The Connection Between Narrative and Purpose

Narrative and purpose. These are two widely used words in business and life, yet they’re often loosely used. They’re really important words, so I want to at least clarify how I use them, because I think meaning matters.

Defining terms

I’ve been exploring narrative for years, but I have a very specific meaning for the word. As those who have followed me know, I make a key distinction between stories and narratives that I’ve explored here and  here. In short, stories for me have two characteristics: they’re self-contained (they have a beginning, a middle and an ending) and they’re about the story teller or some other people, but they’re not about you (although you can use your imagination to explore what you might have done in the story). In contrast, narratives for me are open-ended, there is no resolution yet, but there is some significant opportunity or threat on the horizon that is yet to be achieved and it’s not clear whether it will be achieved. The resolution of the narrative hinges on you: it is a call to action to those you are addressing, telling them that their choices and actions will play a material role in helping to resolve the narrative.

One of the challenges that I’ve encountered in exploring narratives is that I find people often equate narratives with purpose and yet I think they're different. Purpose is really big right now. More and more of us have a hunger to commit ourselves to something that's meaningful and that can have significant and lasting impact, rather than being buffeted about by the tides of the moment.

Now, there are lots of definitions of purpose, so let me offer mine. I consider purpose to be a commitment to achieve some kind of significant impact in the world around you.

Both narrative and purpose can be crafted at the level of each of us as individuals, organizations and broader social entities like cities, religions and movements. But are they the same? I find that many people are equating narrative as I define it with purpose. I would challenge that and suggest that they are different, but related.

What do I mean? Let’s focus on corporate narratives to illustrate the difference. Take the example I have used in previous posts of Apple’s early corporate narrative that was encapsulated in the slogan “Think different”. Unpack the slogan and it basically suggested that for decades we had digital technology that took away our names and gave us numbers, put us in cubicles and made us cogs in a machine. Now, for the first time, we had a new generation of digital technology that enabled us to express our unique identity and achieve more of our potential. But it was not automatic, it wasn't inevitable. To harness this potential, you needed to think different – it was a call to action to all of us saying that we needed to act in order to achieve the opportunity created by the technology.

That’s a powerful narrative. It’s the reason I believe that, for many people, Apple became the equivalent of a religion.

But it’s not a purpose. Purpose, the way most companies would define it, is about the impact that they, as a company, are committing to achieve. It’s directed to the people within the organization although it can be useful in helping others outside the organization (e.g., investors, partners, customers) to better understand what the organization is trying to achieve. But the call to action is directed to the people within the organization or perhaps those who are considering joining the organization. Those outside the organization are much more passive in this context – it’s not a call to action to them.

So, in this case, Apple’s purpose might have been to design and deliver digital technology that would help people to reclaim their uniqueness and achieve more of their potential. A purpose can be very consistent with, and contribute to, a broader narrative, but it’s not the narrative.

Does this distinction matter?

Why do I put so much emphasis on this difference? Because narratives focus on crafting a call to action targeted to people outside the company, not those within the company. Why does this matter?

Because in a world of mounting performance pressure, narratives provide a powerful way to mobilize others to achieve a significant opportunity that will benefit themselves as well as the company. Corporate narratives can become a powerful source of leverage, learning and loyalty.

By defining an opportunity that's meaningful and inspiring to others outside the company, narratives motivate others to invest their own time and resources to address the opportunity. Take the example of “think different.” It motivated a lot of people around the world to find ways to use Apple’s technology to help them think and act different. As some of the users began to show the potential value that could be achieved by thinking and acting different, it inspired others to address the opportunity as well. The narrative also drew a large number of third party application developers who were inspired to provide applications and other tools to help users who wanted to “think different.” Together, all of these participants invested significantly more time and resources than Apple itself had invested – the leverage was significant.

But there’s more. As more and more participants were drawn into the narrative and started to take action to address the opportunity, they began to try many ways of thinking and acting different. Some of them achieved greater impact and some didn’t. There was a growing opportunity for everyone to learn faster by observing and reflecting on the impact of various approaches. They certainly learned much faster than if they were attempting this alone without any sense that others had embarked on a similar journey. So, narratives help to accelerate learning.

There’s another benefit of narratives. They instill loyalty in a growing number of people outside the organization. People who were inspired by Apple’s narrative often became intensely loyal, following Apple in its migration from computers to iPods, iPads and mobile phones. They paid premium prices because they valued the opportunity that was being offered to them.

Narratives also build trust. As a call to action, they're also a call for help. They declare that the opportunity addressed by the narrative cannot be achieved alone by the organization crafting the narrative. The organization needs the help of others outside the organization. The call for help expresses vulnerability and that builds trust. That trust is reinforced if the opportunity identified by the narrative is one that's meaningful to potential participants – it suggests that there's a shared interest in achieving an opportunity that can make a difference for all concerned.

Finally, I’ve written before about the increasing importance of strategies of trajectory here and here. In a more rapidly changing world, we need to accelerate our progress and impact, not simply follow a linear improvement path. Narratives can help us do that because they mobilize a much larger ecosystem that can harness network effects – where the value created and the impact achieved increases exponentially as the number of participants increases.

The role of purpose

So, how does this relate to purpose? Narrative is bigger and broader than purpose in the sense that it's speaking to a much broader constituency about a much bigger opportunity. Let’s stay with “think different.” As I’ve indicated, the constituency addressed by the narrative was the whole world – everyone had an opportunity to think different and achieve much more of their potential. It wasn’t just addressed to the employees of the company although, of course, they too had an opportunity to think different.

And, equally importantly, the narrative wasn’t just about Apple products and services – it went far beyond that. The opportunity was something that everyone could and should do, even if they weren’t using Apple products. Of course, Apple believed its products could be key enablers of the opportunity but, if you look at how the narrative was communicated, Apple products were far in the background – the focus was on you and the opportunity you had.

Narratives are bigger and broader than purpose, but they provide a powerful home and setting to frame a purpose that can be directed to the employees within the company. The narrative actually gives more meaning and inspiration to purpose because now that purpose is part of something much bigger. It becomes an enabler of actions that are being taken far beyond the boundaries of the organization and achieving far more impact than any individual organization could hope to achieve.

As I suggested earlier, the purpose that Apple might have framed around its narrative could have been to design and deliver digital technology that would help people to think different – to reclaim their uniqueness and achieve more of their potential (by the way, I don’t know what purpose Apple actually framed for its employees). But now that purpose takes on much more meaning because the broader narrative is inspiring more and more people to think different and providing compelling evidence of the opportunity that can be addressed. Now Apple is addressing a bigger opportunity that brings it together with others – it’s not just acting in isolation.

Purpose is certainly helpful in this context – it provides a way to focus efforts within the organization, inspire the employees regarding the opportunity and clarify the role that the organization can play in a much broader narrative. But it’s not the narrative – it is, or should be, the derivative of a narrative.

Narrative as catalyst

Hopefully I’ve persuaded you that organizational narratives are powerful. So, how do you craft one of these powerful organizational narratives? Well, the first piece of advice is: don’t hand it off to your PR agency. Narratives aren’t just words on a page; they emerge over time through action. I’ve briefly addressed what’s required to craft strong corporate narratives here.

I will add here that narratives can be catalysts to take leadership out of their organizations and help them to understand the evolving needs of the people or organizations they are hoping to impact. The power of a narrative hinges on its ability to understand the aspirations and frustrations of those it is addressing. Since narratives play out over an extended period of time, the leaders of the organization need to understand how the aspirations and frustrations may evolve over time, rather than just focusing on what they are today.

Bottom line

Narratives are a great example of the power of pull. In this post, I’ve focused on the distinction and the relationship between narratives and purpose as it applies to organizations. As mentioned earlier, narratives can also play a significant role for individuals and broader social entities like cities, religions and movements. Given the length of this post already, I’ll reserve that discussion for future posts.

Right now, let me leave you with three questions to address within your organization:

• Do we have an explicit narrative with an explicit call to action for others outside our organization?
• If so, is our narrative as powerful as it could be? Could we be addressing even bigger and more inspiring opportunities that are meaningful to the people we are trying to reach?
• Do we have an explicit statement of purpose and have we made the effort to show how that purpose is connected to our broader narrative?

Independence Day

Today is the day that Americans celebrate the signing of the Declaration of Independence that marked our intent to establish our own nation, free from British colonial rule. Like many holidays, I believe it's an opportunity to reflect on our history as a better way to understand where we might head in the future.

Agency versus passivity

One of the reasons that the Declaration of Independence is so inspiring is that it was a brave act by a group of people who believed it was not only their right, but their duty, to resist oppression. It's an example of people expressing a sense of agency – their ability to change their destiny through taking action.

If you think about it in context, it was an extraordinary act of bravery. How could a small group of colonists in a distant and largely undeveloped land possibly imagine that they could take on the largest empire in the world at the time and win? They not only believed it was possible, but that it was something that could be achieved if they came together and acted with resolve.

This is in sharp contrast with a growing trend around the world today. Faced with mounting performance pressure, an increasing number of people are falling into passivity. They're overwhelmed by the forces shaping our global economy and society and they have an increasing sense that things are simply beyond their control.

If we're going to achieve our potential, we need to find a way to overcome this passivity and actively shape our future. We need to abandon passivity and embrace a sense of agency.

Achieve more of our potential

The colonists who came together in Philadelphia were driven by a deep sense of natural rights that are unalienable. The Declaration of Independence at the outset refers specifically to the rights of life, liberty and the pursuit of happiness. While the first two rights are perhaps more straightforward and easy to understand, there's been some misunderstanding around that third right – the pursuit of happiness.

The signers of the Declaration of Independence were not declaring that they had a right to be happy, rather than sad. They were very much influenced by philosophers extending back to the ancient Greeks who believed that we all are driven to achieve more of our potential and that true happiness can only occur when we are able to do that. We can trace this meaning of happiness all the way back to the Greek concept of “eudaimonia” which ultimately describes a condition of human flourishing that they believed was a prerequisite for true happiness or a sense of fulfillment. In short, the signers of the Declaration of Independence were declaring that we all have a right to pursue more of our human potential and to resist institutions that seek to limit that right.

