Category Archives: Uncategorized

Seeking Strategic Advantage? Break Down Walls and Cultivate Networks

Where’s the advantage? In traditional business strategy, the answer was easy: build a wall. The companies with the highest and strongest walls would win. In the Big Shift, that answer becomes less credible. Walls work in stable worlds but they can actually become obstacles in more rapidly changing worlds. In the exponential world we’re entering, walls may be replaced by networks as the most promising sources of advantage.

I’ve become increasingly interested in how strategy will evolve in the Big Shift as revealed here and here. In this posting, I want to focus on the implications for how we think about competitive advantage. There’s no question about it – traditional sources of competitive advantage are eroding as revealed by our own analysis of long-term return on asset trends in the US economy and the well-known study of the rapidly shrinking lifetime of the successful companies that make it onto the prestigious S&P 500 list. What used to protect us from competition is becoming less and less effective.

Building walls

How did we build advantage in the past? We built walls. The walls took many different forms, but the key was to block potential competitors from entering our markets and taking our customers. One of the best ways of doing that was to acquire some proprietary knowledge, ideally something that could be protected with patents and copyrights. Even better if we could harness economies of scale that would reduce the number of companies operating in our markets – the economies of scale would become high walls that even the most intrepid challenger would find intimidating to scale.

These walls worked very well in stable times. Once built, they were durable and reliable. Companies could then focus all their time and energy on driving greater and greater efficiency into their operations to increase profit margins. Life was good.

But the times they are a’changing. The walls are becoming less and less effective in keeping competitors out. If the walls are based on proprietary knowledge, the accelerating pace of change means that proprietary knowledge is becoming obsolete at an accelerating rate.

If the walls are built around economies of scale, we’re seeing a variety of options opening up that can help new entrants overcome this barrier. For example, with contract manufacturing, a new entrant can leverage a promising new product by relying on the scale manufacturing capabilities of others. Similarly, new entrants can find ways to reach potential customers at scale by leveraging global market platforms – they no longer need to build their own scale-driven distribution channels.

So, does that mean that the potential for competitive advantage no longer exists? Far from it. It’s just that the sources of advantage are shifting in ways that most companies don’t yet understand, much less effectively harness.

Cultivating networks

In a more and more rapidly changing world, the key source of advantage will reside in the ability to become a concentration point for knowledge flows so that we can learn faster and gain the insight required to more effectively harness the long-term forces that are reshaping our global landscape.
I originally wanted to call this new source of advantage “bridges” because it provided such a visual contrast to walls, but there was a problem. Bridges, at least the physical ones that we know, have a key limitation – the more people who want to cross the bridge, the more crowded it gets, and eventually it turns into a parking lot, blocking any movement.

What we need are bridges that are capable of infinite expansion. More importantly, we need bridges where, the more people who use them, the more valuable the bridge becomes. What we need, in effect, are networks, capable of infinite connections, building bridges that can expand in all directions. So, I’m going to refer to the new source of advantage as networks, but primarily because they represent a new kind of bridge.

Recently, I wrote about networks as a new form of “net worth” for individuals, but it turns out that networks are also emerging as a key form of net worth for companies, even though not explicitly measured on the balance sheet.

Finding and occupying influence points

So, what’s required to become the concentration point of an expanding network? In an earlier blog post, I identified these concentration points as “influence points” and explored what the attributes of the most powerful influence points are likely to be.

Influence points matter. If you don’t understand what the emerging influence points in your relevant market arenas are likely to be, you’re in trouble. It means you certainly will not be effectively targeting them and, perhaps even more importantly, you will not understand what the implications will be if someone else occupies those influence points.

And here’s an important point: if you intend to build and occupy an influence point, there’s significant urgency. Influence points are driven by network effects which means that, once someone manages to occupy an influence point, they will be very difficult to challenge. That’s a key source of their advantage. So there really is not an option of being a “fast follower” if you want to harness this new form of strategic advantage. If you’re not first to critical mass in an emerging influence point, the game is likely over.

