Are we progressing? What new possibilities have become visible?
Lean thinking defines value as providing benefit to the customer. Anything else is waste. But what if we really don’t know? Then the most important business process is to find out. We have to learn what creates value for different customers in different situations. “Anything that does not contribute to learning is waste” as Eric Ries puts it. The business challenge for a creative company is to learn fast and cheaply!
Management theory needs to leave behind the industrial, mechanistic model of reality and the belief in linear if-then, causality. The sciences of complexity, non-linear dynamics, uncertainty and creative learning are the foundations of modern, human-centric management.
The task of managers is not the reduction of uncertainty but to develop the capacity to operate creatively within it. Ilya Prigogine wrote in his book “The End of Certainty” that the future is not given, but under perpetual construction:
“Life is about unpredictable novelty where the possible is always richer than the real.”
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Thank you Eric Ries, Stu Kauffman and Ralph Stacey
Lean and social
October 2, 2011
Waste seems like a straightforward term, but lean thinking has given new meaning to the word. In lean vocabulary, anything that does not create value, slows one down, or does not contain potential for learning is waste. A thing or a document sitting around waiting to be used is waste. Making something that is not needed is waste. Unwanted movement is waste. Transportation is waste. Waiting is waste. Any extra processing steps are waste.
The concept of waste has lately been transferred from manufacturing to other practices such as product development. According to lean principles, when a development project is started, the goal is to complete it as rapidly as possible. In a sense, ongoing development projects are just like inventory sitting around in a factory. Design and prototypes are only valuable when (paying) customers are involved.
Eliminating waste is a fundamental lean principle. Thus three of the steps towards implementing lean development are learning to see waste, uncovering the sources and eliminating them.
We recently studied the product development methodology of a large multinational company. They have been very successful in the past, leading in most of the markets they have entered. But lately, many people have voiced concern that there have been unnecessary delays in getting new products to market. To find out why, we gathered input from managers and ecosystem partners.
A division into two main areas of concern developed: technology/process and social interaction. We asked people what percentage of the barriers to faster time-to-market might relate to the technology/process side and what percentage would be on the social interaction side. The answers were almost unanimous: over 75 percent of the reasons for slow product development were on the social interaction side. The results were alarming because in this organization almost all approaches to being more agile and to taking waste out of the system were historically on the technology/process side.
People are used to lean thinking when it comes to technology and processes but it is still very rare to look at taking waste out of communication. Many managers still trivialize the power of conversation. They think that social interaction issues are soft compared to the hard issues of technology and process.
We still don’t understand that work is communication: we live and work in a network of conversations. Being lean means understanding that conversations are never neutral. They always affect the quality and pace of the outcome. Communication either accelerates or slows down. Communication either creates value or creates waste. Communication can create energy and inspiration or take energy away and reduce inspiration.
The world around us is changing. The interactions in mass manufacturing were very different from the interactions in complex, dynamic, knowledge-based work. Many managers possess the skills that meet the challenges of static conditions. Those conditions are based on predictability and systems thinking, meaning that the crucial variables are known in advance. The main risk factor is then the accuracy of the predictions.
In a static environment, you know how each role fits within the larger system. You know how the processes work, and you don’t want deviations. You know what it takes to make the products and you don’t want people experimenting and making things up. You want everyone to do their part and not get in each other’s way. Roles and organizational units are separated from other roles and other units. You, as a manager, do the coordination and share the information necessary for each to make their planned contribution and nothing more.
In dynamic business conditions the management practices described above are not only unhelpful but cause damage and create waste rather than value.
If you cannot predict you have to invest in real-time learning and iterations instead of more predictions. Success is based on speed of learning and responsiveness. Responsiveness is not possible if you are many handshakes away from the things that you should respond to. Learning is then based, not on teaching materials, but on conversations linking interdependent people. The question is what the design of a valuable conversation is? We spend countless hours attending meetings and sending/answering emails, but the nature of those hours goes unexamined. Many people think that a conversation is inherently valuable. That is not the case. The challenge we face is to deepen our awareness of how conversations create either value or waste. The goal is not just to be more social.
The agile manifesto points out that individuals in interaction are more important than processes and tools. Working prototypes are more important than documentation. Customer collaboration is more important than contracts and most importantly responding to change is more important than following a plan. Creating value or waste is a result of how we interact.
We need to embrace change, unpredictability and complexity as inescapable constants in all product development. It is about being lean and social!
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Thank you Craig Larman, Petri Haapio, Ari Tikka, Mickey Connolly, Vasco Duarte and Ken Schwaber
Why do I have to collaborate?
September 23, 2011
Somebody recently asked me: “Why do we have to collaborate? I know my job. If I do my job and everybody else does his, we will be fine. The people I work with every day know what to do. I don’t get it why I need to be working with those other guys.”
Today’s organizations are complex systems that require continuous, responsive coordination to be effective. Work is much less repetitive than before. Job roles and work instructions can never be complete descriptions of what needs to be done. Work is not separate actions but connected tasks. It is all about links. Who needs to connect cannot always be planned in advance. Interdependence is contextual, situational. In order to be successful, the constantly changing people forming the organization have to connect. Work is communication between interdependent people.
The days when we could just do our own thing are over.
When it comes to understanding the organizations in which we work, most of us understand best our own jobs and the work groups we have been part of. As a result from individual, reductionist scorecards, most people are ignorant of the larger network in which they work. When problems arise, this unawareness of how things affect one another often leads to short sighted and suboptimal solutions. Issues are resolved in favor of just one point of view.
When the circle of involvement is larger many changes occur. When people see where they fit in the bigger picture they are able to see the interdependencies and are able to respond much, much faster to changing conditions. Our research shows that transparent processes are more than four times faster than corresponding processes where people just see their own part.
Any one person or any one function cannot meet today’s challenges alone. We need a community of people who willingly participate and provide their insights to address the increasingly interdependent issues. Collaboration is necessary because one person no longer has the answer. Answers reside in the interaction, between all of us.
The challenge today is engagement. Widening the circle of involvement means expanding who gets to participate. It is about inviting and including relevant, new and different voices.
The unfortunate misunderstanding is that engaging people requires managers to let go. As managers contemplate to widen the circle of involvement they sometimes believe that it means to have less ability to provide input based on their knowledge and experience. Paradoxically, engaging more people requires more from managers than the current management paradigm. Instead of being responsible for identifying both the problem and the solution, they are now responsible for identifying the problem and identifying the people whose voices need to be heard. Who else needs to be here? How do I invite people who do not report to me? How do I invite people from outside our organization?
Success today is increasingly a result from skillful management of participation: who are included and who are not, who are excluded.
Another misunderstanding is that productivity will suffer if larger numbers of people are involved. The new social platforms and interaction technologies have dramatically reduced the cost of participation. Temporal communities can be formed to solve a problem or to tackle an opportunity easier, cheaper and faster than ever before – if people are invited and if people want to engage.
We all have the experience of teams discussing among themselves about what is working and not working. People often degenerate into blaming the parties that are not present. “If only the other group would get their act together!” This kind of thinking never produces learning, responsiveness and agility. Bringing more people into the conversation is essential. When you widen the circle of participation, you also widen the conceptual frame and the solution space.
“If there are enough eyeballs, all problems are shallow” as Linus Torvalds put it
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More on the subject: Lessons from wikipedia. A HBR blog post by Gartner.