In a world of mounting performance pressure, we may begin to lose hope that we can achieve more of our potential and fall back on survival as the best that we can hope for. The Declaration of Independence is an important reminder that we all have an inalienable right to pursue human flourishing. That right becomes more meaningful if we can find a way to move beyond passivity and restore our sense of human agency.

The emerging American narrative

In many respects, the Declaration of Independence was a key milestone in the framing of a compelling American narrative that has been a key factor in the growth and prosperity of the United States. I’ve talked a lot about a very specific meaning of narrative here and here. In brief, I believe that powerful narratives are ultimately a call to action that bring people together to help address an opportunity or threat out in the future.

The growth of the United States has been driven by an opportunity based narrative that spoke to people around the world. At a high level, that narrative basically said that, no matter how modest your current resources or condition, there was an opportunity to achieve far more of your potential and aspirations. The call to action was that, to achieve that opportunity, you had to make the journey to the United States from wherever you were in the world.

Over centuries that narrative has drawn people from all over the world to disrupt their lives and take great risk to find a way to come to the US and participate in that narrative. The early colonists in the British outposts in what is now the United States were certainly drawn by the opportunity to achieve more of their potential. In some cases, it was the opportunity to pursue their religious beliefs more freely and, in other cases, it was the lure of exploring new parts of the world and achieving a higher level of prosperity than if they stayed in the villages of their ancestors.

The Declaration of Independence was a bold defense of that opportunity and inspired even more to make the journey in the decades and centuries following the signing of this document. Narratives become more credible when people act on them and achieve the opportunities that the narratives promise for others.

Now, I want to acknowledge that this narrative had its limitations and blindspots. It turned a blind eye to the plight of many, starting with the American Indians who occupied this land long before any immigrants came from Europe. It also clearly was not addressed to the Africans who were brought over as slaves to toil in the fields of early European settlers. It also was largely addressed to males, since women were expected to accompany their male partners or fathers and serve their needs, rather than focusing on opportunities for themselves.

Nevertheless, I believe this narrative played a key role in bringing a large number of increasingly diverse people from many parts of the world to the United States and was a key driver in the growth and prosperity of the American economy.

Better together

The American narrative was largely an individualistic narrative – speaking to individuals about what they could achieve on their own through their individual efforts. Yet, the Declaration of Independence was an inspiring example of the opportunity that can be created when people come together, rather than just acting in isolation. It made clear that, no matter how much we can achieve through individual initiative, there's far more opportunity that can be achieved when people collaborate.

Secession

Now we come to an interesting dimension of the Declaration of Independence that often isn't mentioned. We frame the Declaration of Independence as the opening salvo in the American Revolution against the British Empire. Truth be told, the Declaration of Independence was an act of secession, not revolution. We were not seeking to overthrow the British monarchy; we were seeking to leave it.

In fact, the American Revolution became a catalyst for a growing wave of secessionist movements around the world that were seeking independence from oppressive European empires. It was the opening salvo in the disintegration of the empires that ruled the world at the time and that limited the ability of large numbers of people to achieve more of their potential.

I know that secession has gotten a bad reputation because of the secessionist movement that led to the American Civil War but, at the risk of being too provocative, let me suggest that the Declaration of Independence will ultimately become an inspiration for a new wave of secessionist movements around the world.

There’s a global movement of people into large urban settlements around the world. It's been going on for centuries and it's accelerating, rather than slowing down. There are many reasons for this movement, but one key reason is an intuitive sense that more and more people have that they will achieve more of their potential in a large city than they ever could in a rural area or small town.

As large urban cities become the key drivers of economic growth and prosperity, there will likely be growing friction between these cities and the national governments that rule over them. I suspect we're on the cusp of a “back to the future” moment when we will see the rise of a new generation of city states and the disintegration of nation states. We're already starting to hear talk in the United States of a new wave of secessionist movements driven by cities that want more autonomy in helping their residents to achieve more of their potential, free from the constraints imposed by the Federal government.

In that context, the Declaration of Independence may acquire new meaning. It shows what can be achieved when people take initiative and come together to create conditions where they can achieve more of their potential.

Bottom line

Let’s not just view the Declaration of Independence as an interesting historical event. Let’s find a way to draw on this historical event to shape our future. We’ll only thrive and flourish if we restore our sense of agency and re-commit to the opportunity to achieve more of our potential, both as individuals and as communities. There are clearly significant risks and challenges along the way but, if we come together to pursue this opportunity, the potential is limitless. Those brave men who came together in Philadelphia to challenge the most powerful government in the world can be an inspiration for all of us, including American Indians, African Americans and women. We are all in this together.

The Big Shift From Engagement to Passion

For decades now, companies have been relentlessly tracking levels of employee engagement. Every large company I know has an employee engagement survey it regularly administers. Is it possible that they’re tracking the wrong thing? I’ve come to believe that engagement is a distraction from the real issue – the lack of worker passion. Let me explain.

Employee engagement

Employee engagement is a concept that is used widely and somewhat loosely. If I step back from all of the employee engagement studies and surveys that I’ve seen, the concept broadly focuses on three elements:

• Do the employees like the work they do?
• Do the employees like the people that they work with?
• Do the employees like and respect the company that they work for?

Why has employee engagement become such a significant issue for companies? It’s not just because it’s the “right thing” to do. It’s because more and more research suggests that engaged employees are substantially more productive than employees who are not engaged in their work. One widely quoted study showed a 21% increase in productivity if employees are engaged in their work. There’s a significant bump in productivity that can be fostering by creating more employee engagement.

In a time of mounting performance pressure, it’s completely understandable therefore why companies are so focused on worker engagement. A more productive workforce can be a significant competitive advantage in the marketplace.

So, why is employee engagement a distraction? Because it has limited impact. True, it generates a substantial improvement in productivity, but it’s a one-time improvement. The research shows that an engaged employee is more productive than an employee who is not engaged. But I’m not aware of any research that shows that engaged employees become more and more productive over time.

In a world of mounting performance pressure, that’s not enough. If you’re not accelerating performance improvement over time, you’ll become increasingly marginalized. You may buy yourself some time by expanding employee engagement, but it won’t be enough to keep up with markets that are demanding more and more rapid performance improvement.

Passion of the explorer

That’s the reason we ended up exploring arenas where sustained extreme performance improvement is required. We went into many arenas far removed from business, ranging from extreme sports to online war games. What did we learn? We found that, despite the great diversity of these arenas, they all had one common element: all the participants were deeply passionate about their quests.

Now, passion is another word that’s used widely and loosely. We found that the participants in these arenas had a very specific form of passion, something that we call the “passion of the explorer” and that we’ve written about here. This form of passion has three components:

• A long-term commitment to achieving an increasing impact in a domain
• A questing disposition that creates excitement when confronted with an unexpected challenge
• A connecting disposition that motivates the individual to systematically seek out others who can help them to get to a better answer faster when confronted with an unexpected challenge

That’s a powerful combination. People with the passion of the explorer are never satisfied or happy with what they have accomplished. What excites them is the next challenge on the horizon – it’s an opportunity to achieve more of their potential and take their impact in the domain to the next level. They are constantly seeking out those challenges and connecting with anyone who can help them address the challenge.

What drives passionate people is the opportunity to do better – constantly. Can you see why I’ve become so focused on passion as the key attribute for employees in a world of mounting performance pressure? These are the people that will be accelerating performance improvement over time, rather than just yielding the one-time productivity improvement that comes with engagement.

Who has passion?

Now, here’s the bad news. Our latest survey of the US workforce confirms that employee passion levels are remarkably low – far lower than employee engagement levels. Our best estimate based on our survey is that only 13% of workers have the passion of the explorer.

Why are passion levels so low? This isn’t an accident, but the deliberate product of the scalable efficiency model that all of our institutions have adopted. In a scalable efficiency world, workers are expected to deliver results predictably and reliably, performing highly specified and standardized tasks that are tightly integrated.

In that kind of work environment, passion is deeply suspect. Passionate workers don’t keep to the script and they’re constantly taking risks to get to that next level of performance – something that’s anathema in the scalable efficiency world where “failure is not an option.”

That’s why our school systems have been systematically designed to take students who are curious, creative and imaginative and train them to listen carefully, memorize what they’ve heard and repeat it back reliably on exams. The message is that, if you have a passion, that’s what playgrounds are for but, when you’re in the classroom, you need to focus on the assigned task. Our schools seek to make us successful in a scalable efficiency world.

I’m often told that it’s unrealistic to expect everyone to develop and nurture a passion in work. A common view is that passion is restricted to the select few and that most of us just want to be told what to do and receive a reliable paycheck in return. My response is to take those skeptics out to a playground and watch children 5-6 years old. There’s not a single one who isn’t passionate and curious and creative. Something happens between that age and the age that we’re at now – and my belief is that it’s our experience with the institutions that teach us to leave our passion outside.

If the schools don’t squeeze the passion out of us, our work environments surely will. But, here’s the challenge. As I’ve written before we’re moving from a world where our institutions are driven by scalable efficiency to a world where our institutions will be driven by scalable learning. And passion, which is so suspect in a scalable efficiency world, becomes a prerequisite in a scalable learning world.

People with passion will learn faster and accelerate performance improvement much more effectively than those who lack passion. I’ve written elsewhere about the need to redesign work environments with the primary design goal of accelerating learning and performance improvement. There’s a lot that can be done to apply design thinking and methodologies in this context to our work environment. But, if the people in those environments lack passion, they won’t be able to harness the full potential of those environments.

Another issue with employee engagement

As indicated earlier, employee engagement is characterized by happiness with the work and work environment. While this is certainly a laudable goal, it does have its downside. If the employee is really happy with the work that they’re doing and the people they’re working with, what’s likely to be their reaction when faced with the prospect of fundamental change? There’s a risk that they will resist the change – they’re happy with what they’re already doing. Why mess with a good thing? Engagement can breed conservatism and resistance to change, something that could be dangerous in a world where fundamental change is becoming more and more necessary.

