Soft Technology Invention

Most attempts by business to understand the future rather seem to miss the point. They come across as technology plays, predictions about which breakthroughs are likely to come to fruition and how they'll parlay these into products. This is fine if you are head of a research lab, but has less obvious application if you are tasked with other management positions. If your job is to head up a business or function, you're likely looking - if indeed you are looking at all - at the wrong kind of technology.

Some should focus on the evolution and change in hard technology - changes in cars, computers, drugs, and telephones. Most managers should be focused instead on soft technology - changes in culture, behavior, roles, beliefs, and organization. It's true that in practice these two, the hard and soft technologies, play together. It's also true that any one individual is likely to focus on one dimension. Thanks to roughly a century in the evolution of the formal role of scientists and engineers, we have clearly defined the tasks associated with the development of hard technology. By contrast, roles for developing soft technology are less clearly defined. Indeed, what plays catalyst for the shift in public opinion or new practice often seems unpredictable and random. Of course, so is the development of hard technology, but that doesn't stop societies from investing hundreds of billions into its development.

Most management types should be looking at the future of organizations, work, and society. It is not that they should remain willfully ignorant of the hard technology, but often there is little that a CEO or VP of, say, Human Relations can do about furthering the next generation of web development software. They can help to develop the organization.

There is so much that can be written about this, but I will for now limit myself to this. There are a variety of questions that anyone in management - from small business owner to CEO - can ask, questions that intelligent and imaginative people scattered throughout the organization can answer more creatively than me. Managers should be regularly asking these questions.

1. How do we more fully engage our people in work? What work place designs, chunking of tasks, and communication protocols should we use to encourage focus?

2. How do we clarify consequences? What can we do to more clearly link the work of the individual to the value created by the organization?

3. How do we more clearly tie together individual effort, longer term consequences, and organizational performance? Are there lessons we can draw from market economies?

4. Are we prepared for the devolution of power and decision making as accords with self-adapting complexity and market dynamics that might follow from designing a system that allows individual initiative in place of central controls? What are the consequences of creating such a system? How would we make this operational? What are the practical obstacles to moving in this direction today?

5. Are our people motivated by a vision of their future? Do they see this organization as a place of possibility or are they even interested in realizing their own potential? Why or why not? What would we have to change about our organization to allow a critical mass of our employees to realize their potential?

6. Who in the organization is tasked with coaching our people towards the realization of their potential? What is the lost revenue resulting from our lack of interest in this?

I would argue that seriously pursuing questions such as this could be the catalyst for developing new organizations, for creating the next generation soft technology. If your business is hard technology, you are likely focusing an enormous amount of energy on creating the next generation of your products. If you expect to remain competitive as a senior executive, you should be just as focused on creating the next generation of soft technology.

The DNA of Social Evolution

DNA is coded by the sequence of four bases. I'd argue for a parallel in social development. At a high level, any society is defined by social order, its dominant institution, economy, and worldview. I'd argue further that a change in one of these has the potential to trigger changes in all, just as the purchase of a new software application might trigger the purchase of a new operating system which might trigger the purchase of a new computer system.



Social Order
The simplest indication of how a society is defined might be seen in its tallest buildings. In medieval Europe, the tallest buildings were cathedrals and churches. Later, castles, parliamentary buildings, banks, and corporate headquarters followed.

Since about 1300, there has been a succession of dominant institutions: church, state, bank, and corporation. In various times and places, the dominant institution is not necessarily the one that has the most physical power but, rather, the one that most structures and shapes the attention and goals of the average person. In 1100 AD, most people conformed their daily lives to the church. Today, it is no longer church bells but, rather, corporate advertising and employment to which most conform their lives.

Dominant Institution
A society dominated by the church is very different from one dominated by the corporation. But how power is distributed within the church or corporation also makes a difference. Quite simply, there are two extremes in the distribution of power within any institution: power held by elites or power distributed to the masses. It is one thing to live in a society dominated by the state, by politics; it is quite another to live in a dictatorship or democracy.

Economy
Agricultural, industrial, information, or entrepreneurial economies are very different, but all are market economies. An entrepreneurial economy is just now beginning to emerge. This emergence will have a sweeping influence, just as did the emergence of the information economy in about 1900 and the industrial economy in about 1700.

Worldview
This is perhaps the most subtle yet most defining of the four elements. How we make sense of the world defines so much else. And a worldview, like glasses, is made to be seen through rather than seen.

Since about 1300, the worldviews that have defined the West are the Renaissance, Enlightenment, and Pragmatism. Systems thinking is the set of glasses being adopted by more and more people.

