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.
Complexity, patterns and links
March 27, 2012
The mainstream ways of thinking about management are based on the sciences of certainty. The whole system of strategic choice, goal setting and choosing actions to reach the given goals in a controlled way depends on predictability. The problem is that this familiar causal foundation cannot explain the reality we face. Almost daily, we experience the inability of people to choose what happens in their organizations – or in their countries. We live in a complex world. Things may appear orderly over time, but are inherently unpredictable.
Complexity refers to a pattern, a movement in time that is at the same time predictable and unpredictable, knowable and unknowable. Healthy, ordinary, everyday life is always complex, no matter what the situation is. There is absolutely no linearity in the world of human beings.
Human patterns that lose this complexity become repetitive and rapidly inappropriate for dealing with life. Unlike mechanical systems, human systems thrive on variety and diversity. An exact replication of behavior in nature would be disastrous and seen as neurotic in social life. For example, a failing heart is typically characterized by increasing loss of complexity.
A pattern is something that emerges through the complex interactions between elements in a system. Although there is apparent order, there is never exact repetition if the system is viable. This is why human interaction cannot be understood as processes in the way they were used in manufacturing, but as patterns.
Patterns that are more repetitive are normally called routines or habits. This conclusion is important for us. Novelty emerges in a radically unpredictable way. Creativity is seldom the end result of a repetitive process.
The Internet changes the patterns of connectivity, transforms our understanding what “local” is, and makes possible wide participation and new enriching variety in interaction. By relying on the interactions of millions of people instead of a few experts/managers to classify content on the net, Google democratized scientific citation indexing. To be able to manage the increasingly complex organizations of today, the same kind of democratization needs to take place in the corporate world. Companies are transforming themselves from industrial mass production to creating value in networks of mass communication.
Transparency of tasks is the corporate equivalent of publishing academic articles. Responsive linking, rather than predictive linking such as in corporate hierarchies and process charts, acts as a measure of relevance, control and value. This has served the academic community well. It made Sergey Brin and Larry Page billionaires. Now is the time to do the same in the corporate world.
The Google lesson for management is, that the more work is based on responsive, democratic processes of relating and the more organizing is an ongoing process of communicative linking, the more value we can create!
It is now time for the sciences of uncertainty.
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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.
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“
Networked thoughts and networked emotions
December 5, 2011
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.
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Thank you Barry Nalebuff, Adam Brandenburger, Marcial Losada, John Gottman 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
Start-ups in the networked information economy
September 6, 2011
Corporations are the dominant mechanism by which economic activity is organized in developed countries. Whether there are opportunities for leaner and more agile approaches to value creation in the corporate context, is hence a key question for the prosperity and well-being in the society.
The big move we are in the midst of is towards an economy that is more centered on information products than physical products. Examples of this are financial services, professional services in general and software.
The second transformative change is global access to relatively cheap and relatively high quality communication networks.
New communication technologies have always had a strong impact on the production of information. But this time the societal changes are huge. The Internet is the first communication environment that decentralizes the financial capital requirements of producing information. Much of the capital is not only distributed but also largely owned by the end users. Network servers are not very different from the computers we have at home. This is a complete departure from the model of TV broadcast stations and televisions.
The characteristics of the new economy are different from what we are used to: the production of physical goods was (financial) capital-intensive, leading to centralized management structures and the shareholder capitalism we now experience. The production of information goods always requires more human capital than financial capital. It is much more about finding brains than finding money. But the good news is that you are not limited to the local supply. Work on information products does not need to be co-located. If the task at hand is inviting and compelling, human capital investments can come from any part of the network.
This is why decentralized action plays a much more important role today than ever before. The architecture of work is the network and the basic unit of work is not a process or a job role but a task.
Our management and organizational approaches are derived from the era of tangible goods production and high-cost/low-quality communications. These mindsets are not helpful in a world of widely distributed value creation and ubiquitous connectivity.
The opportunity is in new relational forms that don’t mimic the governance models of industrial, hierarchical firms. We are already witnessing the rise of very large-scale collaborative efforts that create tremendous value. Coordinated value in these cases is the result of uncoordinated actions by a large number of individuals with different goals, different values and different motivations to take part.
The financial capital constraints on action meant that having a great idea, or simply wanting to do something, was not enough to get one going and trying it out. In the networked economy, information products can now be created and co-created in a human-centric way, by interdependent individuals, interacting with each other by utilizing free or low cost social media.
Technology does not determine social and organizational change, but it does create new opportunity spaces for new social practices. Some things are becoming much easier than before and some things are becoming possible, perhaps for the first time.
Pitching in the world that is built on the centrality of information and radical decentralization of intelligence may be more about justifying human capital investments than justifying financial investments. Perhaps start-ups in the future won’t even seek to create jobs at all because of their industrial-era nature, but may see themselves as platforms for all kinds of contributions from all over the network they are an active part of.