In contrast, passionate employees welcome change, provided it can help them get to the next level of impact. In fact, they’re often frustrated with the current environment because they can see all the institutional obstacles that are undermining their ability to increase their impact. Even more, they get bored and restless if the environment isn’t changing and providing them with more opportunities to have even more impact.

The dilemma of engagement

Here’s something that I’ve never seen discussed. If employee engagement is so important and companies are spending so much money over decades to drive engagement levels higher, why have engagement levels remained so low?

I suspect that the answer might be troubling to institutional leaders. Maybe the reason that engagement levels remain so low despite so much focus and spending is that scalable efficiency environments are simply not conducive to engagement, much less passion. Maybe we humans don’t particularly like to be put into environments where we are expected to perform tightly specified and highly standardized tasks day in and day out. Maybe that’s not what humans were meant to do with their lives.

Maybe this is yet another reason to step back and question some basic assumptions. Perhaps the shift from scalable efficiency to scalable learning is not just necessary for our institutions, but essential for us as humans to achieve more of our potential and to feel that we are in fact needed as individuals, rather than just cogs in a well-oiled machine.

What can leaders do?

For those who recognize the imperative to catalyze and amplify passion within the workforce, what is to be done? I develop this in much more detail in our new research report, but here’s a high level view of the opportunity to drive change:

Lead by example. If you as a leader are not passionate about the work you do, all the words in the world will not inspire others to pursue their passion. Celebrate those who are passionate (remember there are 13% of the workers who already have this kind of passion) and who are taking risks in addressing challenges that will help them, and the organization, get to higher and higher levels of performance.

Provide focus. The most effective leaders in a scalable learning environment are not those with all the answers, they’ll be the ones with most inspiring and high impact questions. These questions help employees to focus on the challenges that matter but they also highlight the opportunity to get to new levels of performance. If the leader is excited by the questions, it will help to generate excitement within the workforce.

Create the environment. We can do a lot to create environments that will help catalyze and nurture passion. Provide platforms that can help people who are excited by high impact questions to find each other, connect with each other and learn from each other as they take on the challenge of getting to the next level of performance. Deploy experimentation platforms that invite workers to test out new approaches while managing the risk associated with those new initiatives.

The bottom line

In a world of mounting performance pressure, we need to shift our focus from employee engagement to employee passion. This is an imperative not just for our institutions, also for all of us as individuals. We have an opportunity to create far more value and achieve far more of our potential than we ever imagined possible. But to harness that opportunity, we need to navigate through the big shift from scalable efficiency to scalable learning.

Follow the Data to Find the Money

The perennial question here in Silicon Valley is: where’s the money? Given the techie culture here, this question usually gets translated into: what’s the next breakthrough technology? Let me suggest that’s the wrong way to frame the question. If you want to know where’s the money, then follow the data and don’t get distracted by the technology.

Sure, technology is a key enabler of data capture, aggregation, and analytics, but the providers of this technology will not capture the vast bulk of the value – it will be those who have access to this data and, most importantly, those who can creatively find ways to generate economic value from this data. There’s no question that technology is dramatically expanding the ability to capture increasingly rich data in real-time – just look at the rapid spread of sensors and networks in the Internet of Things technology that are making the invisible visible at scale.

Growing gap between actual and potential value creation

But the real question is: what are we doing with that data to create economic value? The answer is: not much. There's a rapidly growing gap between the potential economic value of the data being captured and the actual economic value created. An even better question, therefore, is what could we be doing with that data?

There’s a growing meme that data is the new oil. That’s the wrong way to think about it. Data is not the new oil; it’s the new solar. The problem with the oil metaphor is that oil is a fixed stock of resource that depletes over time. The most productive way to think of data and its economic value is as a flow, not a fixed stock, and it’s a flow that refreshes over time. Most importantly, like solar energy, it’s a flow that we’ve only just begun to understand in terms of how to harness its economic potential. As I’ve discussed elsewhere, flows will beat stocks in terms of value creation.

Given the significant and growing gap between economic value potential and actual economic value captured, there’s a substantial opportunity for disruption across a broad range of industries and markets as some companies find more creative ways to close that gap. That’s why I advise executives to follow the data and to challenge core assumptions about where the economic value could be. Those who do this will carve out very profitable leadership positions in rapidly growing markets.

The rest of this blog post will focus on some of the key principles that will form the basis for disruptive data-driven strategies.

Break down the data silos

Data increases in value as it integrates with other data in rich flows with feedback loops. Silos block this from happening, yet more and more of the data being generated is captured in technology and business silos.

If we just see a small slice of data, we are unlikely to have as much insight as when we can look at data holistically. The more of the context we can see, the more understanding we can develop about what is going on and, most importantly, what is likely to happen and what the participants will need to achieve even more impact. The value is in the whole, not the slice.

Here’s an example. I see you searching online for a medication for diabetes. That’s interesting, but it becomes even more useful if I know that it’s your father that was diagnosed with diabetes. That becomes even more meaningful if I understand that the diabetes is interfering with your father’s job and that he is facing the prospect of a significant erosion of income. If I also know that you have been supported by your father as you pursue a new start-up opportunity, that gives me even more insight into your context.
It also helps if I have real-time feedback loops that help me to see that the medication you found online was prescribed but is not helping to address your father’s symptoms.

The point is: context matters and context is fractal and evolving. The more I know about you as an individual, the more helpful I can be. I can be even more helpful if I understand the broader contexts you operate in: your family and friends, your work, and your community. And I can be most helpful if I can see how your context is evolving and the impact that your actions are having in these various contexts.

But there’s also another level of data integration. If I just see you and your context, I can’t be as helpful to you as I could be if I had visibility into a lot of people. Then I could start to see patterns emerging in terms of what kinds of actions yielded what kinds of results in what kinds of environments. With that broader visibility, I could have much greater insight into the actions that would give you the greatest impact in your specific context.

Those who can find a way to break down the data silos and create more integrated views of evolving contexts for many will be the ones who can create the most value for their stakeholders.

One of the keys to creating and capturing economic value from data is to harness what Matt Turck has described as “data network effects.” Data becomes more valuable as it connects with more data. Silos create a barrier to growing the economic value of that data.

Shift the focus of data value

If you look at how companies today are using data, it’s narrowly self-centered and short-term. It’s all about me today. The focus is on two things: using data to drive greater efficiency of internal operations or using data to more effectively target prospects in the marketplace.

I certainly don’t want to minimize the value of applying data for this purpose, but my question to executives is: is that all there is? Isn’t there far more economic value locked in the data that hasn’t yet been realized?

What’s missing is the opportunity to develop far more insight into context that can help to drive much greater value creation, rather than just improving the efficiency of existing operations. To see opportunities for value creation, one must be able to read rapidly evolving contexts in richer and richer ways.

Start with our customers. How much do we know about how they are actually using our products and services? Even more importantly, how much do we know about whether they are achieving what they wanted to achieve when they first sought out our products and services? This is the real potential of the Internet of Things as it begins to make the invisible visible at scale in real time.

Data can give us much richer insight into these questions and help us to spot new opportunities to add value around the products and services that we offer in the marketplace. Data feedback loops can also help us to redesign our products and services to deliver even more value in the first place. And, guess what? If we start to do that, customers will start to seek us out, because word will spread that we are adding so much value in the customer context.

And, let’s look inside our company. Rather than just looking at ways to reduce costs further, how about harnessing data that can give us more insight into ways to add more value by re-thinking our operations to address the unmet needs of others, whether they are our customers, members of our business ecosystem or simply other employees within our company? Data can become a catalyst to increase awareness of opportunities to add value, rather than simply delivering current value more cost-effectively.

Once again, data feedback loops also become a powerful way to test and evolve new approaches to add value as we can get much richer and more real time insight into the impact of our actions. It’s not just about redesigning our products and services, but redesigning the ways we act on a daily basis to deliver more value. By harnessing data more effectively, we can learn faster about the approaches that have the greatest potential to increase value.

Evolve new data driven business models

I’ve addressed the opportunity to evolve new, and much more powerful, business models before. As a key driver of economic value, data becomes a catalyst for new, disruptive business models that will challenge incumbents wedded to older, more limited business models.

There are several dimensions of potential evolution. First, data can be used to shift the payment model from upfront payment to payment based on usage and ultimately payment based upon impact achieved. Second, data itself can become a significant new revenue stream that over time may dwarf the revenue and profit generated from underlying products and services. Data can be delivered to help customers and users better understand their current context, then to help them anticipate future events and, finally to advise them on what actions to take to increase impact given those future events. Finally, data can also be used to more effectively identify and mobilize third parties to add value to customers given a richer understanding of the customer’s context.

But that’s not the ultimate disruptive potential of data in terms of business models. As I’ve already written, there’s a growing potential for disruption of the conventional, advertising-driven business models used by many companies today. In their place, we could see new business models that actually ask customers to pay for value received. The most promising manifestation of these business models is something that I call the “trusted advisor” business model, covered in this previous post and in my Net Worth book.

Cultivate customer trust

We live in a world where customer trust in all of our institutions is eroding globally. In that kind of environment, customers are going to be less and less willing to share data about themselves. On the other hand, if companies can more tangibly demonstrate how they are using data about us to deliver more tailored value to us to help us achieve more of what we are trying to accomplish, these companies are likely to gain privileged access to more and more data about us. We’ll be happy to share data if we feel that the company will use this data to add value for us and that the company will prevent access to that data by others who may not be as well-intentioned.

If I’m right that data will increasingly become the driver of economic value creation, then companies that have this kind of privileged access to data will thrive and marginalize the companies that are wedded to traditional ways of accessing and using data. If you want to know who will make the most money, focus on who owns the data and who has privileged access to data.

