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It is believed that one important step in the success of a business is how efficiently resources are transformed into products. In knowledge intensive business, the main resource is identified as human learning or expertise. However, treating knowledge as a resource will lead to practices that actually inhibit value creation. Networked business environments call for a new definition of expertise as something that develops and occurs in interaction, not as a personal quality to identify and exploit.  

Expertise refers to refined skills or extensive knowledge in a given field. The best expertise often stems from a personal passion that leads to high motivation, immersion and hours of training. When a person becomes part of a work organization, the fruits of this passion are utilized as part of a predefined work process. This may lead to situations where it becomes a measure of a person’s worth, the basis of status or a sort of commodity, which is unfortunate for the organization as well as the individual. From the perspective of the organization, treating expertise as a resource will decrease its value, and from the perspective of the expert, restrict learning and personal development.

The reason is that if expertise is an exploitable resource that defines a person’s place and worth within an organization, it will lead to practices where information is not shared. If your worth within an organization is based on a special skill, this worth will diminish if you teach the skill to someone else. This thought is in turn based on the misunderstanding that scarcity will increase the value of knowledge as it does for physical resources. The confusion about the nature of information is catastrophic for organizations in knowledge intensive business. Staying relevant in changing environments requires continuous interaction around central content. Sharing and interaction are the most important processes to increasing value and developing the quality of information.

On a personal level, the resource-view of expertise can stagnate personal development. If expertise is something that is contained within an individual and released for pay, there is no room for admitting lack of knowledge. What people pay for when they pay an expert is certainty. Admitting that there is room for error would be admitting that you, your product or service has low quality.

Expertise is also often sought for outside the organization. Typically expert opinions are obtained to give meaning to complicated occurrences or to predict future happening from complex data. People are easily influenced and persuaded by experts even though it has long been known that expert judgment is prone to the same biases as anyone else’s thinking. What kind of service is then actually being acquired? Experts who offer a clear narrative of a situation create a sense of cognitive ease. Cognitive ease creates an illusion of truth. Relying on others’ expertise is used as a heuristic, to save energy. However, in complex environments, relying on the feeling of cognitive ease and heuristics should not be they way to go.

When seeking expert advice, we should look for interaction that produces a feeling of cognitive unease and strain because that tells us that learning is taking place. Instead of finding an expert who can create a nice story that puts us at ease, we should be looking for people who can ask the right questions and with whom we can learn. 

For individuals, the way to advance is to find a way to know less and stay uncomfortable. As soon as you are cognitively at ease you know that you are not learning. The most important thing for an individual is to find environments and relationships where learning is possible. Learning benefits from confusion, and wavering performance predicts better learning results. When we reward people at work for steady performance, we are actually rewarding them for not learning. Work organizations that wish to thrive need to become places that allow cognitive unease, confusion, unreliable performance.  

The amount of information available, the development of artificial intelligence and the fast pace of technological advancement may make some people feel that narrow expertise is becoming obsolete. But in fact, expertise is more important now than ever. When learning is the key process of work, personal passion will be its most important driver. The problem is not that people acquire expertise but that at the moment, it cannot grow in business environments. Allowing feelings of unease, uncertainty and confusion are the first steps towards a more learning-intensive interaction.

_MG_3570_2In typically organized firms, position comes with power. Nominated leaders draw plans, make decisions and are accountable for the employees they oversee. This setting defines leadership as a characteristic of the few, making power scarce. Clear role-based leadership works well for example in manufacturing where the quality of the end product depends on well-defined processes and minimizing human error. However, in information intensive, socially constructed work, leadership should be seen as something more than power over others. Leadership is a characteristic of interaction and learning that permeates all layers of the ecosystem.

Most definitions of leadership contain reference to power and dominance. Especially in trying times, leaders are looked to for clear-cut plans and the ability to create certainty. Great leadership is said to lean on a set of skills like clear communication, strategic thinking and visionary capability. The list goes on, recently also highlighting the importance of emotional intelligence. But what actually differentiates a these leadership traits from characteristics desirable for any employee? Does leadership as we now define it ultimately boil down to the capability to dominate or the willingness of followers to follow?