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Thank you Margaret Blair and Yochai Benkler
More on the subject: The work of Yochai Benkler. The Atlantic on progress in life and job careers. A TED video on unintended consequences. Steve Blank´s great post on start-ups. Irving Wladawsky-Berger´s post on new style of working. Luis Suarez writing about the social enterprise. GigaOM: Do we need defined hours of work any more? The Atlantic: A Jobs Plan for the Post-Cubicle Economy. “From a container to a platform”; @Joi Ito’s blog post @ the MIT Media Lab. A very nice Cisco ad.
Communication as crowdsourcing
October 6, 2010
Communication constitutes reality. Communication is said to be the primary process by which human life is experienced: how we communicate creates and forms our experiences. Accordingly social life consists of dynamic interaction processes rather than stable structures. Therefore the way we communicate is of great interest. Where then do our communication-related habits come from?
We saw communication as a process of senders and receivers. The mass audience was seen as passive receivers and easily influenced by the media. The audience today is very different. Individuals have access to modes of communication that, just a few years ago, were available only for people working inside media channels. Most importantly the mathematical theory of communication, the concept of senders and receivers is not only unhelpful, but has been proven to be plain wrong in human communication!
Private and public modes of communication
Two distinct modes of communication have emerged and spread since the invention of the telegraph. The first mode was private point-to-point communication that was meant to connect people. The original telegraph was the classic example. It’s more developed form, the telephone, made synchronous communication between individuals on a global scale one of the defining technologies of the modern society.
The second mode was the public broadcasting of content. These two approaches to communication were advanced significantly by a series of innovations resulting in media technologies being perhaps the most socially disruptive developments of the past century, but the basic division into the two modes of private point-to-point and public broadcasting has remained essentially the same until now.
Thomas Edison filed a patent claim in the autumn of 1888 for a device, which, according to him “does for the eye what the phonograph does for the ear.” The kinetoscope as it was called, carried a long spiral of tiny images that could be viewed in a moving sequence by turning a crank and peering through a magnifying glass. Edison’s vision of this new technology was quite quickly taken over by people who saw motion pictures not as a personal experience but as a publicly broadcasted mass media.
In the US the primary financing for radio and TV broadcast stations came very quickly from airtime used for advertising. In other countries, different models emerged. In Europe radio/TV was funded largely through license fees paid by radio/TV set owners. This model was grounded in the belief that radio/TV is a political voice that should serve the interest of the “people” and not the interest of making a profit.
The broadcasting model of communication was now turned into the property of either advertisers or politicians.
This was because of the inherited way of thinking about people’s actions. We have two major ways of understanding why people behave the way they do. On the one hand, there is the causal explanation. People change because of external forces. People can be influenced, educated, motivated or even forced to change their behaviour. This is the causal thinking of mainstream management theory: I send you a message and you act. I steer you and your use of time.
Complex responsiveness
On the other hand, there is the assumption of agency based on response-ability and responsiveness. Instead of seeing the audience as an undifferentiated, passive mass, we understand the audience as a network of people, forming small groups and larger communities. The commercial and political interest to broadcasting was a result from the belief that the media can mold masses. In contrast to earlier thinking, the society is today seen to consist of numerous differentiated communities, each with own values and interests. All media content is interpreted within the community according to social sense making within the group. The individuals are influenced more by their peers than by media. Meaning is not in the message, but is produced in interaction. Different people will understand what they view and read in very different ways.
Private broadcasting that connects people
A new, third form of communication in the digital, networked world combines broadcasting and point-to-point. The means of broadcasting are today available for individual people. They are not only the property of institutions. The audience for this new form of private broadcasting is not a passive mass, but the emerging, active communities that the individual wants to reach and connect with.
In it’s most basic form, responsive communication involves a three-part relationship: an initial broadcasted gesture from one individual, leaving it free who in the audience acts on the gesture, a voluntary response to that gesture by another, and resulting crowdsourced activity. Meaning here does not reside solely in any one of these parts but in the relationship of all three.
The passive audience view suggested that people are easily influenced by the media. The active audience view thinks that people make active decisions about how to aggregate, and how to respond. The mass society theories subscribed to the passive conception of the audience and public broadcasting. It is time now to subscribe to an active, responsive notion of the audience and the possibility of private broadcasting.
A transformative, third mode of communication is here.
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Thank you Robert Friedel, Kenneth Gergen, Stephen Littlejohn, Stowe Boyd, Doug Griffin, Clay Shirky, Kim Weckström and Jeff Jarvis
More on this: confused of calcutta and Using communication tools as a form of “co-presence” (The New York Times). Changing communication patterns.