Bottom line

If you want to know where the money will be, follow the data. Data isn’t static and it will move over time to those who can find ways to generate more economic value from the data. Data wants to be valuable.

Therefore, if you want to know where the money will be, look for those who are trying to break down data silos rather than hide behind them. Also, look for those who are harnessing to data to find new ways to increase impact and value creation for the users and those who are developing innovative new business models enabled by data. But, most important of all, look for those who are cultivating customer trust so that they can get access to more data rather than those who are abusing data for short-term gain.

Just remember one thing. Customers are using data too. They are using data about providers much more aggressively to find the providers of products and services that can truly meet their rapidly evolving needs. Companies need to find ways to harness the economic value of data to understand and serve evolving customer needs or they will become increasingly sidelined.

Rather than thinking about customers as the “targets” for push driven marketing “campaigns,” we need to find ways to cross the table and sit next to our customers, using data in ways that will pull them to seek us out. We need to harness The Power of Pull. Data will determine who wins and who loses.

Exploring Business Types and Business Models

OK, I’ve created some confusion. I’ve been writing a lot recently about business models, including here and here. But I’ve also written a lot about business types/roles, including a popular Harvard Business Review article almost 20 years ago. Many of you have approached me to ask, so what’s the difference between a business model and a business type? And, if there is a difference, what business models should each business type adopt?

Well, fasten your safety belts. I’m going to try to explain myself, but I’m going to throw around a lot of concepts that may be hard to grasp on first reading. Because I can’t pack too much into a short (well, not that short) blog, I’m going to fly at a pretty high level and hope that it will motivate you to dive deeper into the concepts.

And, not to keep you in suspense, there is a difference between business models and business types as I use them. As I suggested in a blog post last year, business models focus on the specific form of value delivered to customers and the economics (revenue, expenses and assets) required to deliver that value to the marketplace so that customers feel they are paying a fair price and the owner of the business earns a decent return. It’s ultimately all about money.

Business types, on the other hand, focus more on the capabilities and culture required to deliver value to the marketplace. As we’ll see, there’s also an economic dimension to business types but the focus here is on the potential for fragmentation and concentration for each business type. As I’ll discuss below, each business type is likely to end up with somewhat different business models as a result of differing value propositions.

Let’s focus on the three business types – infrastructure management businesses, product innovation and commercialization businesses and customer relationship businesses – as a context for discussing business model choices.

Infrastructure management businesses

This business type involves high volume, routine processing kinds of activities – everything from assembly line manufacturing and logistics networks to data center operations and routine call center operations. It also includes a growing range of platform businesses that focus on aggregating participants and transactions.

These businesses are driven by a cost-focused efficiency culture – the key is to drive down cost per transaction without compromising on quality and reliability. Predictability is one of the highest values in these businesses. Standardization also ranks high – the more variability there is, the harder it will be to drive down costs.

These are typically asset intensive businesses and the key capabilities involve building/acquiring assets that are optimized for routine processing and managing these assets to drive increasing asset utilization and efficiency over time.

From an economic perspective, these businesses are driven by powerful economies of scale. The larger they get, the lower their unit transaction costs become. As a result, these businesses are likely to become very concentrated on a global scale over time.

So, what business models are most appropriate for infrastructure management businesses? As I share my answer, it may be useful to take a look at the posting where I developed the three dimensions of business model evolution so that I don’t have to repeat all that detail here.

In short, on the payment dimension, infrastructure management businesses are most suited for usage based pricing models. The payment model of impact based pricing is likely to be more challenging for infrastructure management businesses because they have limited visibility into the broader context of their customers and their culture is much more driven by efficiency and standardization.

If we turn to the data dimension, infrastructure management businesses are likely to be able to evolve into predictive data services, helping their customers to anticipate potential issues and opportunities related to the routine processing operations. Moving further along the spectrum to prescriptive data services may be more challenging because, once again, these businesses don’t have a lot of visibility into the broader context of their customers.

On the participant dimension, infrastructure management businesses are likely to remain locked into a vendor based model. Their economies of scale will make them relentlessly focused on doing as much of the routine activities themselves – their nirvana is truly a one to one relationship with the customer.

There’s one major exception to this last observation and that has to do with platform businesses, which I view as a sub-category of infrastructure management businesses. Platform businesses by necessity reach out to recruit a broader and broader range of providers to serve the users on their platform. Their economies of scale hinge on attracting more and more participants because the value of their infrastructure – the platform itself – depends on the number of participants.

But these platform businesses are unlikely to evolve into the “anyone/everyone” position on the participant spectrum. They are very protective of their platform because that is the asset that generates increasing value and they understandably want everyone to participate on their platform.

Product innovation and commercialization businesses

This business type is all about coming up with creative new products and services, bringing them to market quickly and accelerating their adoption. The culture of this business type is completely focused on celebrating the creativity of product and service designers – they rule the roost.

The key capability for this business type is, of course, creative product design that integrates a sense of unmet customer needs, a deep understanding of the materials and components that can be assembled to address those needs (or, in the case of services, the activities required to address those unmet needs), and an awareness of what will be required to support these products and services over time. In addition, this business type requires highly sophisticated marketing and sales capability that can rapidly build awareness of new products and services and accelerate adoption of the products and services.

From an economic perspective, this business type is the one that is most vulnerable to fragmentation over time as customers move from a willingness to settle for highly standardized, mass market products and services to an increasing desire for creative products and services that are tailored to their unique needs. Highly creative talent also likes to be in charge of their own shop and, as the means of production become more accessible to smaller and smaller businesses, the creative talent is likely to cluster into small businesses that make it possible for them to run their own show. I explored the fragmentation potential of this business type in greater detail here.

So, let’s look at the business models that would likely be the best fit for product innovation and commercialization businesses. On the payment dimension, this business type is likely to evolve the full distance to impact based pricing. After all, this is the key measure of success of a product or service – did it increase impact in terms of value creation for the customer? These businesses would be highly motivated to understand more deeply how their products and services are increasing value for their customers so they can tailor them even more finely to meet their various needs. With the proliferation of sensor and monitoring technology, it will be more and more feasible to gain visibility into the customer context, especially if the customer is assured that it will only pay for impact achieved.

On the data dimension, that ability to develop a deeper understanding of customer context will also make it more feasible for product innovation and commercialization businesses to move to generating revenue from prescriptive data services associated with their core products or services. As they develop a deeper understanding of the customer context in using their products and services, they can not only help customers to anticipate what might happen as they use the products and services, but give them advice on the options that they might pursue given what is likely to happen. Their understanding of the customer context is likely to remain limited to the immediate context defined by their products or services, but within that limited domain, they can become more helpful to the customer and, in the process, develop more insight about how to evolve their products and services to create even more value over time.

On the participant dimension, product innovation and commercialization businesses may have an opportunity to evolve into a specific variant of a platform business as a way to mobilize a larger number of third parties to add value. The type of platform business that could be attractive to this business type is what I have called a “product platform.” This business focuses on defining and developing some core functionality in a product or service domain that could then become a foundation for third parties to come in and develop a growing range of variations to address more specific customer needs. The platform provider would focus on rapidly evolving the foundation elements to enhance the ability of participants to develop more and more variations.

This product platform business is most developed in the digital product space where, for example, an operating system can become a platform for both device developers and application developers to use as they tailor their products to specific customer niches. I expect that this form of product platform will become increasingly prevalent in non-digital product and service arenas as well.

These product platform businesses are different from the platforms described earlier in the infrastructure management business type. Instead of focusing on high volume, routine processing kinds of activities, these product platforms focus on becoming more and more creative in developing and evolving core functionality that matters to more specialized product and service vendors. It requires a deep understanding of, and connection with, creative product and service developers to anticipate their needs.

But it would be very unlikely that a product innovation and commercialization business would evolve further on the participant dimension to embrace the “anyone/everyone” position. After all, the essence of a product innovation and commercialization business is great pride in the creativity and talent of its own product and service developers, so reaching out and connecting the customer with anyone and everyone, even competitors in its own product domains would be unthinkable.

Customer relationship business

This business type focuses on developing a deeper and deeper understanding of individual customers and using this knowledge to become more and more helpful to the customers in connecting them with the products and services that would create the most value for them. It is what I have described as a “trusted advisor” that is totally focused on helping customers, regardless of their needs.

The culture of this business type is very much driven by “the customer comes first” mindset. Whatever the customer wants, the customer gets. These businesses will move heaven and earth to accommodate the customer, no matter how trivial or unique their need might be. But they also are driven by helping the customer to accomplish even more, so they are willing to challenge customers if they are asking for something that is not in their best interests or would limit their ability to achieve their aspirations.

The key capability required for this business type is an ability to read individual customer contexts in great detail and, based on this information, to be able to anticipate and address customer needs. In order to do that, there must also be a capability to build and sustain deep trust so that the customer is comfortable in sharing more and more information about themselves. The advisors in this business type must have a deep sense of emotional intelligence so that they can constructively challenge customers and help them to accomplish even more.

This business type is driven by powerful economies of scope. The more the trusted advisors know about the context of an individual customer, the more helpful they can be to the customer and they can be much more helpful than someone who sees only a narrow slice of the customer’s context. And, the more customers the trusted advisor serves, the more helpful the advisor can be to each customer because of the ability to see patterns among customers like that particular customer in terms of what kind of value they have received from certain products or services. As a result, this business type is likely to become very concentrated over time, giving rise to large, global corporations.

So, what kinds of business models would be most appropriate for this business type? OK, I’ve saved the best for last, because this business type is in the best position to fully exploit the potential evolution of business models on all three dimensions of payment, data and participants.

In terms of payment, the trusted advisor is certainly in the best position to charge the customer based on the impact experienced by the customer since the trusted advisor depends on a deep understanding of the broader context of each customer. Again, because of this deep understanding of broader context, the trusted advisor is in a privileged position to leverage data to provide prescriptive value for customers, not just helping them to anticipate what might happen to them but providing tailored advice in terms of the choices available and which choices are likely to create the most value for the customer. Finally, trusted advisors are much more likely to evolve to an “anyone/everyone” position on the participant dimension because they are committed to connecting their customers with the most relevant resources regardless of where they are.