And just to be provocative, leaders who adopt the feminine archetype are going to be much more successful at building and occupying influence points. Leaders who adhere to the masculine archetype will be drawn to those walls and face considerable challenges if they venture beyond those walls and try to cultivate networks. It's one of many reasons that I maintain that the feminine archetype will ultimately prevail in business over the masculine archetype.

Choices to be made

To effectively target and occupy an influence point, companies will need to step back and ask the most fundamental question of all: what business am I in? I have suggested in other venues that most companies today are an unnatural bundle of three very different business types: infrastructure management, product innovation and commercialization and customer relationship businesses.

The companies that are most likely to occupy emerging influence points will be those who are tightly focused on either infrastructure management or customer relationship businesses (but not both – they’ll need to pick one). And, by the way, if you choose to focus on the product innovation and commercialization business, you’ll have a much harder time finding and occupying influence points – it’s one of the reasons I believe that those businesses will tend to fragment over time and have relatively high turnover rates.

The value of influence points

Influence points are strategically important because they concentrate knowledge flows in ways that help the owner of the influence point to learn faster and accelerate performance improvement. But, in a more rapidly changing world, there will need to be reciprocity here. If the owners of the influence points simply focus on aggregating, analyzing and acting on the knowledge for their own benefit, they will be increasingly vulnerable to challenges from those who offer to provide more value back to the participants in terms of feedback loops that can help everyone to learn faster, not just the owner of the influence point. There’s an interesting dynamic here: the more rapidly everyone learns and improves their performance, the more valuable the influence point becomes. Reciprocity actually strengthens advantage.

As we become more focused on the potential of artificial intelligence, the strategic value of influence points increases for one simple reason: artificial intelligence without access to lots of data is actually pretty stupid. Influence points become natural sites for the aggregation and rapid refreshing of data. Whoever owns these influence points will have a natural advantage in harnessing the insights and value that can be generated from artificial intelligence because they will have access to far more data than anyone else.

Advantage for individuals and countries

So far, I've been talking about strategy from the viewpoint of companies, but the same basic shift is playing out at the level of individuals and countries as well. Think about it. For individuals, the key to success was to accumulate a set of degrees and experiences that would qualify someone as an “expert.” In other words, advantage was built on proprietary knowledge that would insulate you from challenges by anyone else.

Now, it’s becoming increasingly apparent that if you consider yourself an expert, you simply don’t understand how rapidly the world is changing. The key to success going forward is the ability to cultivate rich networks of relationships with diverse people who can help you to learn faster. The strategy for success for individuals in the future will hinge on the ability to become a concentration point for a growing number of relationships – and on the ability to harness those relationships to learn faster.

There’s a similar dynamic playing out for cities, regions and nations. It used to be that your advantage at this level hinged on some set of natural resources or locational advantage (for example, having a coastal area with a natural harbor). That’s less and less true. The cities, regions and nations that are surging ahead are those that manage to become gathering spots for people with rich networks of relationships, and increasingly, relationships that extend well beyond existing geographic boundaries. In this context, I wrote a perspective several years ago that we need to shift our focus from the BRIC countries to the LUSTI countries, precisely because the latter are driven to connect beyond their borders because they were so small.

Walls as a source of vulnerability

So, if the sources of strategic advantage are shifting from walls to networks, what about those who continue to seek to hide behind walls? The walls that were so helpful in providing protection are increasingly becoming barriers to building the sources of advantage that are necessary for success in the Big Shift world. What were very effective sources of protection are now becoming sources of vulnerability. The illusion of protection breeds complacency and blinds us to the changes that are undermining our positions.

Bottom line

Feel the fear. If you’re not afraid, you don’t understand the changes that are playing out in the world around you. But don’t let the fear overcome you. Resist the temptation to hide behind the walls that served you so well in the past. Venture out into unfamiliar territory and find ways to connect with others that are facing similar challenges. By coming together and leveraging a growing array of diverse assets and capabilities, you will discover the ability to cultivate more and more of your potential and turn challenges into ever expanding opportunities.

Measuring Your Real Net Worth

Net worth is an important topic, but not in the way it’s usually discussed. We all know about net worth – it’s about assets and liabilities, and hopefully the assets are bigger than the liabilities.

