Christmas Letter
December 23, 2011
2011 was a year of major breakthroughs. The creative economy is here and looks very different from what we have been used to. I try to sum up some of the most important findings of the year.
The industrial logic was most vividly captured in the idea of the value chain. Value creating activities were sequential, unidirectional and linear. In the model, value was not really created but added step by step. The output of one task was the input of another. The image of work was the assembly line, meaning that work could be fragmented and individual performance goals could be set for each worker. The world was all about people and boxes separated from one another.
Physical tasks can be broken up in a reductionist way. Bigger tasks can be divided by assigning people to different smaller parts of the whole. For intellectual tasks, it is much harder to find parts that make for an efficient division of labour. Intellectual tasks are by default linked and complex.
Reductionism does not work any more.
Knowledge workers are often put in a position where they have to negotiate some understanding of what they face. The same event means different things to different people. The cognitive opportunity lies in the fact that as we don’t all select the same things, we don’t all miss the same things. If we can pool our insights in a creative, enriching way we can thrive in the complex world we live in. The challenge is that people often treat the existence of multiple views as a symptom of a weakness and conflict rather than as an accurate and needed sign of uncertainty.
Higher performance occurs through the combination of different perspectives and supportive, enriching communication.
Social interactions also play a role in shaping our brain. Repeated experiences sculpt the synaptic connections and rewire the brain. Accordingly, our relationships gradually frame the neural circuitry. Being chronically depressed by others or being emotionally nourished and enriched has lifelong impacts. Our mental life is co-created in an interconnected network. The human mind is not located and stored in an individual. Rather, what we have called the individual mind is something that arises continuously in relationships between people.
Supportive, energizing and enabling patterns of interaction have proven to be the most important explanation behind creativity and business success. The quality of action is always constrained/enabled by the quality of the interaction. The lines between the boxes matter more than the boxes! Communication either accelerates or slows down. Communication either creates value or creates waste. Communication either creates energy and inspiration or demeans and demotivates.
Communication forms much more than informs.
What is now needed is to unlearn the reductionist organizing principles that are still the mainstream. Knowledge used to be understood as the internal property of an individual. Today knowledge should be seen as networked communication.
Work is interaction between interdependent people and the network is the amplifier, and at best a supportive and enriching enabler.
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The future of work – the way I see it
November 13, 2011
Technology does not determine social and organizational change, but it does create new opportunity spaces for social innovations like new employment forms. Partial employment for young unemployed people is becoming much easier than before, and truly global task-based work is becoming possible, perhaps for the first time in history.
The opportunity today 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 efforts that create tremendous value in a very new way. Coordinated value in the cases of helping Haiti or building Wikipedia type of platforms is the result of uncoordinated actions by a large number of individuals. People with different goals, different values and different motivations take part and co-create together.
The characteristics of the network economy are different from what we are used to: the industrial production of physical goods was financial capital-intensive, leading to centralized management and manufacturing facilities where you needed to be at during predetermined hours. The industrial era also created the shareholder capitalism we now experience. Having a great idea, or simply wanting to do something, was not enough to get one going. You needed a lot of money. In the network economy, individuals, interacting with each other by utilizing free or low cost social platforms and relatively cheap mobile, smart devices, can now create information products.
The production of information goods requires more human capital than financial capital. It is more about connecting with brains than connecting with money. And the good news is that you are not limited to the local supply. Work on information products does not need to be co-located. The architecture of work does not resemble a factory any more.
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 thinking is 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 ownership of means of production/smart devices and ubiquitous connectivity.
“A corporation/employer exists to make money and the employee goes to work for the employer to make money.” Almost all economic theories have made the same assumption: the employer – employee relationship is necessary to make work possible.
We have taken that relationship as given. The other taken for granted assumption is that it is the independent employer/manager who exercises freedom of choice in choosing the goals and designing the rules that the members of the organization are to follow. The employees of the organization are not seen autonomous, with a choice of their own, but are seen as rule-following, dependent entities. People are resources.
Dependence is the opposite of taking responsibility. It is getting the daily tasks that are given to you done, or at least out of the way. We are as used to the employer choosing the work objectives as we are used to the teacher choosing the learning objectives. The manager directs the way in which the employee engages with work, and manages the timing and duration of the work. This image of work is easy to grasp because it has been taught at school where the model is the same.