According to an article, successful leaders have higher levels of testosterone and lower levels of cortisol than others. This hormonal composition is connected to more risk tolerance and competitiveness, and less fear and anxiety. Furthermore, and quite amusingly, the original study found that the levels of testosterone and cortisol could be teetered to the optimal level by assuming a “power pose” and holding it for two minutes (for example, standing in a wide stride, chest puffed out). In another study it was found that lowering the pitch of their voice made participants feel more powerful and promoted their abstract thinking. Together, these results emphasize the importance of personally experienced power and dominance in the traditional concept of leadership.

In addition to personal experience of power, also the follower experience of leadership has to be taken into account. Ultimately, the only one who can make a leader is the follower. In line with this thinking, research has found a connection between the experience of leadership and the follower’s leadership prototypes. Additionally, the followers’ style of self-leadership influences the prototypes that they choose in evaluating leadership in others. This variability of relationships between individual differences and concepts of leadership has led to the demand for more complex models of leadership and followership.

It seems that on one side, leadership is all about the experience of power and dominance but on the other, it is always contextual and highly personal.  Also, the approaches to defining, measuring and studying leadership are multiple. When thinking about how leadership should be redefined, it might be good to take a step back and look at the need for leadership. Why does leadership exist within an organization? What is is used for?

Today, value creation demands above all the development of thought and the ability to help others in this endeavor. If the individual only relies on an external power for information, organization and strategy, there is no true ownership of the thought process or interaction. Maybe it is time to let go of the power concept and see leadership as something entirely contextual.  If you are experiencing undue stress or personal uncertainty, maybe it is a good idea to seek support from a typical “good leader”, with low cortisol and high testosterone, who can make you feel secure and cared for. However, it would be a mistake to say that this type of interaction would suffice or be appropriate in every work situation. Furthermore, leadership that is mainly a projection of power and confidence and that originates from a separate organizational layer can provide a false sense of security in an organization. It contains the notion that someone smarter more insightful has devised a plan that will surely take everything into account. When inevitable changes happen and the plan needs to be altered, it feels like a breach of trust. This kind of setting promotes interpersonal models that stem more from parent-child interactions than the interaction between equal adults. If the goal is to develop thought and encourage learning, equality of power will provide more possibilities for leadership and through that more possibilities for interaction that leads to learning.

Leadership could be redefined as simply a form of interaction where one looks to another in order to become better and learn. A leader in today’s organization could simply be defined as someone with whom you want to work in order to develop. In this sense, the characteristics pertaining to the concept of leader vary with every learning situation. Leadership can take turns or coexist within a network, and it can be something that is never explicitly expressed, something the leader is not even aware of.

If leadership is an attribute of the few, so is the power to influence others within the organization. This in turn minimizes the possibilities for interaction that leads to learning and development. Finding good leaders is one key process of successful value creation. The new concept of leadership defines this as a highly personal and contextual process that relies above all on good self-knowledge: who could complement my understanding in this situation, who could challenge my views, who could support my thinking? Who could help me become better?

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In knowledge intensive work, the human perspective is paramount.  In recognition of increased individuality in work cultures, the most forward-thinking companies are now renaming their HRM HC (for Human Capital). As capital is invested instead of consumed like resources, the new name reflects a renewed view on the relationship between the employee and employer. Employees are not a resource to be used up but an investment that grows in value. Or perhaps the employee is seen as investing time and knowhow in the value creation of the firm.

Viewing employees as a resource makes the relationship between the employee and employer exploit. Viewing employees as capital redefines this relationship as investment. If the goal of work is to create something new, success lies in creating organizational relationships that support this kind of thinking.

It may seem nit-picky to get hung up on terminology. Surely no one actually thinks of employees as something to exploit. But the thing is that language is a reflection of culture. Words carry history and always convey more than their intended meaning. In striving for release from dated definitions of human interaction in work cultures, a lot of ground can be covered simply by recognizing poor vocabulary and changing the way things are defined.

