January 06, 2016

Companies Struggle to Understand the Phenomenon of Networking

by Digitalization, Industry Trends and Technology, Point-of-View

Originally published in OpusCapita Journal.

“The democratization of technological opportunities means that we are entering an era of unprecedented possibilities. Ideas matter more than money, and as there are more people with good ideas than there are people with money, new opportunity spaces are being created. To succeed in the new, networked economy, corporations need to expand their view outside their own walls – to interaction and above all to high-quality relations.”

These are the words of Esko Kilpi, who studies the current transformation of work from three angles: as a researcher, a teacher, and an executive adviser. He has decades of international experience as an expert in knowledge work and digital transformation. We asked him to share his views on the ongoing and accelerating transformation of work.

“Those companies that are able to adapt their processes now will gain a significant competitive advantage. I believe many companies have a vast amount of learning debt. The gap between those companies that are already utilizing the new opportunities and those that are only thinking about their digital strategies is growing all the time in leaps and bounds.”

Kilpi emphasizes that the ongoing transformation is not in essence about the technological innovations but about the opportunity spaces it creates for new social practices.

To benefit from these opportunities, both individuals and companies need to break the so-called functional fixedness that prevents them from seeing nothing but the most obvious uses for the new tools. The same goes for our idea of work.

“Work is no longer about having a fixed role in a company nor is it about the tasks given to you. The future of work is in solving problems and spotting opportunities in creative interaction with other people. Individual skills will not suffice, as both work and learning, creating value and knowledge, happen in networks.”

In the mass-market economy, the focus has been on creating a quality product and then scaling up the business volume for larger profits. Esko Kilpi points out that in the new economy, enterprises need to integrate their entire network around the needs of each individual customer context. With the disruptive technologies and the fact that small actors can now orchestrate very large networks of assets, it is possible to provide solutions for very specific needs.

“Also the resources, or the excess capacity, can be used in a much more sustainable and flexible way than before. Accommodation-sharing service Airbnb and taxi company Uber are prime examples.”

Kilpi believes that in the coming years the change will become obvious also in the more traditional, manufacturing industry sectors.

“With 3D printing technology and a skilled network anyone can set up a factory, for example. We are entering an on-demand world also in this area.”

“Adapting the interactive model is not as easy as identifying customer segments or a niche market, and then passing on the dialogue with the customer to the sales and marketing department. The on-demand chain means continuous on-demand learning and continuous change.”

What is fundamental in this transformation is that in the make-and-sell model, the key to success was the individual assets and skills of a company or an entrepreneur, whereas now it is the high-quality relationships and the network they work from.

Imagine an organization that would make it possible for 10 million people from all over the world to work together for 10 minutes.”

This experiment proves that the nature of organizations is changing. And this idea has not been plucked out of thin air: for example, the photographs sent from NASA’s Mars rover were processed using this kind of project.

According to Kilpi, company managers struggle to understand this phenomenon of networking. A world where the current hierarchical organizational structure is the solution will no longer exist soon, and the skills needed to own and manage physical assets and subordinates are no longer valid.

“To put it bluntly, industrial workers used to do what they were told to, while knowledge workers create solutions in active interaction with their peers. Management needs to focus on facilitating these interactions. Individual workers’ careers will outreach the boundaries of organizations, and this will profoundly change our way of thinking. People come first, creating a revolution in work-related social structures.”

Whenever the transformation of knowledge work is discussed, threats and the fear of jobs disappearing hit the headlines. And it’s no wonder that the figures frighten us. A new report by the World Economy Forum predicts that 7.1 million jobs will disappear by 2020, while only 2 million new jobs will be created to replace these.

“The fact is that we are in a situation in which old jobs disappear faster than new ones are created. And this is undoubtedly a mammoth problem for individuals and society. We do not have the full mental capacity to deal with this change and society is unable to offer the necessary safety nets,” says Esko Kilpi.