In contrast to the above, digital work has brought about circumstances in which the employee in effect chooses the purpose of work, voluntarily selects the tasks, determines the modes and timing of engagement, and designs the outcomes. The worker here might be said to be largely independent of some other person’s management, but is in effect interdependent. Interdependence here means that the worker is free to choose what tasks to take up, and when to take them up, but is not independent in the sense that she would not need to make the choice.
The interdependent, task-based worker negotiates her work based on her own purposes, not the goals of somebody else, and chooses her fellow workers based on her network, not a given organization. The aim is to do meaningful things with meaningful people utilizing networks and voluntary participation.
It is not the corporation that is in the center, but the intentions and choices of individuals. This view of work focuses attention on the way ordinary, everyday work-tasks enrich life and perpetually create the future through continuous learning.
The architecture of work is not the structure of a corporation, but the structure of the IT-network. The organization is not a given hierarchy, but an ongoing process of organizing. The basis of work is not financial self-interest, but people’s different and yet, complementary expectations of the future, conditioned by their accounts of the past and developed skills.
The factory logic of mass production forced people to come to where the work is. The crowdsourcing logic of mass communication makes it possible to distribute work to where the people are, no matter where on the globe they may be.
Knowledge work is not about jobs or job roles but about tasks. Most importantly knowledge work can, if we want, be human-centric. Through mobile smart devices and ubiquitous connectivity, we can create new opportunities and a better future for millions of unemployed people.
It is possible!
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Thank you Ralph Stacey, Doug Griffin and Yochai Benkler
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.
What it takes to get a job done
April 25, 2011
Physical tasks can normally be broken up in a reductionist way. Bigger tasks can be divided by assigning people to different smaller parts of the whole. For intellectual tasks, it is much harder to find parts that make for an efficient division of labour. Intellectual tasks are by default linked and complex. Reductionism does not work.
The machine metaphor led to the belief that if we only can arrange the parts in the right way, we optimize efficiency. When the image of work was the assembly line, work could be fragmented and individual performance goals could be set for each worker. The world was all about little boxes separated from one another.
The demands of work are different now: how efficient an organization is reflects the links people have with one another and the links they have to the contexts of value. How many handshakes separates them from one another and from the things that matter? We are beginning to see the world as relations.
When we talk about relations, we often take examples from nature: murmuration and bird flocks. The V shape of a bird flock does not result from one bird being selected as the leader, and the other birds lining up behind the leader. Instead, each bird’s behaviour is based on its position relative to nearby birds. Ornithologists say that the V shape is not planned or centrally determined; it emerges out of simple, and relatively few, rules of interaction. The bird flock demonstrates a striking feature of emergent phenomena. But the birds do not need to figure out the rules of flight that guide how they organize themselves. These rules are genetically hardwired. Nature provides this for the birds.
Birds then are not “free like birds”.
When it comes to people it is a different story. Mother nature does not provide deterministic rules for collaboration. We are free to choose, or not to choose, our own ways of doing things together. Accordingly we are ourselves responsible for formulating the principles we use to organize our life. Social systems are thus fundamentally different from natural mechanisms.
New architectures of work
We have examples of social architectures that redefine some basic beliefs about social systems.
The wiki is at the moment the best departure from division of labor and workflows. Wikis let people work digitally together the very same way they would work face-to-face. In a physical meeting, there are always more or less the wrong people present and the transaction costs are very high. Unlike email, which pushes copies of the same information to people to work or edit separately, a wiki pulls non co-located people together to work collaboratively, and with very low transaction costs. Email and physical meetings are excluding ways of doing things. They leave people out. A wiki (depending on the topic, the context) is always inviting and including. The goal is to enable groups to form around shared contexts without preset organizational walls, or rules of engagement.
Ward Cunningham described his invention in 1995 as the simplest online database that could possibly work. An important principle of the wiki is the conscious emphasis on using as little structure as possible to get the job done. A wiki does not force hierarchy on the people. In this case, less structure and less hierarchy mean less transaction costs. A wiki always starts out flat, with all the pages on the same level. This allows people to dynamically create the organization and hierarchy that makes most sense in the situation at hand to get the job done.
