John Hagel is one of the most important contributors to the canon of thought that I consider the foundation for my research in Socialogy. I honestly don’t remember where we met, but John’s contributions — especially his work at Deloitte’s Center for the Edge with John Seely Brown — has been immensely important. Strangely enough, I never wrote a review of The Power Of Pull, by John Hagel, John Seely Brown, and Lang Davison, although I think it is a pivotal work. My pal Umair Haque wrote this about the book:
Instead of cramming that moldy old paradigm down our gullets — and hoping we’re so enamored by interesting examples, florid prose, or yet more jargon that we don’t notice or protest — John, JSB, and Lang do something, well, radical. They challenge it with a novel perspective. It’s one that, a little bit like my own, is uncompromisingly constructivist, humanistic, and dynamic. It says: the economy’s what we create every day, with every decision we make. And we can, with small steps and big dreams, create a better one. It’s a perspective anchored in creating real, enduring value, by doing stuff that matters most, in a messy, complex — and very fragile — human world.
So don’t just read Pull because it tells you what to do next. Read it because it paints a nuanced, compelling picture of why to do next — because it will help you see, and more importantly, feel, the contours of a new paradigm for 21st century prosperity.
I completely agree.
About John Hagel
[from Deloitte]
John Hagel III has nearly 30 years experience as a management consultant, author, speaker and entrepreneur, and has helped companies improve their performance by effectively applying information technology to reshape business strategies. John currently serves as co-chairman of the Silicon Valley-based Deloitte Center for the Edge, which conducts original research and develops substantive points of view for new corporate growth.
Before joining Deloitte, John was an independent consultant and writer. Prior to that, he held significant positions at leading consulting firms and companies. From 1984 to 2000, he was a principal at McKinsey & Co., where he was a leader of the Strategy Practice. In addition, he founded and led McKinsey’s Electronic Commerce Practice from 1993 to 2000. John has also served as senior vice president of strategic planning at Atari, Inc., and earlier in his career, worked at Boston Consulting Group. He is the founder of two Silicon Valley startups.
John is the author of a series of best-selling business books, including Net Gain, Net Worth, Out of the Box and The Only Sustainable Edge. He has won two awards from Harvard Business Review for best articles in that publication and has been recognized as an industry thought leader by a variety of publications and professional service firms. Additionally, he and Center Co-chairman John Seely Brown recently contributed a chapter to Business Network Transformation: Strategies to Reconfigure Your Business Relationships for Competitive Advantage (2009) and The Power of Pull (April 2010; 2nd edition December 2012).
Interview
Stowe Boyd: John, do you think that the intensification of competition is a driving force behind CEOs wanting to find more productivity through the adoption of social tools and techniques?
“Our point of view is that the rationale of scalable efficiency is becoming less and less compelling, and the alternative rationale is scalable learning.”
John Hagel: Very definitely. It’s central to a lot of the research we have been doing at the Center for the Edge. One of the perspectives we have about long term forces shaping the business landscape is that we’re in a world of mounting performance pressure. We’re in the dark side of digital technology, since that’s one of the key forces at work: that it’s intensifying competition. We are feeling it on the individual level, as well as the in institutions and companies. The 20th century corporation was based around scalable efficiency, based on larger and larger scale. The problem with that is that it’s a diminishing returns approach: the more cost you take out the longer and harder you have to work to take out that next increment of costs, because it’s tighter and tighter. It highlights one of the key challenges that companies are facing. An alternative approach from our perspective. We talk a lot about the need for institutional innovation as opposed to innovation on the product level or process level or even business model level. How do you innovate institutions? Going to the root questions: why do we have institutions to begin with? Our point of view is that the rationale of scalable efficiency is becoming less and less compelling, and the alternative rationale is scalable learning. The reason we have institutions is because we can learn faster as part of an institution than we could alone. Most institutions are not structured or operated to deliver on that rationale, but we think it’s an interesting alternative to squeezing harder and harder to get that next increment of cost savings out of the business.
SB: So there’s a fundamental shift in the reason for a business to exist, to make learning scalable. The former model of scalability was around find patterns that could be idealized as business processes, but have we reached the limit on that? Is that part of the shift to social?
JH: I think there is a related trend that were seeing. If we step back and look at the long term changes that are going on: in a very simplistic level if you look at 20th century companies it’s all about the institution and the need for individuals to adapt to the the institution. You had standardized processes that were the key to driving scalable efficiency. Your job was to read the instruction manual and not deviate, being highly predictable. And again I believe that model is less and less tenable, and the focus of power has shifted from the institution to the individual. Increasingly, if you take scalable learning as the key rationale for institutions to exist, then the individual becomes front and center. Because you can’t learn without individuals taking initiative and you can’t predict the learning that happens through serendipity, or unexpected experiments. Now the question is, ‘how does the institution adapt to the individual?’, and that pretty much is the recasting of the business world.
SB: I have always said that ‘social = me, first’, which sounds selfish, but is really just an acknowledgement that each person has to start with themselves, as a social being connected to others. So this is a swing of perception and value in the business.
JH: At one level the implications of what we are talking about is a shift from the focus on standard processes business processes basically were the center of all business activities to an increasing focus on practices of the individual and groups of individuals coming together.
