a new business ideology

“Ideas lead technology. Technology leads organizations. Organizations lead institutions. Then ideology brings up the rear, lagging all the rest—that’s when things really get set in concrete.”Charles Green

The following table shows how ideas, technology, organizations, and institutions are changing as we enter a network economy. There is now a need for a new business ideology.

network-era-change

Intangible Services

As our organizations become inter-networked, and relationships create more of our value, we have to pay attention to intangible value, much of it requiring implicit knowledge. Neither of these are easy to measure.

Today, intangible assets, like knowledge, are over 80% of current market value. Because intangible assets do not have to be shipped and stored like real assets do, they increase the volatility of the marketplace, with larger and more frequent fluctuations over perceived value. Unlike tangible assets, intangible assets can be lost and gained quite quickly. At the same time, we are witnessing that company lifespans are decreasing, which also increases market volatility.

intangible assets

“Intangible knowledge exchanges include strategic information, planning knowledge, process knowledge, technical know-how, collaborative design, policy development, etc., which flow around and support the core product and service value chain.

“Intangible benefits are advantages or favors that can be offered from one person to another. Examples might be offering to provide political support to someone. Or a research organization might ask someone to volunteer their time and expertise to a project in exchange for an intangible benefit of prestige by affiliation. These are intangible products that can be exchanged, as indeed people can and do trade favors to build relationships.” – Verna Allee

Emergent Practices

Best practices look to the past. By the time they are established, most people know them. They are obvious in hindsight. But how can we deal with new and complex problems? To deal with increasing complexity, organizations need to support emergent work practices, as part of organizational learning and knowledge-sharing. They must support collaboration, communication, synthesis, pattern recognition, and creative tension, all within a trusting environment in order to be effective.

Many best practices are self-evident. They’ve worked for years and address relatively simple systems. But the business issues that consume us are most likely complex. Instead of looking for best practices, we should take that time and money to invest in experiments and develop emergent practices from what is learned.

Transparency

“Transparency isn’t a choice. The only choice is does it happen to you or do you participate in it.”Alex Bogusky

Transparent work is the one of biggest opportunities we have in creating more effective organizations. Making management transparent also exposes any weaknesses in leadership. But more and more, workers know where the problems are because they have access to the data. They can see alternatives and find solutions blindingly fast on the web. The hard reality for business leaders is that in an inter-connected world, we need less management, not more.

Business value increases with transparency. Businesses that are open, transparent, and cooperative are more resilient because they rely on people, not processes. In a transparent environment, there are fewer ways to game the system. Knowledge networks function best when they are 1) based on openness, which 2) enables transparency, and 3) in turn fosters diversity – all of which reinforce the basic principle of openness. In such a transparent workplace, the role of management is to give workers a job worth doing, the tools to do it, recognition of a job well done and then let them manage themselves.

A socially networked business that enables open conversations around work can make better and faster decisions. But it is all based on trust, for without trust, there is no sharing. Transparency sets the stage for trust to develop.

Mass Customization

With the ease of digital publishing comes increased competition and no shortage of free content online. Content is not king. Context-free information, like this blog post, is given away. Value, especially in professional services, lies in customization for each client. The challenge is providing this highly contextualized service effectively and profitably. It is not easy but that is what a networked market demands. One approach is establishing more human relationships between seller and buyer and creating long-term relationships.

Decentralized & Dynamic

“It’s all about thriving in networks that are smarter and faster than you are. It’s all about being utterly screwed if you don’t know what I’m talking about.”Hugh MacLeod

Decentralized organizations are not yet the norm but we have many examples now. Very few organizations are truly open. The same ones keep getting cited: W.L. Gore, Automattic, Zappos, Semco SA. These are the innovators. There are others who are moving to a more cooperative work environment, where outside and inside are allowed to mix, without undo control. These are the early adopters. The majority of companies are still satisfied with improving internal collaboration and getting the job done, blind to the faster moving competition building up outside. Finally, the laggards are merely coordinating work, according to some timetable, oblivious to the end of the market era.
connected

Past strategies of optimizing current business processes or reducing costs can only marginally influence the organization’s overall performance. Faster market feedback challenges the organization’s ability to react to customer demand. Decision-making becomes paralyzed by process-based operations and the formal chain of command. In organizations focused on collaborating and coordinating, agility is almost non-existent.