People work together to reach a balance of different viewpoints through interaction as they iterate the content of work. The wiki way of working is essentially the digital and more advanced version of a meeting or a workshop. It enables multiple people to inhabit the same space, see the same thing and participate freely. Some might just listen, some make comments or a small edits, while others might make more significant contributions and conclusions.
New work is about responsive, free and voluntary participation by people who contribute as little, or as much as they like, and who are motivated by something much more elusive than only money. The society has moved away from the era of boxes to the time of networks and linked individualism. Being connected to people – from elsewhere – is a cultural necessity and links, not boxes, are the new texture of value creation.
Organizations are their communicative performance.
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Thank you R. Keith Sawyer, Stewart Mader, Robert Cummings, Rod Collins, Doug Griffin, Kim Weckström, Richard Harper and Yochai Benkler
More on the subject: Center for Network Culture. The Agile Manifesto. About Ushahidis. Zen habits. Examples of wikis.
The problem with the iPad and Facebook
April 17, 2011
I loved Napster.
I saw Napster as a fundamentally important social innovation when it came out in 1999. These thoughts were brought to my mind as I recently heard of Shawn Fanning and his new venture.
The original Internet was designed as a peer-to-peer system, like Napster was. Up until around 1993, the Internet had only one model of connectivity. Computers were assumed to be always on and always connected. The goal of the original Arpanet after 1969 was to share computing resources through integrating networks and allowing every host to be an equal player. Any two computers on the Internet could send packets to each other. Firewalls were unknown and communication patterns were by default symmetric.
Reach together with symmetry and equality were the things that made the Internet such a radical social innovation.
The explosion of the Internet in 1993 – 1994 was largely the result of the web browser and a different logic: the client-server protocol. The client initiates a connection to a known server, asks a question, downloads the answer and disconnects. The device running the client doesn’t need to have a permanent address. It does not even need to be always on. This is the reason why broadband providers gave us asymmetric bandwidth. More bandwidth is offered when getting data from the Internet than when sending data to it. The assumption was that the majority of users want to download and consume, not upload and produce.
It was not about symmetry and equality any more.
The client-server model was not the only development that changed usage patterns. The original model was transformed even more as a result of firewalls. Now the hosts of the network could not talk freely to other hosts because of firewalls creating obstacles to communication.
One of the most common and widely spread social developments is people being able to be their own authors and publishers. What Napster did was a different and likewise revolutionary social innovation. It came up with a third alternative, a new logic between producing and consuming: every computer in the network was used as a re-publisher and curator.
The assumption that there were few publishers and many consumers did not hold any more. Napster changed the flow of data.
The real genius of Napster was the way it made collaboration automatic. By default, a consumer of files was also a producer of files for the network. Once somebody downloaded a file, her machine was available to pass along the file to other users when needed. A central addressing authority connected the nodes of the network and then after that left everything else to take place by itself.
The totally transparent architecture produced value as a by-product of people getting what they wanted. No altruistic sharing motives were needed
Napster was a very decentralized system with some important centralized elements. In a decentralized system every host in the system is an equal participant. No hosts have facilitating or administrative roles. But Napster was also a search engine. It maintained a master song list adding and removing songs as individual users came online. This created redundancy and led to a high probability that a given file could be found although the probability of a given user being online is very low. As a result the contribution of one individual is very small but the collaborative interaction of the group creates tremendous value.
In a centralized, hierarchical system, coordination between peers is controlled and mediated by a central server, one host. A modern version of a hierarchical system transfers some coordination responsibility down from the centre to a tree-like architecture of coordinators. In this model, peers are organized into groups, where a local manager/host mediates communication between peers in the same group, but communication between peers in different groups is passed upwards to a higher level manager. This is essentially the way firms operate today.
Ronald Coase developed the concept of transaction costs. These are the costs of coordinating actions and the costs of interacting and contracting. When it is cheaper to do this inside a formal organization than as a network of more or less independent parties, organizations will form and prevail.