But here’s the problem. Looking at net worth in financial terms focuses us on a lagging indicator. It tells us how we’ve done in the past, but it offers only limited insight into how we will do in the future.

Is there a different way of thinking about net worth? I believe there is, a way that’s much more insightful and help us to focus on what’s really important.

I believe that our best measure of net worth is our network. I say this with some hesitation because that statement can conjure up images of transactional networking: how many business cards have you been able to collect or, in somewhat more modern terms, how large is your Facebook or LinkedIn network?

I’m talking about a very different kind of network. It’s not about who you “know” but instead who really knows you? That moves it from a transactional collection of names and contact information to a much deeper focus on long-term, trust-based relationships.

If someone really knows you, that means you’ve been willing to be vulnerable with them. You’ve shared not just your strengths and accomplishments, but your failures and fears.

That’s one way of measuring of net worth in terms of your network, but there are other dimensions that need to be assessed. It’s one thing if someone really knows you, but it’s even more valuable if they actively use that knowledge not only to provide you with support and encouragement when the going gets tough, but also to challenge you when you’re missing opportunities for development and impact. To what extent are they actively helping you to achieve more of your potential, even if it takes you out of your comfort zone?

In that context, there’s another dimension that matters greatly. How diverse is your network? As we know, diversity takes many forms including gender, ethnic origins, and age. Underneath all of that, the question to really focus on is the cognitive diversity of your network of relationships – what are the backgrounds, experiences and perspectives of the people within your network and how diverse are they?

We’re all aware of the growing risk of “filter bubbles” that insulate us from different perspectives. To what extent are our networks helping us to escape those filter bubbles and exposing us to different ways of viewing the world?

There’s yet another dimension to explore in assessing your network. To what extent are the people in your network questing and risk-taking, always looking for new opportunities to increase impact, versus defensive and risk averse? In my experience, people with questing and risk-taking attributes generate and amplify energy within their networks, while people who are defensive and risk averse tend to drain energy.

Amplifying your network

These kinds of networks can be very challenging to cultivate, especially if you’re an introvert like me. I actually find that writing has been very helpful to me in building my network – it draws out people through the “power of pull” who are intrigued with my questions and ideas and who seek me out, people that I never would have found or connected with in my day to day interactions.

My passion also helps me to build a richer network because it encourages me to ask questions and ask for help, rather than just sitting here and pretending that I know all the answers. I’ve found that people who have cultivated the passion of the explorer have much richer and more diverse networks because they are not just willing, but compelled, to be vulnerable because of their overwhelming desire to venture beyond what they already know.

Having said that, I would welcome advice and insight on how introverts (and others) can be more intentional about cultivating the kinds of personal networks that I’ve described above. It’s an area that I’m still exploring.

The growing importance of networks

So, why does all of this matter? It matters because we’re living in a world of mounting performance pressure – the Big Shift, as we’ve come to describe it. It’s a world where, no matter what credentials, accomplishments and financial net worth you’ve accumulated in the past, you'll be increasingly challenged to reach higher and higher levels of performance or risk being marginalized.

In that kind of world, you’ll need to learn faster and faster. No matter how smart you are, you’ll learn a lot faster if you’re embedded in a personal network of people who share the attributes that I described above. And the larger your network, the faster you and everyone else will learn. This is why your personal network is your best leading indicator of net worth in financial terms.

This isn’t just about pressure, it’s also about extraordinary opportunity. And it’s not just about financial opportunity in terms of creating more and more value and reaping the financial rewards from that. At a much more fundamental level, it’s about the opportunity that we all have to achieve much more of our potential. It’s also about the opportunity to live much richer lives, enriched by the deep relationships that emerge among people who share the desire to achieve more of their potential.

Can these networks scale?

I can hear the skeptics saying that this is all very interesting, but these kinds of relationships can’t scale. We're all familiar with the Dunbar number.  If we’re talking about really deep, trust-based relationships where we know each other in our full complexity, there’s a limit to how many of these relationships we can sustain. Agreed. But this is where I have a feeling that some of my perspectives on creation spaces can come into play.