Tying it all together

Most companies today are an unnatural bundle of all three of the business types outlined above. Because these three business types have very different cultures, capability requirements and economics, keeping them tightly bundled together in a single company inevitably leads to sub-optimal performance across all three business types. In a world of mounting performance pressure, companies are ultimately going to be forced to choose which of the three business types they really want to focus on and shed the remaining two business types to more focused players who can provide world-class performance in those business types.

The unbundling of the corporation does not mean that companies are doomed to get smaller. If they choose to focus on the infrastructure management business or the customer relationship business, they will have an opportunity to become much larger than ever before, driven by powerful forces of concentration and consolidation. If you’re a large company or want to become a large company, the one business type you might want to shed most quickly is the product innovation and commercialization business, because that business type will be increasingly vulnerable to fragmentation.

Making the choice on business type to focus on will make it much easier to assess the potential for evolution of a company’s business model. The business model must ultimately be optimized for each business type. If the company continues to try to hang on to all three business types, it will inevitably sub-optimize on the business model front as well.

Bottom line

Life is complicated, and getting even more complicated, but there are promising approaches to simplify it. Start by asking “what business should we really be in?” Don’t stop asking that question until there is an alignment around one of the three business types described earlier and a commitment to shed the other two business types. That will lead to a much tighter focus on what really matters for success and free up resources to deepen capabilities in the chosen business type. It will also make it much easier to choose the business model that will generate the most value for the company.

We need to extricate ourselves from the understandable but increasingly dysfunctional tendency to fall into a reactive posture, trying to spread ourselves too thinly across too many businesses and initiatives. The winners in this more complicated and uncertain world will be those who have a clear sense of who they are and what is really required for success.

The Future of the Gig Economy

The “gig economy” has become an ever-expanding meme, clocking over 500,000 citations on Google. It’s also become an interesting barometer of sentiment. Some people, especially techies, love the concept and can’t wait until the gig economy frees everyone from working as employees for large, bureaucratic organizations. Others, especially “progressives,” worry that this is the latest form of labor exploitation that will surely consume all of us, driving us into the pits of poverty.

As I'm prone to do, I'm going to try to define a third path that will offer a different perspective on the gig economy. I believe that the gig economy, at least as currently conceived, is a transitional phenomenon that will evolve into something much more enduring, but quite different from the current model.

So, what is the “gig economy”? If you Google the term, the following definition appears: “a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.” It’s kind of implicit in the definition, but I find that most people consider the gig economy to be individuals bidding for short-term work.

The gig economy has been a rapidly growing part of the US labor force. A recent study by two prominent economists concludes that about 94% of the net job growth in the US from 2005 to 2015 was in temporary work that would broadly be considered within the gig economy.

What are the key types of gig work today?

If you look around at what passes for gig work today, it tends to fall into one of two categories: routine tasks and creative problem solving. I haven’t seen any reliable studies on this, but my impression is that the vast portion of gig work today falls into that first category – routine tasks.

Routine tasks. Perhaps the poster children of the gig economy today are the drivers who work on a freelance basis for various mobility fleet operators in large cities. But earlier participants in the gig economy were people working on a growing number of online platforms to do everything from routine software coding and translation services to bookkeeping services and clerical services.

One of the key drivers of the growth of this portion of the gig economy has been an increasing tendency for larger companies to shed major portions of their workforce in their quest to shift from fixed labor costs to variable labor costs, especially if there's significant fluctuation in the demand for certain kinds of tasks. This trend has been accelerated by the emergence of a growing array of platforms that help companies to more easily connect to a broader array of independent contractors to get these jobs done when needed and where needed.

Creative problem solving. Crowdsourcing has become a growing trend within corporate America. Do you have a really challenging question that needs to be addressed? Crowdsourcing is an approach that encourages managers to go beyond the boundaries of the enterprise to ensure that they come up with the best answer possible. Companies can pose a problem or question on crowdsourcing platforms and offer a reward of some kind to the person who comes up with the best answer. The power of these platforms is the ability to tap into a broader and more diverse range of expertise, regardless of where it is located.

The key drivers of the growth of crowdsourcing are the accelerating pace of change and the pressure to deliver increasing efficiency by turning expertise into a variable cost – why not just pay experts when they come up with the right answer, rather than paying them a fixed salary?

The essence of gig work today. So, while there are two significant categories of gig work today – routine tasks and creative problem solving – all gig work shares some common characteristics. First, it tends to be highly transactional. I have a specific short-term need and you have a capability that I need, so let’s do a transaction. Long-term relationships are generally not part of the equation. After all, that’s the attraction of the gig economy to corporate America – the ability to turn labor into a variable cost. And, yes, drivers for mobility fleet operators tend to work for the same operators over an extended period of time but they are paid just for tasks performed – the compensation system is highly transactional.

The second characteristic of gig work today is that it tends to be done by individual contractors who bid for the work independently and perform the tasks as individuals.

Forces driving the evolution of the gig economy

The gig economy is likely to evolve significantly in the decades ahead, shaped by three key forces: automation, changing customer needs and the mounting pressure to accelerate learning.

Automation. The first category of gig work identified above – routine tasks – is currently the dominant segment of the gig economy but it’s the most vulnerable to automation. Routine tasks? Machines are likely to be able to do those much more cost effectively and reliably than humans can. Even such complex but routine tasks as driving a car in cities or driving a truck across an entire country are likely to be automated as autonomous vehicles become more versatile and affordable.

Changing customer needs. There’s a new category of work that’s likely to emerge in response to changing customer needs. It starts in the consumer space where customers are evolving away from acceptance of highly standardized, mass market products and services and instead increasingly seeking, and even expecting, highly tailored products and services that meet their unique needs.

This began to play out in the digital media space where we have seen growing fragmentation of music, videos and software as the means of production became more accessible to a broader range of creative developers of these products. Now, technology is helping to make the means of production more accessible for physical products as well, and the expectations that customers are developing in the digital media space are cascading over into physical products as well. This trend is being accelerated by the growth of online platforms that can help connect producers of creative and highly tailored products and services with relevant customers, wherever they reside in the world.

As a result of all this, we’re likely to see a new category of gig work emerge – let’s call it “creative opportunity targeting.” As we developed in much more detail in our research paper on fragmentation and concentration trends in the economy, we're likely to see more and more people abandoning their role as employees within large companies and venturing out to develop creative new products and services for smaller and smaller customer niches. We can already see early signals of this in such diverse areas as the Maker Movement and the craft movement that platforms like Etsy are helping to support.

A little more speculatively, I anticipate that consumers are going to show increasing interest in highly specialized, creative services that help them to draw out more of their potential. This could come in the form of creative experience designers that help them to learn about things or people that matter to them or highly specialized wellness providers in such diverse arenas as massage, meditation and nutrition. All of these tailored services are likely to be provided by gig operators.

Mounting pressure to accelerate learning. So, as routine tasks become more and more automated, gig work is likely to evolve into an ever broadening range of creative problem-solving or creative opportunity targeting. In a much more rapidly changing world, the sustained success of this kind of gig work will hinge upon the ability to accelerate learning and performance improvement to come up with ever more creative and differentiated offerings.

So, how might this mounting pressure to accelerate learning affect how gig workers operate? I believe that it will increase the incentive for individual workers to band together into small workgroups of 3-15 workers who collaborate on gig projects. No matter how creative and smart individual workers are likely to be, they will likely learn a lot faster if they are collaborating together with a small group of other equally motivated people who have built long-term, trust based relationships with each other and who are challenging each other to come up with even more creative ideas. While some of these workers will continue to collaborate informally, the imperative to learn faster forever will drive the gig economy towards more sustained collaboration.

Like all things in the future, this is already starting to happen today. For example, InnoCentive discovered that some the top performing problem-solvers on its platform were actually groups of people who had come together on a sustained basis behind the scenes to tackle a series of problems, rather than just tackling one problem.

As the gig economy evolves to focus more on creative tasks that are highly specific to one small set of customers or to one specific kind of context, it is also likely that these gig workgroups will begin to build more sustained relationships with specific customers rather than broadly distributing themselves across any random customer that comes their way. The deeper and more nuanced understanding that a gig workgroup has of the customer or the work context, the more creative they are likely to be in addressing the evolving needs relative to gig workers that are coming in without any familiarity with the situation. The growth of reputation systems that specify the impact over time of gig workgroups will help to draw new customers with comparable needs and contexts, helping the gig workgroups to deepen their expertise.

If our research work on fragmentation and concentration trends in the economy is right, we anticipate that more and more of the workforce will be pulled into this arena of creative gig workgroups. While there will be growing pressure on these workgroups to learn faster and deliver more value to their customers, the people in these workgroups will be sustained by deep, trust-based relationships both within their workgroup and with many of the customer they are serving and they will be rewarded by their growing ability to add tailored value to the customers they serve.

I’m often confronted by two objections to this somewhat optimistic view of the future of work. First, many people wonder whether all humans are capable of this kind of creative work or whether it will be limited to just a privileged few. Second, others wonder whether there will be enough demand for this kind of creative work. I believe that all humans are intrinsically capable of this kind of creative work and I also believe that there will be unlimited demand for this kind of creative work, but this blog post has already gone on way too long so I will leave everyone in suspense and promise to address these concerns in yet another blog post.

Bottom line

We're just in the earliest stages of an emerging and evolving gig economy. Very broadly, the gig economy is likely to evolve from a focus on routine tasks to a focus on creative work. As this evolution plays out, we're likely to see the focus of work shift from individuals to small, sustained workgroups that are driven by a desire to learn faster together. This in turn will lead to a shift from work that is defined by short-term transactions to work that is pursued in the context of rich, trust-based and sustained relationships. In short, the gig economy will become a fertile seedbed to help all of us achieve more of our potential and deliver expanding value to the marketplace.