How should we then describe the relationship between employer and employee in modern, learning-centered organizations? The answer lies in thinking about how value is created in information intensive work. In fact, the relationship between employer and employee is only one of many important ones. The value of work is created in a multitude of different interpersonal settings that transcend organizational boundaries. The employee is no longer subservient to or dependent on the employer. Rather, there is mutual dependence between many individuals taking part in value creation. The employee needs the organization just as much as the organization needs the employee. The customer needs the organization just as much as the organization needs the customer.

As the requirements and content of work have dramatically changed, so has the meaning of what it is to be an employee. Individual learning is a prerequisite for value creation in knowledge intensive work. The role of the employee is not to obey orders but to create value through development of thought. The responsibility of the employee is to find the best conditions for learning, the best boss to learn from, the best pal to work with. The role of work processes is not to try to minimize human error but provide room for thought. Human error itself, development of thought and learning are at the core of knowledge intensive work. The traditional role and meaning of the employee has become obsolete and the typical definitions of the employee-employer relationship along with it.

What to call employees then? How to properly rename HR? The point is that the most important aspect of work relationships is context. All structures that predefine work relationships may limit them only to certain contexts and decrease the potential that each individual has to interact, learn and create value. It is also of utmost importance exactly who chooses to do the work and whom they choose to work with in each given situation. Value is tied to learning, which is tied to personal meaning. The best expert on how individual learning, experience of meaning and fruitful collaboration at work happen is the individual herself. An organization wanting to recognize the importance of context and the importance of the individual could choose to get rid of all titles or predefinitions of interpersonal structure that are contained in traditional work roles, departments and other organizational structures. What are we left with then? What do you call this organization, how do you define it? Maybe just people, working together?

Thank you, again, Esko Kilpi

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One of the key concepts driving change in business today is productivity. Work processes are augmented, reorganizations implemented and massive ICT investments made to increase productivity. In simple terms, productivity is the relationship between input and output. Increasing productivity is getting more output with less input. Input, as defined in industry, is typically labor and capital. The output is the firm’s product, and its value is defined through how much people are willing to pay for it. This all seems pretty clear-cut. However, many things that were clear-cut in industry may not directly apply to knowledge intensive business, like services. In many cases it even seems that concepts derived from industry are entirely inappropriate. Interesting questions arise when we approach this discrepancy: How do you define value, if work is the development of knowledge? What is productivity if work occurs in interaction? What are labor and capital in information intensive work?

Abundance of information has changed not only how people work but also what work is. Increasing numbers of people are working in business that is considered knowledge intensive. The service industry is growing and especially ICT supported services are predicted to increase. This work is centered on information and interaction. Value is created through learning of the individuals involved.

The possibilities provided by the liberation of information sound awesome. However, it seems that current concepts of productivity and value pose some problems. If these key concepts could be updated with current understanding how value is experienced, it would dramatically expand the possibilities for value creation in any information intensive business.

Service is typically defined as paying someone else to do things for you. Today, a number of services can be thought of as not a purchased favor but rather the purchase of help for development of thought. As automation continues, it may be that services conducted in the future will solely consist of interaction that requires a human counterpart. The experience of value in these types of services does not happen upon just receiving the service, but during interaction with the service provider. It follows that the measures we currently use for quantifying the productivity of services do not capture key processes. We look at input and output and are left in the dark about the most important thing in service – interaction.

Productivity  in information intensive business is often sought for by applying new technology. However, in many cases, technology can do just the opposite. The fault most often lies in wrong definition of value that is contained within the technology we use. For instance, a mental health clinic may invest millions in software and ask its workers to spend hours documenting how many patients they see per day. This is done in order to see how productive the teams are, meaning the more patients they see the better. However, this technology does not manage to document the most important process pertaining to value – whether the interaction helps the patient get better or not. The input-output logic of productivity does not work when the main content of work is interaction with another human being. This is not to say that it is not important that input and output occur (e.g. that as many patients are seen as possible) but rather that how we define and measure productivity should primarily consist of other things, like the quality of interaction.

It is easy to blame the technology and say that well, the designer of the software obviously had no understanding of the work and what it is meant to attain. This also brings about the problem with software: someone else always designs it for you, approximating what you are trying to accomplish. However, the most pressing problem lies deeper than technology. Technology ultimately is a reflection of how work is defined in our culture. The problem is that we lack the understanding of what value really is in business that happens around human interaction.