SB: There must serious barriers to adoption around that viewpoint, and its implications.
JH: There are huge barriers because the organizations and institutions have been optimized with the previous models. The design of the workplace, the information have been configured around the process as the center of the action. Our view is the only place to start — having being involved in organizational change for thirty years now, with many large companies — is at the edge of the business. The temptation when you have organizational change is that you need to confront the core of the business and change the core. The issue with that is fraught with risks, because the antibodies in the core are extraordinarily powerful, and crush any attempt to change the core. So there have been all kinds of permutations that have been developed, like skunk works on the edge, innovation labs on the edge of companies. But the intent typically has been to build that up to a point and then pull that into the core. In my experience the core crushes even well-articulated edge initiatives. Rather than pulling the edge back into the core the alternative approach is what we called scaling edges. That is, if you can find an edge that has the potential to scale extremely rapidly — and given the world we live in scaling happens much more rapidly than ever before — you can actually pull more and more of the core out to the edge, to the point where the new edge over time becomes the core of the business. In our viewpoint thats a much promising approach to change than the original approaches of trying to transform the core.
SB: Sounds like the transition from avoiding risk to opportunity seeking, the bias toward experimenting your way forward.
“We’re are in an extremely rapidly changing world. Change is accelerating, as we all know. There are peripheries of the business that have significant growth potential. So finding an edge to achieve that growth potential involves fundamentally changing your practices. There is more willingness to take risks.”
JH: Yes, and finding areas of the business to do that. We’re are in an extremely rapidly changing world. Change is accelerating, as we all know. There are peripheries of the business that have significant growth potential. So finding an edge to achieve that growth potential involves fundamentally changing your practices. There is more willingness to take risks. It’s an edge that’s less exposed to risk. One set of reason that we find so interesting: one of the things we focused increasingly on is the notion of passion as a key driver of performance. Based on the research we’ve done, passion is very low in business in general and it’s inversely proportionate to the size of the business. So, the larger the business the smaller the passion. But there is still passion in these big businesses, but it’s often are found on the edge of the enterprise. Passionate people tend to gravitate away from the core because thats so standardized and so prescriptive. So the passionate people tend to be found on the edge of the enterprise. Yes, these people are willing to take risks, and they are connecting to each other. No one knows ‘the answer’, so they are working together to learn faster. We talk about passion in terms of two dispositions or orientations to action. One is questing: seeking out challenges because they are an opportunity to get to the next level of impact and performance. The next disposition is a connecting disposition. When you confront a challenge you say ‘who can I connect to to help me figure this out? Because on my own I can’t figure it out like I could if I tapped into more diverse expertise.’ The other piece to it is we have a notion it gets back to idea of how to avoid the antibodies in the core.
SB: The folks at the edge are more likely to be connected to people outside the company, so that predisposition to connect leads them to have ties externally, which is a great source of innovation, and also opens up opportunities to develop new shared capabilities with third parties, right?
“If you take seriously the notion of the individual as the center of the action then you really do need to leverage the scientific work that’s going on in very broad fields. I can think of three fields that are critical to driving success in the next era. One is neuroscience and cognitive science. Second is complex adaptive systems and the science of complexity. Third is social network analysis: how do networks form, and how do they evolve?”
JH: One of the opportunities available now that was much more limited in the past being able to creatively tap into resources from third parties, rather than trying to fund the change all myself as a CEO, or the leader of a company. Find the right edges and encourage the edges to connect out of the company and you get a lot more learning and innovation in the process.
SB: The premise of this series is that there are a broad range of research findings from the world of science — social science, network analysis, neurolinguistics, behavioral economics, and so on — but these investigations into the degree of human sociality haven’t really had an impact in most businesses. It seems like a long cultural change to steer the business with a new, scientifically-grounded compass. What do you see in your work, in that regard?
JH: Again, it goes back to this shift in gravity, or focus, from the institution to the individual. First of all, if you were focused on the institution and the role of the individual was to fit in you don’t need to focus on all this social stuff, it’s all irrelevant. Just follow the manual. But if you take seriously the notion of the individual as the center of the action then you really do need to leverage the scientific work that’s going on in very broad fields. I can think of three fields that are critical to driving success in the next era. One is neuroscience and cognitive science. Second is complex adaptive systems and the science of complexity. Third is social network analysis: how do networks form, and how do they evolve? Social network analysis has been around for a long time. By in large it’s been on its own, because you can do a lot of interesting network maps of betweenness, and trust, and so on. In the past it’s been very hard to tie that back to what that means to the business. In terms of performance, for example, are certain types of networks more efficient than others? And for me the exciting thing about big data and the analytic tools now becoming available is that we have the opportunity to connect big data to operating metrics in the business. Can we look for different patterns of interaction? Which ones lead to higher performance and which ones don’t?
SB: Yes, I agree totally. One of the big areas for big data is the aggregations of lots of social data, and sifting through that to find patterns, retrospectively, finding what works, what ties us together in ways that lead to innovation and well-being. John, I want to thank you for joining me today, and I hope we can get together, again, soon.
JH: Absolutely. I look forward to seeing what comes out of it. Thanks.
This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. I’ve been compensated to contribute to this program, but the opinions expressed in this post are my own and don’t necessarily represent IBM’s positions, strategies or opinions.