In short, the emergence and evolution of the gig economy is simply one more manifestation of the power of pull. The early initiatives in this arena have focused on harnessing the first level of pull – accessing skills when and where needed. But the real opportunity latent in the emerging gig economy is the opportunity to tap into the third and highest level of pull – achieving more of our potential by creating environments that can pull that out of each of us, especially when we work together.

Given this emerging reality, we may want to find a different name for this part of the economy – rather than gig economy, what would be a more accurate way of describing the evolving nature of work? Collaborative economy?

The Big Shift in Platform Business Models

Everywhere you look today, platform businesses are in the news. Most of the stories focus on what platforms do. Some highlight the value they provide in terms of ease and convenience in connecting with needed resources. Others focus on the risk of monopoly as network effects take hold and as platform participants become commoditized and their earnings squeezed. Relatively few look beneath the surface to try to understand the business models that drive platform businesses. They tend to ignore the most basic question of all: where’s the money?

I want to focus today on that question, exploring it at two levels. First, what’s the appropriate business model for the platform owner? Second, what’s the appropriate business model for platform participants? I suspect that the answer to both questions is that the appropriate business models are quite different from the business models that prevail today on platforms. To develop this perspective, I’m going to build on two earlier posts on business model evolution here and here.

The most basic shift for platform owners

Let’s start with business models for the platform owners. If we look across the business landscape today, two business models prevail. For platforms that focus on facilitating transactions or enabling social connections, the customer rarely pays – the revenue comes either from advertising or transaction fees paid by vendors. The one exception to this are platforms that aggregate resources like data or media where subscription business models often prevail.

Are these business models supported by advertising or transaction fees paid by vendors sustainable? I’m skeptical. Sure, these business models may make sense in the early stages of platform deployment since they increase the incentive for potential customers to participate and help to accelerate network effects. But, what’s the consequence? Over time, the result is that the loyalty of the platform owner rests firmly with the advertisers and vendors – after all, they’re the ones paying the bills.

But here’s the challenge. As I’ve suggested elsewhere, the real future of platform businesses is to evolve into learning platforms where participants can accelerate performance improvement based on feedback loops created by the platform owner. In a world of mounting performance pressure, the ability to accelerate performance improvement will become more and more essential, giving a significant advantage to platforms that focus on helping participants to learn faster.

Getting access to more and more data about the participants is a prerequisite for these learning platforms to emerge, so that this data can be aggregated, analyzed and fed back to participants in ways that help them to improve their performance.

But will customers be willing to share more of their data with the platform owner if they believe that the loyalty of the platform owner is with the vendor or advertiser? I doubt it. The platforms that will be most successful over time are likely to be those that shift their allegiance to the customer. How do they do that? By being paid by the customer.

If the platform owner is being paid by the vendor, customers will always limit their trust since they know who is paying the bills. If the customer is paying the bills, the successful platform owner will do whatever it can to serve the needs of the customer. As the platform owner provides more and more tangible value to the customers, the customers will be more willing to share even more data about themselves to enhance the value they receive back.

Platform owners can still be helpful to vendors on their platform even if the customer is paying the bills. After all, customers will benefit if vendors become more effective in tailoring their products and services to the evolving needs of their customers. But, when there is a clear conflict between the needs of the customer and the needs of the vendors, platform owners will be clear that their loyalty is ultimately to the customer when the customer is paying the bills.

This shift to customer payment may apply to commercial platforms that bring together participants wanting to do business with each other, but what about social platforms where there is no commercial motivation among the participants? Would they still be willing to pay for participation on the platform? Yes, because participants want to share more of themselves to deepen and enrich social relationships, but they want to do it in a safe environment, one where they know the platform owner will not seek to share this personal information with commercial entities in ways that might ultimately be detrimental to participant.

Three more shifts for platform owners

So, that’s one basic shift in business models for platform owners. It will be a very challenging transition for existing platform owners and makes them vulnerable to new entrants who adopt this business model from the outset.

But, that’s just the beginning. So far, we’ve talked about who’s paying the bill – vendors or customers? We also need to explore how the payments by customers might evolve along the three dimensions of business model evolution that I outlined in a previous blog post.

Payment. What will the customer pay for? The most basic model is a monthly subscription model where the customer pays a flat fee for access to the platform. But why stop there? As I’ve suggested, there will be increasing pressure to evolve towards usage based models where the customer pays based on how much time they spend on the platform. This will motivate the platform owner to find ways to be more and more useful to the customer so that they increase their usage of the platform. Beyond usage based models, many platform owners may be able to evolve to impact based pricing models where the customer pays based on the value they generate from participating on the platform.

Data. This is one of the big untapped opportunities for platform owners. Platforms are rich aggregation points for data about a growing number of diverse transactions and interactions among participants. As platform owners begin to harness this data and design services for participants based on this data, there’s a significant new revenue stream that can be generated. As discussed in my earlier blog post, these data services could start with descriptive data but have the potential to rapidly evolve into predictive data services and, most attractive of all, prescriptive data services that advise participants on actions they can take to increase value for themselves. This will also be the untapped opportunity for peer to peer platforms like blockchain that make more data visible to all the participants. Rather than simply focusing on efficiency of transactions, there will be a rich opportunity for these peer to peer platforms to harness this data through services that help participants to create more value for themselves.

Participants. Platform owners are already in the business of connecting participants with a growing range of third parties that could add value to them, challenging the prevailing business model of one to one marketing – one vendor dealing with each customer. Platform owners are potentially vulnerable to new business models that focus on connecting participants with third parties, wherever they reside and regardless of whether or not they are on the same platform. The best defense against these competing business models is to expand the number of participants on the platform as rapidly as possible and to gather richer and richer information about the participants so that they perceive lower risk in connecting with each other than venturing out beyond the platform to connect with others that are less well known.

Evolving business models of participants

There’s no question that platforms intensify competition among the vendors on the platform. Yes, they will be able to reach more customers than they could on their own – that’s the core motivation to participate on the platform in the first place. But those customers will have a growing selection of options to choose from, they’ll have more information about the options and it will be easier for them to switch from one vendor to another.

In that kind of environment, vendors will need to evolve to business models that provide more and more value to the customer. They too will have an opportunity to evolve along the three dimensions outlined earlier – payment, data and participants. The key will be to enhance the potential for differentiation and to continue to evolve their offers as rapidly as possible to stay one or two steps ahead of potential copiers.

In this context, the data aggregated and made available by the platform owner can be a powerful driver of learning and evolution, but the challenge will be that this data will also be available to other platform participants. For this reason, platform participants will have a strong incentive to evolve towards business models that enable them to gain access to additional data about their customers, data that’s not more broadly available to the platform owner. The result will be an increasing emphasis on the data dimension of business model evolution where participants can focus on persuading customers to share more of their data in return for providing more descriptive, predictive and prescriptive value to the customer.

The net effect of business platforms will be to accelerate the potential for fragmentation as each of the product and service vendors seeks to focus on the areas of greatest differentiation. While scale will be a more difficult outcome to achieve, participants will find that they can be more profitable as they reduce marketing and sales expense because the platform owner is helping them to connect to the customers that are most relevant to them and that are most willing to pay a premium for their product and services because they are so unique to their individual needs.

They will also enhance their profitability by shedding activities that they previously felt a need to pursue because their customers wanted the convenience of bundled offers of products and services. Now they will be able to focus tightly on the areas where they have the greatest differentiation and rely on others in the platform to provide world class complementary products and services conveniently and reliably to their customers.

But what about the big squeeze?

Many platform participants are concerned because they may be vulnerable to the growing power of the platform owner as network effects take hold and the platform owner gains bargaining power relative to the platform participants.

While this will always be a risk, the increasing feasibility of business models – especially the trusted advisor business model -  that go beyond an individual platform and help customers to connect with providers of products and services wherever they reside will represent a more and more powerful check and balance on the potential greed of the platform owner.

As suggested above, in this kind of business environment, the winning approach for a platform owner will be to focus on harnessing data and knowledge flows to help platform participants get better faster so that they can create and capture even more value from customers. If they do this well, the platform owners will be able to capture some of that value for themselves through value based billing of platform participants. Rather than seeking to capture more and more share of a fixed value pie, the platform owner can grow its revenue and profit flows through participating in the growing revenue and profits of its participants that it helps to enable, as well as through adding more and more participants to its platform as word spreads about the learning potential.

Bottom line

The quest to harness data to help accelerate learning and performance improvement is a powerful one. It will increasingly shape the business model evolution of both the platform owner and platform participants. This business model evolution will also help to create a “win, win” economic relationship between platform owners and platform participants where both sides gain the faster everyone learns. In the end, this will be the motivation that attracts participants to join platforms and to remain active on platforms over time.

Business Practice Redesign

In the world of scalable efficiency, processes rule. Businesses around the world are well into their third decade of “business process reengineering”, massive initiatives designed to create more and more tightly integrated and standardized business processes to squeeze out the inefficiency that lurks when people don’t follow instructions to the letter. And, it’s not just companies – all of our institutions have caught the process religion, whether it’s schools, governments or even NGO’s.

But here’s a provocative proposition – perhaps processes are becoming prisons that keep us trapped in a world of diminishing returns rather than providing us with platforms to help us achieve more of our potential. And perhaps routine processes that worked so well in times of relative stability become increasingly inefficient in a world that’s characterized by increasing uncertainty and an accelerating pace of change. Maybe they’re actually becoming a barrier to performance improvement rather than a prerequisite for performance improvement.

Where do workers spend their time?

It turns out that we’re spending more and more of our time outside processes. An informal survey that I did many years ago suggests that as much as 60-70% of employee time in large, established enterprises is being spent on something called “exception handling” – an event that occurs that was not anticipated by the process and that the process policies and procedures cannot handle, so it gets handed off to an employee who has a short time (typically 24 – 48 hours) to resolve the exception. That person usually cannot do it on his or her own, so several other people need to be found and brought together quickly with relevant data and analytics to get to a resolution. Today, these activities tend to be very inefficient.