The reverse side of the Coasean theory is even more interesting. As transaction costs outside the organization fall as a result of technological and societal advance, the reasons for formal coming together dissolve. This leads to the organization becoming outdated, unless it can simplify its processes significantly. The big challenge for many organizations is to do things in a much, much simpler and more responsive way. The sad truth is that it is easier for managers to grasp the threat of competition than the risk of simply becoming obsolete.
In theory, if transaction costs in society at large become low enough, there will be no hierarchical, formal organizations as we have known them. The transaction costs of forming and maintaining these types of organizations are higher than the transaction costs of the alternative ways of creating the same value. The traditional hierarchical and formal organization is just too complicated, slow, and far too costly as a system. Unfortunately, the mainstream business schools haven’t figured this out yet. They still keep on teaching yesterday’s pricey way of doing things.
Peer-to-peer is an architectural model that is much more interesting, but also much more demanding, than the dominant client-server models. I believe that Napster gave us a glimpse of the future. The architecture it pioneered is going to be a viable model for the agile value constellations of the very near future.
Client-server is not the only truth and Facebook is (just) a modern version of a Telco. Facebook is not the same as the Internet.
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Thank you Larry Lessig, Clay Shirky and Andy Oram
More on the subject: The early history of the Internet. Blog post by Doc Searls. Blog Napsterization.org. On personal data. Personal leverage for personal data by Doc Searls. On user-centric identity. Blog post by Venessa Miemis.
Enterprise 2.0
February 8, 2010
Corporations are the dominant mechanism by which economic activity is organized in our economies. How companies perform and what helps them to perform better are hence questions of huge importance. Corporations have such an enormous influence on our lives that corporate decision-making and actions might well deserve more attention right now than does discussing the new Enterprise 2.0 tools. Or, to put it in another way: what kind of changes in our corporate thinking would enable maximum benefits to be gained from social media?
One key question in corporate governance is, who should have the right to make what decisions, and why.
Instead of thinking that we already know the answer, let’s look at what is going on. Companies that focus on their share price, which is the business press doctrine, have the incentive to shut down, or move operations that are not generating the best possible profits for their shareholders, even though those operations are still generating substantial economic value in the area they are located in.
From the point of view of the people who are employed, and the society where those corporations are located, this is obviously not very efficient. I am not against globalization, quite the contrary, but it is doubtful whether maximizing the value of shares, maximizes social wealth. Can it be that the idea of companies’ “raison d étre” being the maximizing of shareholder value is a dangerously incomplete performance standard in post-industrial economies?
I am not suggesting at all that firms should serve all their stakeholders, or even society at large. I am certainly not talking about social responsibility here. What I am claiming is that there are other parties, other than shareholders, who have made an investment in the enterprise. In order to understand this, we should start by asking who is contributing to the enterprise, and what, and who is bearing what risk.
The question I am raising here is whether we can think of employees as labour any more. It matters in a very specific way who does what. The contributions of knowledge workers cannot be understood as fixed-wage generic inputs, but they can easily be understood as risk investments, in the very same way as we today understand shareholders’ financial contributions. We should ask whether the current social construct of allocating risks and rewards is inevitable for some reason, or whether it is an outdated industrial artefact that should be redesigned?
A large part of the economic surplus that a company creates is paid to the employees as wages. This is treated as an operating cost. Naturally, costs should be lowered. The picture would look somewhat different if we understood employees as being investors of human capital, and treated them accordingly. Our system of industrial management creates a systemic inefficiency in knowledge-based work. It can only be removed if the worker’s role included a more active (managerial) responsibility leading to responsive, agile practices. This cannot be achieved unless our mental construct of the employer employee relationship changes radically.
The change would mean that employees would explicitly bear the entrepreneurial accountability for the success or failure of the company, as they do any way and additionally benefit from any possible upside, just as shareholders do. From the point of view of corporate governance, it would mean that companies should be run in the interests of their employees, as much as in the interests of their owners.
To be honest, I don’t think that Enterprise 2.0 has that many employees, more contributors of different resources – mainly financial capital and human capital. Some investors invest for a long term, some for a very short term.