Revolution
We rightfully call the change from agricultural to industrial economies an economic revolution. Intellectual, social, and institutional revolutions characterize the change of each of these elements. Western Civilization has thus far been defined by a pattern of revolutions, described in the table above.

Moving into the Entrepreneurial Economy

The defining figure in an agricultural economy is the farmer with a hoe. The defining figure in an industrial economy is the factory worker helping to manufacture back hoes. The defining figure in an information economy is the engineer who works on design plans for the back hoe.
The work of the factory work can substitute for quite a few farmers. (You can see in the above graph that farm workers were about 80-some% of the working population in 1800 and about ~3% of the working population in 1980.)

The knowledge worker, too, can replace a number of factory workers. (Think about how a newly designed robot - the product of a knowledge worker - can replace numerous factory workers.)

My own vision of a movement into an entrepreneurial economy is that the portion of the work force categorized as entrepreneur will grow as did the factory worker in the 1800s and the information (or knowledge) worker in the 1900s.

Manufacturing in the 1500s involved little alteration to raw materials: wheat was ground, wool was spun, and grapes crushed and aged. Yet by the 1800s the processing was more sophisticated. Manufacturing assumes a mature market for raw goods - and the manufacturer uses raw goods as inputs to a process that creates more value than the mere trade of raw goods.

The information economy arose out of the complexity of the industrial economy. As machinery, products, processes, markets, and distribution became more complex, it created a demand for more sophisticated workers. Education that shared knowledge about principles in design, engineering, advertising, and sales became important in the creation of a skilled work force - the best jobs increasingly required university education. The information economy assumes a mature market for capital - and the knowledge workers use capital goods as the material to be manipulated into greater value just as the capitalists uses raw materials to be manipulated into greater value.

We now have a very mature information economy. This forms a great foundation for an entrepreneurial economy that could build on information technology. If entrepreneurship is about bringing together raw materials, capital, and labor (or, more specifically, knowledge workers), then it assumes information networks that make dynamic markets cost-effective. The information economy will be the foundation for the coming entrepreneurial economy.

One difference that will characterize the entrepreneurial economy is the role of the worker. Traditionally, a knowledge worker sold his / her skills to the corporation that transformed those efforts into value on the market in the form of goods or services. Entrepreneurs or managers were responsible for correctly orchestrating such efforts into projects and tasks that created market value; if they did well, these entrepreneurs and managers were handsomely rewarded. The entrepreneurial economy will change that arrangement. An increasing percentage of knowledge workers (a percentage that I suspect will not exceed 30 or 40% by 2050) will work as entrepreneurs themselves. By that I partly mean that they will offer their services through a dynamic market rather than a traditional salaried position. Their pay will be linked to profits from particular projects or activities. We'll have the corporate equivalent of self-organizing complexity rather than central, command and control economies.

This will drive further advances in information technology, just as the industrial revolution transformed agricultural and the information economy has transformed industry. And this change will simply be the start of a more complex change that will transform the modern corporation into something that looks more like an incubator than a bureaucracy.

This will change so many things about how we conceive of corporations today. This and related, required changes will disperse power outwards from paternalistic managers towards individual workers. It will create opportunities that don't exist today. And it will link to the driving force of progress throughout the history of Western Civilization - increased autonomy for the individual.

The Swinging Pendulum of Social Evolution

The Rothschild brothers didn’t seem like elites when they began their career. Mayer Rothschild began his life living in a Frankfurt ghetto, forced to leave the sidewalk when even a young child ordered him to “Step aside, Jew!” He had the vision to send four of his five sons to the most important cities in Europe.

Mayer's son Nathan Rothschild was in London when the English began their war against Napoleon. This war was incredibly expensive. Coordinating efforts with his brothers, Nathan was able to raise huge sums of money for the British by selling war bonds throughout Europe – primarily through his brothers in Frankfurt, Paris, Vienna, and Naples. Nathan not only raised money for the British – he made the Rothschild brothers rich and famous. By the time of his death in 1836, he might have had more liquid wealth than anyone in the world. Because they helped to invent modern financial markets, the Rothschild brothers rose from the German ghetto to become elites with power enough to dictate terms to kings.

The Rothschild brothers and others like JP Morgan helped to pioneer modern financial markets and then, in the next century, philosophers like Keynes, policy-makers like FDR, and business visionaries like Charlie Merrill and Dee Hock “democratized” financial markets, creating access to credit and investment markets for the people. Alan Greenspan or Ben Bernanke is supposed to manage interest rates and reserve rates so as to do what is best for the general economy and the average person – not just a few powerful bankers. Access to financial markets is now considered a right.

Martin Luther, John Calvin, Huldrych Zwingli, and John Knox were among the revolutionaries who wrested control of the church away from the elites and helped to put it into the hands of the people.