And, when we’re not handling exceptions, we’re often coming together in teams or work groups on a more sustained basis to launch some kind of new business initiative – e.g., entering a new market or seeking to expand our network of business relationships. These new initiatives are becoming more frequent because we are dealing with a world that creates unexpected opportunities and challenges. The people involved in these initiatives are rarely governed by processes and they are improvising as they go.

If we’re spending more and more of our time outside established processes, maybe we should shift our focus away from processes and focus instead on the practices that small, front line work groups use to improve their performance over time by learning faster on the job.

Learning faster to accelerate performance improvement

This notion of learning faster has been a core theme of much of my writing for years now, but I’ve encountered a lot of misunderstanding when I use the term. Many people assume that I’m talking about training programs or knowledge management systems – helping to improve access to existing knowledge within the institution. No, in a world that’s increasingly driven by exponential change, existing knowledge depreciates at an accelerating rate. The people and institutions that will be most successful in this new world are those who learn faster by creating new knowledge through action – coming up with new ways of doing things that can increase impact.

This kind of knowledge is often not explicit knowledge that can be written down and disseminated to others. Instead, it’s tacit knowledge that’s in our heads and even our bodies (think of muscle memory required to ride a bicycle). We have a hard time articulating this tacit knowledge to ourselves, much less to anyone else. It’s embedded in our practices and hard to understand unless we are deeply embedded in a specific context with the individuals engaged in these practices, often as part of a small workgroup.

So, here’s a question:

What are the specific practices that can help small, front-line workgroups to learn faster – to evolve their practices more rapidly to generate accelerating performance improvement?

These are meta-practices, if you will – practices that specifically help to create new insight into how to act in new ways to improve the impact of the workgroup in terms of performance that matters to the institution.

The assumptions behind the question

There are a lot of assumptions embedded in this question. For example, it focuses on small workgroups rather than individuals or departments. It assumes that these workgroups will be the most fertile setting for learning faster – far better than an individual sitting alone in an office or a larger department that doesn’t have a rich enough understanding of the context that these small workgroups are operating in. Also, these small workgroups often include participants that span across multiple departments. Increasingly, these small workgroups also include one or more participants from other institutions as we seek to tap into the practices that others outside our organization can bring to bear on a particular challenge or opportunity.

The question also focuses on front-line workgroups rather than the workgroups that operate at many levels of an organization. The assumption here is that the most meaningful performance of institutions will ultimately be driven by practices on the front-line – dealing with customers or suppliers, for example, or working on the assembly line of a factory or in the engine room of a cargo ship. The front-line is often where the unexpected problems or opportunities first appear and where the practices that could have the greatest impact in addressing these unforeseen situations will be first crafted. Here’s an interesting observation: the more uncertain and volatile our world becomes, the more important the front-line becomes – that’s where the action will be.

In line with my earlier comments, the question emphasizes practices because the assumption is that these are the most effective way to respond to unforeseen and new situations. But, practices present challenges. They tend to be highly context specific, so a key challenge will be to see if we can generalize about practices at least a high level that seem to relevant across many diverse contexts. Practices tend not to be explicitly defined – they emerge and evolve depending on the context. They have to do with how we perceive that context, how we think about it, and how we act in it, often in ways that we couldn't even make explicit to ourselves, much less to anyone else. For example, one set of practices involves how we can more quickly make sense of a new context that we’ve never seen before so that we can act in a way that has more impact.

There’s an issue of how far we can go in making these practices explicit so that they can be communicated to others. We have an instinct that the most effective way to understand practices is by becoming embedded in the context – it’s why apprenticeship models tend to be so effective in building capability in a practice.

The question also refers to accelerating performance improvement, not just one time performance improvement. This assumes that one-time performance improvement is no longer adequate. What we need in a world driven by exponential change are practices that will help us to accelerate performance improvement – getting better faster over time. One time or even linear performance improvement will become less and less adequate and the winners will be those who can move beyond that and find ways to unleash a trajectory of accelerating performance improvement.

There’s been a lot of work done to understand the practices pursued by high performing front-line workgroups but, to my knowledge, very little if any work has explicitly focused on the question as framed above. Yes, a workgroup may be high performing today, but what’s the trajectory of performance improvement and what are the specific practices that contribute to accelerating performance improvement?

Our next wave of research

This is going to be the focus of our next wave of research at the Deloitte Center for the Edge. We’re going to be bold and suggest that “business process redesign” will actually lead to diminishing returns. In its place, we suspect that the most successful institutions of the future will be the ones that focus on “business practice redesign” – seeking to cultivate the practices specifically designed to accelerate performance improvement and learning on the front-line. We expect that this will be a key factor in helping our existing institutions transform themselves as they seek to move from scalable efficiency to scalable learning. It may in fact turn out that the only way to operate efficiently in the Big Shift will be to focus relentlessly on scalable learning.

A call for help

I’m using this blog post to reach out to ask for help on three fronts:

• Does the question as framed above make sense and are we in fact making the right assumptions in framing the question as we did?
• Has anyone else done work on this question or one like it? What research could we access to learn more about what might have already been discovered on this front?
• Do you know of any front-line work groups that have demonstrated accelerating performance improvement over a reasonable period of time? We’d like to find some workgroups that we can study to begin to identify the practices that seem to be specifically contributing to accelerating performance improvement.

Bottom line

We need all the help we can get. As usual, we’re venturing out on an edge that we don’t think has been explored, but that could yield great insight into how we can accelerate performance improvement in a world of mounting performance pressure. In doing so, we’re venturing beyond our comfort zone, but isn’t that where all the growth and insight occurs? We'd welcome others to join us on this exploration and help us with the questions that I’ve framed above. Who knows? As we move from a relentless focus on process to a more nuanced exploration of practices, we might actually change the world.

Make This the Best Year Ever

As we approach the New Year, it’s an opportunity to step back and reflect on our journey. Are we headed in the right direction? Are we making the kind of progress that we would like to see?

For most of us, we approach this opportunity in a relatively granular and ad hoc way – we craft a set of resolutions for how we’re going to act in the New Year. And more often than not, there are usually a lot of resolutions (we seem to believe that the more resolutions we have, the more likely it will be that we can at least adhere to one or two).

But is that the best way to proceed on our journey? Maybe we’re not taking full advantage of the opportunity available to us.

Crafting a personal narrative

What could we do differently? Well, I’ve written a lot about the power of personal narratives. We all have one, but few of us have taken the time to articulate it to ourselves, much less to reflect on whether it’s a narrative that’s really helping us to achieve more of our potential. To determine that, we need to start by examining the key choices and decisions we’ve made in our life and seek to make explicit the implicit narrative that drove those actions.

What do I mean by narrative? As I’ve discussed elsewhere, the way I see it, a narrative has two key elements. First, it’s open ended – it’s driven by some view of an opportunity or threat out in the future that has yet to be achieved and it’s far from guaranteed that it will be achieved, but it is worth pursuing. Second, it’s ultimately not about you, it’s a call to action directed to the people you are wanting to reach – it motivates them to collaborate with you in ways that will help all of you to achieve something that’s really valuable.

So, what’s driving you? Is it hope about some opportunity that’s down the road or fear about some threat that lies in the bushes, waiting for you to get closer? If it’s a threat, is the threat really that real and is the fear preventing you from having more impact in the areas that really matter to you? And, if it’s an opportunity, is it really the opportunity that excites you the most and that will help you to achieve more of your potential? Those kinds of opportunities are unlikely to be achieved within a short period – if they’re really challenging us to be more of who we could be, they are likely to be opportunities that would take years, decades and perhaps even a life-time to attain.

And what about the others around you? Are you geared to facing this threat or opportunity on your own, without help from others? If you’re asking for help, what kind of help are you seeking? Is there some way that this threat or opportunity can motivate others to go above and beyond in providing the help you need because they'll benefit greatly as well?

Maybe we should use New Year’s Day to step back and reflect on our personal narrative. What is our personal narrative? Is it really the narrative that will help us to achieve more of the potential that lies within us?

And what about those resolutions?

But crafting a compelling and exciting personal narrative is just the beginning – we need to turn it into action, action with real impact. How do we do that?

Well, this is where resolutions may help. Your resolutions now have a context – a context that matters deeply to you and that will help to motivate you to do your best in pursuing them in the months ahead.

But, the key is to stay focused. Resist the temptation to churn out a long list of resolutions. Ask yourself, what are the two or three actions – no more, just two or three – that I could take in the New Year that would have the greatest ability to accelerate my movement towards to the opportunity that I’ve defined for myself in my personal narrative?

Here I’ll reveal my personal bias – opportunity based narratives have the greatest ability to unleash our potential while threat based narratives will tend to confine us. So, if you’re still clinging to a threat-based narrative, work hard to challenge whether that threat is as real as you imagine it to be and, if it is, whether there isn’t an opportunity that could ultimately neutralize that perceived threat and at the same time help you to achieve more of your potential.

And, as you’re looking for those two or three actions to focus on in the New Year, be sure to include at least one or two that will help you to more effectively connect with others so that you can get more leverage for your own efforts. Here, it may help to frame the actions as efforts to answer really interesting and important questions.

By focusing on questions, you do two things. First, you can potentially attract others who are very intrigued by the questions and motivate them to help you answer them. Second, you acknowledge that you need help – you have interesting and important questions, but you don’t have the answers and want help in coming up with the best answers. In this way you build trust – you are expressing vulnerability and asking for help. That helps to deepen your relationships with others and increase their motivation to join you on your journey.

So, what are the most important questions that need to be answered in order for you to make progress in reaching that opportunity out on the horizon? Perhaps your resolutions could be about finding answers to those questions with the help of others.