Do we also lack the courage to question industry-driven concepts and think about what they have to do with human interaction in the first place? Human interaction lies (at the moment) beyond comprehensive modeling. It is ever changing and bafflingly complex and even the best scientists can’t surely predict it. But this complexity is just where value is experienced and where it truly occurs. Realizing this could stop us trying to buy assurance and security with predictions or statistics based on inadequate mathematics. Realizing this would help us find a deeper sense of worth in the work we do.

Thank you Esko Kilpi

Learning is often taken as something that happens in childhood and adolescence, in preparation for adulthood. This view of learning contains the thought of education as a means to provide individuals with the cognitive skills and knowledge they need for occupational life. After that, it’s just the occasional Spanish course or leadership program alongside work, which is the application of the things you have learned in school. In contrast, the modern view of viewing learning sees it as a key process and an especially salient characteristic of knowledge intensive work. Seeing learning as a continuous process of the mind and as a key factor in value creation supports the ability to consciously produce better quality and develop in any field. Understanding the neural characteristics of learning can be one way of finding a more conscious take on personal learning processes.

The research on brain plasticity has demonstrated the multitudes of ways the brain responds to experience, finding ways to reorganize after trauma or undergoing structural and functional changes as a result of intense skill training, (see e.g. Tervaniemi et al (2009) for a review on structural and functional changes induced by music training). Learning can be described as changes in the organization and connections within neuronal networks in the brain happening conjointly with external life events. On this fundamental level, every experience we undergo contains the possibility of producing learning and change. Learning can also be characterized as disruption of the models with which we predict life events and operate in this world. New events that were not succesfully predicted by our model capture our attention and cause an update, i.e. learning. Developing personal learning processes requires developing a sensitivity to recognize subtle differences. It also calls for courage to seek interaction that challenges or disrupts old models.

Neuroscientific research has revealed interesting connections between learning, neurogenesis and health. It was long believed that no new neurons are born in the adult brain. However, recent animal studies reveal ongoing neurogenesis in adult individuals. The remarkable thing is that after birth, these new cells will slowly start to die – unless learning happens. Markers of a healthy lifestyle such as exercise and low stress levels can increase the number of cells being born whereas for example alcohol consumption can decrease their number. Learning can save entire populations of new neurons, but it has to produce enough of a challenge. If the task is too easy or too difficult, there will be no effect.

Neuroscientific research has also found a striking association between learning and motivation. It has been reported that performance of a task itself, without explicit reinforcement, can act as a reward, supporting learning. Learning has the capacity to be intrinsically rewarding for people – and if work is viewed AS learning, the best way to support motivation and development is to let the individual determine and lead personal work processes. From the viewpoint of relationship structures at work, being in a setting where someone else defines the meaning of your work or attempts to guide it by for example providing reinforcement, can in fact hinder learning, value creation and the experience of meaning.

Learning should not be viewed as something that happened before entering work life, but as the core function of work. If we do work that produces no learning, no new connections or no change within ourselves or in relation to others, it is an activity that is cognitively worthless. Learning can be seen to protect the brain and develop cognitive capacity throughout life. From this viewpoint, work settings that require individuals to do unchallenging tasks are unhealthy. Work should focus on learning in interaction, minimizing repetitive and personally meaningless tasks. In addition to individual health, this will lead to more value in the work that we do through new connections, development of information and the breadth of interaction around the subject.

The old view of knowledge defines it as something that people can own and contain. According to this view, increasing the value of knowledge requires it to be protected and made scarce. This had lead to a static view of expertise that diminishes interaction and cooperation within and outside the organization. In addition, the need to control knowledge has lead to impractical systems for customer-orientation. The view of containable knowledge is in direct opposition to how value can be created in information intensive fields of business. The new view of knowledge highlights openness and continuous development of information in interaction as the source of value and profit.