Later, Louis XIV and Henry VIII help to pioneer the nation-state and then, centuries later, revolutionaries like Jefferson and Franklin wrested control away from the elites and into the hands of the people.

The swings between power held by the elites and the people seem to me inevitable. The elites pioneer and prosper. They are the social inventors who create the great institutions like church, state, and corporation. But once those inventions have become an integral part of the social fabric, along come revolutionaries who turn control of these inventions over from the elites to the people.

Next up for Western Civilization? Wresting control away from the CEOs, the last of the monarchs, and putting power into the hands of the investors, employees, and communities whose fate is so inexorably tied up in the actions of the corporation.

Am I a populist or an elitist? A Republican who wants the people’s interest represented by a trusted group of elites or a Democrat who wants the people to directly represent their own interests? At this point in history, I’m a populist, a Democrat ready to see the power of the powerful corporation dispersed.

You and the Future of the Corporation

Now
You go to work inside of a corporation. The corporation's policies are formulated by senior managers. Goals are set for your department for the year. Your department head translates those goals into your goals. It may well be that you and your peers can see a number of problems with the overall plan as it applies to you, but your attempts to point that out are largely ineffectual. You have little control over the direction of the company. You can leave the company if you are unhappy with its direction, but you would have to find a company run differently or start your own, both uncertain prospects.

Meanwhile, you contribute money each year to a pension fund. By this point in your career, your retirement account is worth about $200,000. Collectively, with accounts ranging from about $1,000 to millions, you and your fellow American workers "control" $6 trillion in funds. Although you and your peers own the companies in which you invest, you aren't particularly happy with their policies. The companies' policies seem to most obviously benefit senior managers. You can take your money out of the company, but you would have to find a company run differently. The way tax laws are set up, you cannot shift your investment funds into a company you would start up.

You are pleased that your employer has created jobs in your community. This generally helps. But you also know that these jobs and your potential are not the aim of your company. If and when these jobs can be done for less in places like the Ukraine or Mumbai, they will be. It is not just your community you are concerned for: you are worried about your planet and don't really know what, if anything, your employer is doing about climate change.

What is the quip of Ackoff's? It's like a fly riding an elephant who thinks he is steering the elephant. The elephant doesn't mind and it makes the ride more interesting for the fly. The individual has choices but those choices seem to have little influence over the corporation.

Later
By the year 2020, our concept of corporation will be transformed. It will become a tool for individuals, a real departure from today when the individual is the tool for the corporation.

You go to work inside a corporation. Just as there are inside of a national economy, there are regulations, opportunities, and natural consequences. No one defines your goals. What you do is a product of some intersection of where you see opportunity for making money, what you enjoy doing and what you think would best realize your potential. Opportunities inside of the corporation arise organically. Employees - maybe 1% or maybe 50% - within the corporation act like entrepreneurs, putting forth business plans that capitalize on connections, technology, markets, or capital and know-how within the corporation (and without - the walls of the corporation are porous). Fellow employees vote in two ways - by signing on to an entrepreneurial venture that they see as promising. This takes advantage of two things - widespread expertise and natural markets. (If employees are uninterested in a particular venture, it suggests serious flaws with it - flaws that might never come to light until after the fact in the world of corporate dictatorship.)

The second way in which employees vote is through their pension funds. Employees have the opportunity to invest in ventures at the ground-floor level, helping to fund their own projects or the projects of fellow employees. Employee money could be invested in company stock or in the startups underway within the company. This, too, would be a market signal about where experts familiar with the market, technology, and people involved thought it best to direct resources.

The community would benefit as well. Policies organically emerge from the actions of dozens, hundreds, or thousands of employees. They are no longer top-down directed. People making policy rarely choose to put the smoke stacks upwind from their houses and the more that policies arise from the actions of more individuals, the less likely corporations are to pursue policies that degrade the environment of people "over there." The dispersion of power within the corporation will make "over there" effectively disappear. Such employees are unlikely to adopt policies that shift their jobs overseas. They will be at least as interested in opportunities that allow them to realize their own potential as they are in opportunities that maximize .... what is it, exactly, that current corporate policies maximize?

Dispersing power within the organization is not just idealistic. It acknowledges current reality. And the current reality is that expertise, information, and control of capital is already dispersed. Changing how corporations are managed to align with this new reality only makes sense.

Finally, the dispersion of power within the corporation will help us to overcome the new limit to development. No longer does land, capital, or even knowledge work limit progress. We are, today, limited by entrepreneurship. Just as the last century popularized knowledge work, so will entrepreneurship be popuarlized in this century. That is the topic for another posting.