Bottom line

By adopting the approach that I’ve outlined above, we may find that New Year’s Day can be the launch pad of a much more productive and fulfilling New Year. It will help us to develop a tighter focus on the things that really matter, rather than compiling lengthy lists of random desires. It will help to motivate us by making more explicit what we are really striving to achieve and how our near-term actions can have a meaningful impact in helping us to achieve the opportunity that really matters. So, if one of these actions is not playing out the way we promised ourselves it would, we’ll feel a real need to re-double our efforts to act in a more effective way. It also will help us to learn faster because we’ll be reflecting on the impact we’ve achieved relative to the longer-term opportunity that’s the focus of our personal narrative and constantly striving to find new and more creative ways to increase that impact.

If we do this right, we may find that small moves in the New Year, smartly made, can set big things in motion.

United We Stand, Divided We Fall

I love paradox and today we’re living through one of the biggest paradoxes of all: at a time when we seem more divided than ever, we’re actually more united than ever.

What do I mean by that? All you have to do is take a cursory look through our media or our conversations when we come together as groups to see that we’re deeply polarized. We not only disagree with the views of the other side, but dismiss the people articulating those views as evil, sick or ignorant beyond belief.

So, how could we be united at the same time? It’s simple: we’re all united by deeply held fear and, if we take the time to really understand the source of the fears on both sides, we’ll discover that we can become even more united around an opportunity that can take to us to levels of achievement that we never imagined possible.

What's the fear that we're feeling?

The precise nature of our fears may differ depending on which side we’re on, but the underlying truth is that we’re abandoning hope and succumbing to fear as the dominant emotion that governs our lives and our behavior. And, by the way, as fear takes hold, it’s very natural for anger to surface as well. Anger is often fear in disguise.

On one side there’s growing fear that mounting performance pressure is diminishing opportunity on a global scale, that our jobs and livelihood are increasingly at risk, and that the privileged few are reaping rewards at the expense of the rest of us. The institutions that were supposed to support us are increasingly failing us. Our children will not be better off than we are but instead will likely have a more challenging time and have to make do with less. So, the fear is not just about ourselves, it’s about our children – what could possibly be worse than that?

On the other side, there’s growing fear that the institutions that we’ve relied upon for stability and prosperity for centuries are now under attack. We’re heading into a society of growing turmoil where no one is safe. We’re fragmenting into warring factions. The consensus that provided a solid foundation for all of our institutions is rapidly eroding. While minorities may be the first to experience the loss of safety, we’ll all be subjected to unexpected attacks over time. Rather than a society where rights and duties prevail, we feel that we’re rapidly shifting to a society ruled by the mobs of the moment.

So, we’re all feeling the fear. And, as fear takes over, a vicious cycle emerges. Fear feeds upon fear. Those few of us who are able to cling to optimism find ourselves increasingly questioning how we can be so comfortable and complacent when those around us are consumed by fear. Those who have only modest fear begin to feel it intensify as we find so many others sharing our fear. We become ever more united in our fear.

And, as fear takes over, we also begin to feel increasingly helpless. Events are beyond our control. We’re victims of circumstances. Fear becomes overwhelming.

So, can we shift from fear to hope?

If we let this dynamic unfold and spiral out of control, the outcome can’t possibly be good. But there's an alternative.
Humans operate from two basic emotions – fear and hope. No matter how fearful we become, there is always some small trace of hope that keeps us going, otherwise we might just as well end it all now.

How can we take that hope and nurture and amplify it in ways that will help us to overcome the fear that we're all feeling? The challenge and opportunity for all of us is to make the journey together from fear to hope. But, how do we do that?

We can start by focusing on three basic facts. First, as human beings we’ve been endowed with unlimited potential to be nurtured and drawn out – whenever we think we’ve reached our limits, someone comes along to show us that those limits can be overcome and new levels of performance achieved.

Second, the long arc of human history shows an amazing pattern of exponential performance improvement on a wide range of dimensions – reduction of violence, health and prosperity. For those who doubt this, check out some of the amazing charts here. Over time, more and more of the global population has been able to participate in this performance improvement. Sure, we’ve faced deep setbacks along the way, but in every case we’ve somehow found a way to overcome those setbacks and return to the longer-term trend of performance improvement.

Third, we’ve been dramatically supported along the way by technology innovation that has helped us to do more with less, culminating with recent decades of exponential digital technology performance improvement that shows no signs of slowing down. In fact, that digital technology is now spreading to other technology domains like 3D manufacturing, biosynthesis, energy production and automobiles, unleashing accelerating performance improvement in those areas as well.

So, there’s a real basis for hope. It’s not just a figment of the imagination. And it’s a hope that can unite all of us, rather than divide us. Who wouldn’t want a world where we’re all able to achieve more of our potential and do far more with a lot less, amplified by technology that augments our capabilities? Who wouldn’t want a world where our children will venture far beyond the limits that we imagined existed?

Acknowledging the challenges

But certainly we face a lot of challenges along the way. We can’t just assume that things will somehow work out. We need to act and we need to act together.

What are some of the challenges we’ll face in moving from fear to hope? Perhaps our biggest challenge is that our institutions have not yet adapted to the changing world catalyzed by new generations of technology. This involves all of our institutions – economic, political, educational and social. They're all operating on old, outdated models.

Our work at the Center for the Edge has focused on understanding the long-term forces that are reshaping the global landscape, something that we call the Big Shift. We’ve just released the latest update of our Shift Index that focuses on 25 metrics tracking the unfolding of this Big Shift. The key finding is that these forces have been playing out for decades and that there's a growing disconnect between the forces of change and our institutions that is leading to deteriorating business performance and increasing instability.

There’s another, more subtle, challenge. We’re going to need to recognize the cognitive biases that inevitably come with fear and work to overcome them together. When we're gripped by fear, we have a natural human tendency to magnify perception of risk and discount perception of reward. We tend therefore to shrink our time horizons. We then fall into a zero sum view of the world where one can only win at the expense of others. And, in that mindset, trust inevitably erodes.

Perhaps our biggest challenge will be to resist the temptation to dismiss the other side. Instead, we need to respect that both sides in this divided world have legitimate fears and that those fears need to be addressed, rather than dismissed. On the one side, we have a fear that our institutions are no longer serving us and, in fact, are increasingly becoming obstacles to our well-being. On the other side, we have a fear that, if our institutions collapse, we will descend into world of chaos and violence. Those fears are not unfounded and they are not incompatible. We will only be able to make progress if we hear and respect the fears that appear to be dividing us and realize that in fact they could bring us together.

And we need to question our current views on where the answer lies. One side will need to resist the temptation to block the flows of people, products, ideas and money that they see as creating mounting pressure. The other side will need to let go of its view that our existing institutions are the best way to respond to the mounting pressure.

What's the quest that can unite us?

Rather than simply attacking our institutions, or conversely, simply defending them, we need to come together in a quest to redefine them. Redefine them to reflect the new context of a rapidly changing world, so that our institutions can continue to support us, helping to turn mounting performance pressure into expanding opportunity for all. As I’ve written elsewhere, we need to transform our institutions from a model of scalable efficiency to scalable learning.

How can we do that? What we need is a movement. As I’ve written elsewhere, successful movements are built on a compelling opportunity-based narrative and mobilize people with a distinctive form of organization.

Powerful movement narratives focus on an opportunity that’s somewhere out in the future. They’re realistic about the challenges and obstacles that need to be overcome in order for the opportunity to be realized. That’s why the opportunity isn't guaranteed to materialize, but instead calls for all of us to act together in order to ensure that the opportunity is achieved. These narratives are a powerful call to action and help to overcome the passivity that we tend to feel when consumed by fear.

Opportunity based narratives can be very effective in overcoming all of the cognitive biases that we tend to experience when overwhelmed by fear. But to be effective, they must be accompanied by action, action that demonstrates in tangible ways that those cognitive biases may not be correct. In this context, the action that has the greatest impact is likely to be small moves that, if smartly made, can yield quick results and set big things in motion over time. If we focus on moves that require massive resources and long lead times before any tangible results are achieved, the cognitive biases are likely to take over and undermine these efforts.

Those of you who know me will realize that I hold little hope that institutional transformation can come through top down, “big bang” initiatives. Instead, fundamental change comes from scaling the edge, building parallel institutions that can quickly demonstrate growing impact from fundamentally different approaches.

This approach to transformation is tailor-made for the emphasis on small moves, smartly made. It’s also very consistent with how successful movements organize. Rather than adopting hierarchical command and control structures, successful movements are all organized around small, local action groups , typically 10 – 15 people, who work together to achieve impact in very different contexts. These action groups are united by a loosely coupled network that enables them to seek help from others and to observe and learn from the diverse actions of each group what actions can achieve the greatest impact. This aggregation of small, local action groups is a powerful form of organization that I've called creation spaces.

So, if we’re serious about institutional transformation, let’s come together in small action groups in our local communities and focus on how we can start to build the kinds of institutions that will be necessary for us to achieve more of our potential. What’s the minimum viable institution that can quickly demonstrate impact? How can we scale those institutions rapidly to expand the potential impact?

For example, how might we create and evolve new learning institutions that approach learning as a life-long endeavor to create new knowledge in sharp contrast to conventional educational institutions that focus on transfer of existing knowledge in return for a certificate? Or how can we build businesses that create environments to encourage everyone (not just employees, but business partners and even customers) to learn faster together in order to achieve more of our potential? Or how can we establish and nurture local community organizations that connect more effectively with marginalized portions of our population and help them to build on the strengths they already have to create a more prosperous life for themselves and for their families?

And, to really make a difference, let’s make an effort to reach across the divides that appear to separate us today and bring together people in our action groups so that we can start to discover common ground. We need to demonstrate that, by coming together, we can achieve far more impact than if we stay isolated in opposing camps.

Bottom line

We’re far more united than we would believe – and we have the potential to become even more united, if we focus on the real sources of our fears. If we focus on opportunities that can unleash our hope rather than remaining prisoners of our fear, we'll discover common ground that can help us all to shift from fear to hope and, in the process, achieve an impact that most of us would never have imagined possible. We just might be able to evolve institutions that help all of us to achieve more of our potential.