Thank you Gary Becker, Margaret Blair and Yochai Benkler
From who I am to what I do, and back
February 7, 2010
It is astonishing to realize that until quite recently, most human beings lacked a concept that is so obvious to all of us: earning money. The vast majority of people lived on the land. A peasant worked all day. He probably had a little money, but that was not what he worked for. He worked because life was work and work was life. It was as simple as that. A peasant did not have a job for which he was paid. Nor could he quit his work and take another position that was more highly paid, if one were offered. People were tied to the land they were born on. As they worked for the land, they worked for themselves and for the landowner, if they did not own the land.
The situation was fairly similar from the landowner’s point of view. The landowners also worked for the land, not for the money. The expectation was not to lose any of the land. The means they had in their possession to increase their resources were limited: cultivate the land, have children, marry in return for increases in the amount of land they owned, or fight other land owners whose land they wanted.
The explanation of Aristotle
Aristotle had interesting ideas to explain what was going on. According to him, the basic economic activities are domestic. This involved the production and consumption of all the things human beings needed in order to live. This is what Aristotle called “Oikos”, meaning a house. It was about house-holding, a kind of an entrepreneurial calling for the wellbeing of the family. “Oikos” together with another word “Nomos”, roughly meaning laws, are the ancient Greek backgrounds to our concept of “Economy”.
Aristotle makes a distinction between two kinds of value added – one that we get from nature’s resources to sustain our lives, and another, which we create to facilitate our interpersonal relationships and trade. The value added in the latter does not begin from nature, but from the promises we make to one another.
The first, for Aristotle, includes things like wood, animals, tools, stones for houses, yarn for weaving etc., and the second is – money. The interesting thing was that the essence of money was to him a promise!
The economy based on promises
There are limits to what we can get from nature, but, according to Aristotle, since money is promises, there is no end to the amount of money we can aspire to collect. What is special about money, Aristotle says, is, that its value is set by agreement. It has no intrinsic use value, only an exchange value, and it keeps that value only as long as people agree to accept it in payment. It is a convention of trust.
Therefore it is understandable that the system of trust always seeks a limit until it reaches a point where promises are not believed any more. This is the point at which fear replaces trust. After that limit is reached, the result is a rapid, sudden and deep drop, a (credit) crunch. The whole house of cards crashes, because it is made of promises that don’t have any value any more. The hot air turns into – just air.
The change that has taken place in a fairly short period of time in history has been remarkable. Money was invisible then, today it is omnipresent. Work existed then as it exists now, but the idea of work being life and life being work has disappeared. We mostly work to earn a living. We even dream of the day when we don’t need to work any more, in order to have time to really live. Work and life, instead of being inseparable parts of our lives, have become conflicting, almost contradictory ideas.
Separating work and life
Adam Smith, in the Wealth of Nations, which was published in 1776, was one of the first to write about what we are experiencing now. He gave form to a new phenomenon: the labour market. In a sense, before he named it and before he explained how it worked, it did not exist. In a situation where life is work and work is life, a man cannot separate his work from himself. Adam Smith claimed that labour is something separate from the worker. This was the point at which work and life separated. It was no longer about who I am, but what I do. Labour was the new resource of the industrial age. As a resource, labour could now be bought and sold like any other resource. In fact, everything has been for sale since then. The emphasis of the economy shifted to trade, buying and selling, and away from (domestic) work. The sign of efficiency was now profit, which was measured in money. Thus the modern world came about.
This led to the situation we are in at present: buying and selling are no longer confined to resources, to trade. The world economy mostly consists of buying and selling money, buying and selling promises according to Aristotle. We believe that this is the natural order of things. Perhaps it is. But we should not forget that only about two centuries ago, it was not thought to be the natural order. It would be interesting to know what the situation we are in at the moment will look like two centuries from now.
The time after labour markets
Adam Smith is not helpful any more. We know now that the inputs of knowledge workers cannot be understood as generic labour. It matters more and more who does what, when, and with whom. The concept of a job role is giving way to tasks as the unit of value creation. Labour markets are turning into task markets. We also know that in the era of creativity and knowledge intensive work, the peasants are also the landowners. What is missing is a new theory explaining what is going on. Perhaps the future is going to look a bit like the past, not our industrial past, but the time before that. Perhaps the theory of social media and the Internet comes from ancient Greece. Perhaps Yochai Benkler is the new Adam Smith. Anyway, in social media, it is not what we do, but who we are.