Technological development previously replaced physical strength. Now, in the current transformation, it is replacing cognitive strength, human thought. Tasks which are defined as repetitive, algorithm chains of actions can be automated and given to computers – and there is no question, computers do the job much faster and more accurately than humans.

“These algorithmic tasks were not meant for people in the first place,” says Kilpi who would like discussions to emphasize the way in which the developing technology and equipment could, in fact, support a genuinely human-centered way of working.

“This is not a zero-sum game or an either/or situation. Human beings have since time immemorial invented and used tools, which is the basis for the collective intelligence of our societies today. As technology changes, so do people and what people do. When it comes down to it, work is always based on the interaction of people who need each other.”

Industrialization transformed the relationship between workers and their tools. The industrial tools became so large and expensive that workers were no longer able to own them. The capital-intensive industrial era created the dichotomy of employers and employees and led to centralized management and manufacturing facilities with predetermined working hours and time cards.

“In the industrial age, organizations outlived workers. Organizations came first, and people served the organizations. Now, in the creative era, the workers’ careers will outreach the boundaries of organizations, profoundly challenging our way of thinking,” says Esko Kilpi.

New technology – the ever-increasing processing power of computers, accessible through cloud services and smartphones, for example – makes it possible for individuals to interact with each other, voluntarily, to create value utilizing platforms and apps with the mobile devices they own themselves, outside large corporate groups.

“This creates unprecedented possibilities. Some things are becoming much easier than before and some things are becoming possible, perhaps for the first time. The vibrant start-up culture proves this point.”

But how to adapt to the transformation of work? Graduates today will most probably end up working in new ways and in job types and specialties that didn’t even exist when they entered the lecture halls for the first time. Kilpi believes it is likely that the current industrial age ideal where people are experts in one field will be replaced by expertise in two or three fields. It’s about time that we started making the lifelong learning mantra, which we have been repeating for a long time, into a reality.

“This will be a challenge for our educational systems as well as companies’ skills development. We need to be able to access education quickly and easily, and at any time of our lives.”

Kilpi also points out that the new opportunities of the network economy bring new responsibilities. Companies will not manage their employees’ long-time careers anymore.

“Individual workers need to become their own HRD professionals. We are each responsible for constructing the narrative of our working life: knowing what to contribute, when to change course and how to keep engaged.”

“The world has never been a more networked place, and yet education and workplaces focus on individuals. Computational social science has proven that behavior can be caught like a disease, merely through exposure to other people. Perhaps intelligence can be caught from others in the same way? With every interaction, the whole network potentially becomes smarter and more able, and gains knowledge.”

An excellent metaphor can be found around the corner: a street with several small shops selling antiques.

“If a new antique shop opens in the street it will, of course, be a competitor to the shops that are already there, but it is nevertheless a welcome addition, as the more high-quality shops there are on the street the more customers who are interested in antiques will visit the street and the more related services will emerge. The most valuable thing for the network partners may be the access to the network where joint value and knowledge creation is happening faster than it is elsewhere.”

What about corporates? In this environment, corporate structures should turn to facilitating networks and interactions in them. Kilpi states that the on-demand model will undoubtedly enter new areas, challenging existing business models. For example, the maker movement – a DIY culture in which individuals and small-scale entrepreneurs utilize new technology and communal workspaces to create unique objects and products – and the associated phenomena, such as crowdfunding, are already getting stronger, and are affecting the manufacturing industry.

Up to now, it has not been easy to do things in a new way in Europe. And the economic growth that is lagging behind that of the USA and China is not a sufficient reason for the slowness to make changes.

“Money is not the issue, but the removal of constraints: whether society offers individuals and companies the opportunity to do things in another way or whether regulations make things so rigid that it is just easier to carry on as before,” says Kilpi.

Esko Kilpi is an internationally renowned expert in knowledge work and digital transformation. He has worked at several universities, participated in an EU knowledge work think tank and is a founding member of US-based Entovation Group, which is a global network of experts in knowledge work. Currently, Kilpi is affiliated with the Adianta School for Leadership and Innovation in New Delhi, India.

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