Here is the organizational creed from Automattic:

“I will never stop learning. I won’t just work on things that are assigned to me. I know there’s no such thing as a status quo. I will build our business sustainably through passionate and loyal customers. I will never pass up an opportunity to help out a colleague, and I’ll remember the days before I knew everything. I am more motivated by impact than money, and I know that Open Source is one of the most powerful ideas of our generation. I will communicate as much as possible, because it’s the oxygen of a distributed company. I am in a marathon, not a sprint, and no matter how far away the goal is, the only way to get there is by putting one foot in front of another every day. Given time, there is no problem that’s insurmountable.” – Automattic

connected-company.001

Networked Professional Communities

This new world of work means that we all have to constantly dance between our work teams, communities, and networks. But when we are faced with a complex problem it’s too late to start engaging in a community of practice or building a knowledge network. These have to be in place beforehand. This approach is a challenge for many people who are too busy in their own workplace to look outside. But it is essential, and this is becoming clear to many business leaders.

As we learn in digital networks, stock (content) loses significance, while flow (conversation) becomes more important – the challenge becomes how to continuously weave the many bits of information and knowledge that pass by us each day. Conversations help us make sense. But we need diversity in our conversations or we become insular. We cannot predict what will emerge from continuous learning, co-creating & sharing at the individual, organizational and market level, but we do know it will make for more resilient organizations.

One method of supporting emergent work is the fostering of communities of practice. These connect the knowledge flows between our social networks and our work teams. A major a challenge in trying to ‘build’ a community of practice is that communication does not equal collaboration. Just because the communication tools are in place does not mean that people will automatically collaborate. One cannot really build a community, it has to emerge through practice, but organizations can put in systems and processes to support communities.

network-learning-modelA professional learning community, with its redundant connections, repetition of information and indirect communications, is a much more resilient system than any designed professional development program can be. Redundancy is also a good principal for supporting social learning diffusion. There is always more than one way to communicate or find something and just because something was blogged, tweeted or posted does not mean it will be understood and eventually internalized as actionable knowledge. The more complex or novel the idea, the more time it will take to be understood.

Network Management

The new ideology I have put forward is the principle of network management. It flips the principles of scientific management*, proposed by F.W. Taylor in 1911, on their head. The principle of network management is based on assumptions that most people want to do good work and that systemic barriers often block this. Performance improvement expert, Geary Rummler wrote that, “If you pit a good performer against a bad system, the system will win almost every time.”  Following the principle of network management can help design more human organizational systems, where performers are not pitted against the system.

It is only through innovative and contextual methods, the self-selection of the most appropriate tools and work conditions, and willing cooperation that more creative work can be fostered. The duty of being transparent in our work and sharing our knowledge rests with all workers, especially management.

*Endnote: “It is only through enforced standardization of methods, enforced adoption of the best implements and working conditions, and enforced cooperation that this faster work can be assured. And the duty of enforcing the adoption of standards and enforcing this cooperation rests with management alone.”
— Excerpt from Frederick Winslow Taylor’s ‘Principles of Scientific Management’ (1911)

One Response to “a new business ideology”

  1. jelt

    I love the table – very interesting to also see the make up of the S&P too. Of course if you look to recent stock valuations – its those companies with intangible assets like Facebook and Google that have no tangible assets – the so called FANG (Facebook, amazon, Netflix, Google) that are the strongest market performers and generating vast interest. But look to General Electric. Its share price barely moves and how many youngsters say they want to work at GE? Its simply not sexy and attractive. So my question is whether companies should change their culture to attract the would be employees of Google if not, how do they compete for talent that has grown up in the networked economy?

    Reply

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