Life and work have come together again.
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Thank you Charles van Doren, Stephen B Young and Douglas @rushkoff
Interactive value creation
December 4, 2009
The division of labor reduces organizational effort and the cost of work. The division of labor also increases the quality of efforts through specialization. For this reason all societies and all enterprises are heading, at least to some extent, towards specialism. The assumption has been that the further the division is carried, the greater are the savings and the better the quality of the contributions. This has led managers to focus on the efficiency of activities separated from other activities and organizational design and management are seen as the planning and execution of a collection of independent activities forming the organizational system.
The function of the line manager was accordingly to be the representative of his box, his domain of action and resources. The manager enjoyed a high degree of autonomy and was accountable only for that domain. The grounding principle in practice was: “Don’t tread on my grass, and I won’t tread on yours”.
From action to interaction
As demands for higher value and creativity are the norm today and the complexity of offerings has grown, we have begun to see that the division of labor has reached its point of diminishing returns. What managers have learnt is that the division of labor always implies a scheme of interaction by which the different divided activities are made to work together. The lines between the boxes are starting to matter more than the boxes! Complex value creation is impossible without interaction. This is because any higher-value activity involves complementary, often parallel, contributions from more than one person or one team. In fact, the more complex the offering is and the more specialized the resources needed, the greater the demand for the amount, quality and efficiency of communication, because of the inherent interdependence of the activities.
One-dimensional approaches to interaction have involved top-down command-and-control or sequential workflow-based communication, where the action of one part is meant to set off the action of another. Interaction has thus been seen as one-way signals, a system of senders and receivers (Shannon and Weaver 1948). These approaches seemed to work in simple, low-value environments, but are not creating the desired results any more. What managers have lately found out is that in the pursuit of higher value and when facing the growing demands of complex offerings the value of actions is limited by the value of the interaction. The two are mutually dependent
Activities and interaction are mutually dependent
A system of partial activities that go into the completion of the total offering always implies a scheme of interaction among the persons concerned. If the scheme of activities changes, even somewhat, the scheme of interaction should change too. As the two are mutually dependent, it means accordingly that if there are changes in interaction, so the activities will change.
The mainstream management paradigm is based on the presupposition that activities are the independent, governing factors and the scheme of interaction conforms to the planned division of labor as a secondary feature. The organizational structure, as a number of independent activities, comes first. Then an appropriate system of co-ordination and communication is put into effect. If, however, action and interaction are mutually dependent, it means that low-quality interaction leads to activities that are poorer than planned, just as enriching, high-quality interaction may lead to higher-value activities than planned.
We need to understand how the present ways of dividing labor have been historically based on a very different communications environment than the one we are living in at present. The earlier high cost of coordination and communication is the reason behind many of the organizational forms that are taken for granted and which we still experience. The digital world we live in today is totally different when it comes to the transaction costs associated with coordination and communication and allows us to experiment with totally new value creation architectures.
Managing the scheme of interaction – creating a social media/communication strategy
The activity systems and units of activity can no longer be seen as a collection of independent activities and independent high-performing specialists. There are, however, many challenges ahead if we adopt the way of thinking of seeing interaction as the governing factor in organizations. One of the challenges is our language. That is the way we speak about work following the system of subjects and predicates. Our language of work is geared towards handling one independent factor and one dependent factor at a time: “someone is doing something to somebody”. Linear causes and effects, rather than thinking in terms of mutual interdependence and non-linearity, are built into our management speech. And yet, a situation that can be described accurately in terms of linear, rational causes and effects is the least common one in social contexts. An organization consisting of people is always a social network following a different logic – complex causality. Organizations as social activity processes are about interdependent people working in complex interaction.
If we take this view, it means that people and actions are simultaneously forming and being formed by each other at the same time, all the time, in interaction. Instead of thinking in terms of spatial metaphors, of organizational levels, boxes and lines, this explanation focuses attention on how the actions of people create patterns in time following a very different approach to communication than the sender receiver model.
