The blurred lines between what is inside of an organization and what is the external environment becomes increasingly difficult to identify and to work with. It is obvious for the professional, and instinctively felt by the laymen, that management in the traditional sense being top-down usually accompanied with a temptations for managers and leaders to steer employees through the process of value management using sanctions, prefabricated ontology, structure and hierarchy, is a left-over from our industrial society. To box and shape employees through a distinctive set of ideas and goals becomes a straight jacket for value creation. Where the industrial society implied control and value management (how we organize and disseminate the existing) the emerging model of decentralized knowledge capitalism means rapid value creation. For the first time in the last 250 years a significant part of society’s value will stem from non-markets – being knowledge networks (but is still, so far, realized into products and service through the traditional market).
My hypothesis: Traditional markets are an efficient way of organizing and realizing existing value, but they are much less innovative than we have thought. Just because something is turned into a product or service on the market – its “quality” (the idea and knowledge) does not necessarily derive from market incentives and the market structure. In short: Markets organize the existing efficiently, but innovation comes from somewhere else. We have to understand that side much better.
Effect of the decentralized knowledge capitalism on organizations
The evolution of our information infrastructure, both qualitatively and quantitatively, increases the complexity of organizations. Due to increased competition from the external environment brought about by the same and new digital infrastructure means that organizations have to merge with the external environment to gain the resources that is embedded outside its historically defined borders and structures – in order to survive. In that way the borders of the organization become more blurred in regards to where the value and knowledge is created. The internal structure will equally assemble that of a network and will be increasingly inseparable with the network structures of the outside – only the management structure around the concentrated capital can more easily be identified.
A highly disruptive effect of the network structure is that knowledge can finally travel faster and the potential of sharing and creating knowledge have a more optimal frame – instead of knowledge being locked up in silos like institutions, companies and organizations and in individuals that never share and meet. What is a notable property of knowledge is that it has no “marginal cost” and requires only a relevant delivery system. In this context the logical step for actors in the emerging economy is to be embedded in networks in order to gain the relevant knowledge for their own activities and give relevant knowledge in exchange for this: it becomes an exchange economy without price points like in traditional markets. In that sense network and its digital facilitation can activate embedded knowledge. It is for innovation what industrialization is for production. With the intensification of knowledge in circulation, the quantitative dimension, leads to its qualitative counterpart: new knowledge and value. New value and knowledge are created when existing knowledge and understandings meet, disturb each other and are mixed to solve new problems.
The changes will become so rapid that it will make less sense to lock and control knowledge inside, because the defining point for the individual actor is to be the first to assembly, recombine and shape pieces of knowledge into a new product or service and institutionalize it in the market – if another actor tries to copy it, it will most likely be too late because the context changes too fast. It will be too costly to stand outside this exchange economy for the individual actor; therefore actors are forced to exchange.
History and where we are now
The old model of production is not left because we have become more clever through analysis or observation – the idealistic evolution of mankind – but because the process of value creations (and not management) has become more intense and the competition more fierce. When we produce knowledge, value and service a completely different ontology (understanding of reality) is required than that of industrial capitalism – hence the current focus on systems theory and complexity theory can be explained – and its further global institutionalization.
To understand how people get motivated, cooperate, share knowledge and innovate is therefore the logical focus of tomorrow’s system in a bigger scale than previous. Ironically what hippies, academics, socialists, softies, sociologists, psychologist, lefties for a long time have understood: that the human being is an inherently creative and social creature is now more relevant than ever before.
This will be pivotal for understanding and facilitating innovation in the age of a decentralized knowledge capitalism:
1) How can you motivate the individual to perform 100% instead of 10%? People perform 10% due to alienation, routine, inclusion and lack of creativity, hierarchy and differences in salary. Our existing structure of incentives and hierarchy result in: strongly indicating towards the employees that they are not really a part of the “family” (organization, company or institution). The result will be accordingly. This can only exist when the innovation rate is low and experience about the old world is important. Experience you can gain by hard work – but innovation happens where systems of knowledge intersect, where people are motivated and want to solve new problems and create new value.
2) Furthermore how to ripe the effects of innovation in systems where the value exceeds the sum of the input.
Karl Marx’s materialism suggested that we “think as we produce” and organizations that wish to engage in any regional or global competition cannot afford to think within the industrial paradigm. Like the feudal society and structures did not fit the emerging industrial capitalism, decentralized knowledge capitalism does not fit into the industrial models and paradigm: measuring, goals, weighing, controlling and defining. The burgeoning decentralized knowledge capitalism is at the moment being squeezed into the models of the industrial capitalism, politicians becomes increasingly eager to control and direct our educational systems towards market conformity (what is existing now and what the market thinks it needs). But this thinking and the old structures will implode and changed very soon, because it cannot deliver the rate of innovation that is needed, ironically, on the market (and in the society more general).
Nonetheless are we now witnessing the world (Western Word) in a sort of transitional phase between silos, hierarchy and control and an emergent and ever more disruptive model of value creation through networks, relations and motivation. The markets have become more transparent and therefore it is easier to find the right resources through these decentralized structures. Why go through silos, structures and hierarchy when you can go directly to the source and circumvent the old system and old market structure.