The broadness of interaction in the creation of information products increases the potential of its value. Successful value creation in information intensive work cannot involve only the people within an organization. As the value of information is defined in learning and interaction, openness in development of information will lead to more interchange and cooperation, leading to more possibilities of learning and interaction and through this, more value. In many organizations, product development is however protected and secret with the fear that the new knowledge being created could be stolen. How then to take the first steps towards more open interaction in development of knowledge?

In striving for value creation through uniqueness, businesses should communicate respect, aiming for mutuality and equality within their ecosystems. If a partnership is valued, it will more likely produce more value. If the people within organization providing services experience that their service is important, they will perceive more meaning in this work, resulting in a better outcome. Calling service-providing companies “vendors” can point out that they are replaceable, subordinate and dependent. In the search for new ideas, connections outside the organization can be a vital source of unlikely discovery.

Respect and trust towards customers can be expressed in how an organization includes them in value creation. Through approaching customer needs through segment-derived decision-making, the company is saying “you do not know what you want, we do”.  By listening and including the customer directly into decision-making, a more fruitful message can be conveyed. If you want to know, just ask. The fear about asking is related to the old view of knowledge  – if you reveal that you do not know, that you do not contain this information, you will be deemed incompetent. However, not-knowing is the very first, most crucial step in learning, which in turn is the very first step in creating more value through information. When the information product is created in a learning interaction with the customer, it will become more valuable and more unique for the customer.

If creating value is viewed as an interactive and creative effort that includes customers and other  organizations, success will be found in the ability to be open and create rewarding interaction for all involved. On the road towards this change, the first step to take is to have a look at what your view of knowledge is and how your communication is defined.

Creating value with information requires inherently different mechanisms than those used for creating value with tangible products: New knowledge is born and becomes relevant in interaction, not through transaction. Knowledge is abundant and develops, rather than depletes, in use. Value in information intensive work grows as a function of learning. And because of this, the people involved in value creation are not a resource, but individually meaningful.

Even though this exceptional nature of information and information intensive work is widely accepted, many companies continue to operate within frameworks that do not support value creation in information intensive work. Because information creates value through learning, the key behind updating organizational processes lies in updating the organization’s perception on the individual, learning and the creative process. The concepts an organization carries can be identified through how it defines the individuals who contribute to value creation – does the organization give roles to individuals? What information do these roles contain? What kind of interaction do these roles promote? What kind of communication resides within the role setting?

The very commonplace roles of the employee and the employer or the superior and subordinate typically contain and promote an outdated view of the human mind. Management carries with it the remnants of a behaviorist view of the individual, stemming from the period of industrial economy. When considering the characteristics of value creation in information intensive work, especially the roles of superior and subordinate are impractical. They contain the notion of the employee as a will-less target of management operations. This interpersonal setting strips the subordinate of self-control, autonomy and self-discovered meaning in work, promoting schemes of dependence and helplessness. Success in value creation requires exactly the opposite.

As creation of new knowledge happens in interaction, the quality of the interaction defines the quality and value of the outcomes. Role settings based on an outdated view of the individual contain communication and statements that do not support quality in interaction. “You are incompetent, untrustworthy and replaceable.” This is something that hopefully no manager wants to communicate to his employees. However, in the superior-subordinate setting, this is exactly what is being conveyed. When decision-making is taken to a level separate from expertise, it says: “you are incompetent”. When an organization assigns someone to oversee another’s work it is saying: “you are untrustworthy”. And when an organization assigns work roles to employees it says: “you are replaceable”.

In order for people to be inspired, creative and able to learn, they need to feel that their unique contribution, opinion and decisions are valued. This value is expressed through the communication and structures of the organization. Experiencing work as meaningful is a vital part of energy and motivation at work. This is not possible if people are not trusted with decision-making about the subjects that are working with. It is also not possible if there is no freedom for organizing how and with whom they work.

So what to do? Instead of communicating mistrust and disrespect, try the opposite. The traditional role of management is to control that subordinates are doing what they are told to do. The new role of management should be to enable and empower learning, interaction, creativity and autonomy. As Forbes magazine states, a paradigm shift in management is taking place, and should we even, as Harvard Business Review suggests, fire all the managers?

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Esko Kilpi on Interactive Value Creation

The art of interaction, the design of digital and the science of social complexity

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