Organizations seen as patterns of interaction
Organizations can be described as patterns of communicative interaction between interdependent individuals. All interacting imposes constraints on those relating, while at the same time enabling those people to do what they could not otherwise do. Supportive, inspirational, energizing and enabling patterns of interaction are the most important raison d´être of working and being together. If we see interaction as the governing factor and see organizations and organizing as relationships between interdependent people, our methods of sense making need to change. Social interaction does not follow linear causality, seen as a system of senders and receivers, but is fundamentally non-linear, responsive and complex. Following this logic, organizations today and information-based value creation in general can only be understood if seen as complex, communicative patterns of mainly digital interaction.
Back from interaction to action
Resource allocation has always been one of the main tasks of management: planning what is to be done by whom and by when. In integrated systems and with homogeneous resources, this allocation can easily be performed top-down and in advance. Planning can take place separately from action. When knowledge resources are the decisive factors of value creation and when work takes place in digital, global, decentralized environments, this top-down process is increasingly inefficient. A manager cannot know who knows best or where the most valuable contributions could come from. The solution has been so far to try to “know what we know”, and, even more importantly, try to “know who knows”. Neither of these approaches has quite fulfilled expectations. Knowledge databases have not met the situational needs of their users. Accordingly, people have not been able to explain what they know to others or even to themselves in a meaningful way
Because of the aforementioned growing needs in daily organizational life a new, different approach has to be adopted. One could even claim that a new mode of knowledge based production is now emerging in, and because of, the digital networked environments. The most important platforms for the new production systems are social media platforms.
This new production method refers to a new economic phenomenon: people from the whole network contribute pieces of their time and expertise to tasks, emergently, according to their interests, availability and experience, working in a transparent, open environment. This method has systemic advantages over traditional production hierarchies when the work in progress is mainly immaterial in nature and the capital investment involved can be distributed. For most knowledge-based products and services, this kind of production is the most efficient method of creating value from a resource allocation point of view.
The system is developed as much in a bottom-up manner as a top-down one. In a top-down system everything is created and provided by the organization to the user. The user has no or very little control over what services, information and people are available to him. Instead of forcing people into predetermined groups in the way groupware does, social media facilitate the natural formation of groups based on spontaneous, contextual needs for interaction. In social media, people affiliate through personal choice and need. Understanding this difference in community formation is crucial for building self-sustaining, dynamic communities.
A Wiki is a typical knowledge production medium, a platform for interdependent people to work in parallel interaction. A Wiki provides the most efficient way for a group of people to contribute, edit and interact with information that is meant to be shared. A Wiki can be seen as a way to create and iterate collective information, thus developing shared iterative learning. It’s about making visible what has been learnt and the road that leads to it. This leads to a better sharing of experiences, use of skills and utilization of the total number of brains in the network.
The primary goals are increasing the value and quality of information and the value and quality of interaction and at the same time lowering the transaction costs associated with information and interaction. Even more importantly, open interaction platforms such as Wikis are a medium for sharing what we would like to know next, where we would like to go, and what we would like to explore. A Wiki is a medium for continuous, creative learning. This thinking is based on a belief that everything can and should develop in iterative interaction among the network of users. In practice it means voicing questions and concerns for others to answer of their own free will: the small deviations, the small questions that we don’t normally pay much attention to or have time to explore. These are, however, the starting points for change, improvements and learning. There is a shift in thinking from sharing what we know to sharing what we don’t know.
All organizations essentially operate like Wikis. Every organization has it’s own language, resulting in a unique, iterative understanding of concepts, terms and ongoing sense making. There is always a lot of information that is continuously evolving in the “encyclopaedia” of an organization. The articles are things like strategies, customer databases, product information and manuals.
Interactive, iterative work
In these kinds of contexts, information artifacts that don’t connect with ongoing live conversations are often of less value, even obsolete and most probably out of date. Because of this, we are now moving away from a focus on content to a focus on conversations. Content should be seen as the by-product of conversation. Perhaps in the future of digital work IT will not mean Information Technologies, but Interaction Technologies.
This view focuses attention on the way in which daily, mainly digitally mediated communication between people organises value creation and, at the same time, creates value. An organisation should today be understood as complex, self-organising, iterative patterns of interaction, through which both continuity and innovation emerge as patterns in time.
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