Based on the research that we’ve pursued at the Center for the Edge, I’ve come to believe that there’s a distinctive organizational form that can scale and accelerate learning for all of the participants. Briefly, the core unit of a creation space is a group of 5-15 people who develop deep, trust-based relationships with each other. But that core group is then connected into a much broader network of other groups who share a similar quest for increasing impact and who can become resources to address particularly gnarly questions. These creation spaces can be found in everything from extreme sports and social movements to scientific endeavors and music.

So, the key is to find and cultivate that small group of people that you can work with to achieve greater impact. But, don’t stop there. The key is find a way to connect that group into a much broader network of similarly motivated groups that can become resources to draw on when you’re wrestling with quests that are particularly challenging.

Is that all there is?

Not at all. Like most things in life, this is complicated. I can also hear the skeptics asking about the importance of “weak ties”, citing the work of Mark Granovetter. In some path-breaking research, he discovered that often the greatest value to a participant in a network comes from people with weaker ties, not the people with the deepest relationships. This is because the people with weak ties often have connections and insights that are more far reaching and diverse than might be shared among a small group of people with rich connections, but who often share many of the same interests and relationships.

While striving for more diversity within your core group can help to compensate for this, there will always be room for, and value in, “weak ties.” Looser and broader connections can always be helpful, but not at the expense of the deep, trust-based relationships that will help to accelerate learning and performance improvement.

But what about the liabilities?

If we’re talking about net worth, assets are balanced by liabilities. So far, we’ve just been talking about another way to frame assets in thinking about net worth. What are the liabilities to offset the assets?

There are many. Perhaps the greatest liability is our tendency to spread ourselves too thinly across too many activities, so that we can’t invest the significant time and effort required to really build, sustain and nurture our network of deep, trust-based relationships. In this context, just building a larger and larger network of superficial and transactional relationships can consume our time and make it more challenging for us to focus on the people and relationships that really matter. We all need to take a hard look at the growing demands on our time and find ways to free up the time required to build the networks that will really matter.

Other liabilities are more personal. Most importantly, they tend to involve the fear, insecurity and risk averseness that prevents us from being vulnerable with others. These feelings are completely understandable and natural in a world of mounting performance pressure but the paradox is that, the more we fall prey to these feelings, the more likely we are to fail.

Bottom line

Your real net worth is your network. If you’re not cultivating your personal network in ways that draw out more of your potential (and the potential of others), whatever financial net worth you might have today is likely to diminish. This is the leading indicator that will give you a better sense of your ability to achieve more of your potential, and to reap many different forms of rewards along the way.

[Full disclosure: I wrote a book called Net Worth almost 20 years ago. In that book, I focused on yet another way of thinking about net worth: focusing on the net worth that is latent in the personal data about ourselves and enlisting the help of trusted agents to help us maximize that net worth. It just goes to show that there are many ways to think about net worth.]

Crafting Corporate Narratives: Zoom Out, Zoom In

I’ve been writing a lot about the significant missed opportunity to craft a compelling corporate narrative here and here. Done right, this corporate narrative can mobilize a large number of third parties to provide growing leverage, learning and loyalty for the company offering the narrative.

While this is appealing to many executives, they stumble over the process of crafting a compelling narrative. How do they identify a powerful opportunity out in the future that’s both credible and motivating to a large number of third parties? After all, the future is so uncertain that it can feel very intimidating to peer out over the horizon and look for these kinds of opportunities.

The zoom out, zoom in strategy approach

It definitely will take executives out of their comfort zone, but it’s a comfort zone that they need to escape if they’re going to continue to create value in a rapidly changing world. It turns out that “zoom out, zoom in,” an approach to strategy that I have been championing, can be a powerful tool to help craft corporate narratives.

The zoom out, zoom in approach emerged first among a number of successful Silicon Valley companies, but it can be applied by any company that wants to avoid the risk of falling into incremental, reactive strategies. It challenges the conventional strategic planning horizon of one to five years (we’re all familiar with the five year strategic plan). Instead, this approach to strategy focuses on two very different horizons – 10 – 20 years (zoom out) and 6-12 months (zoom in). Companies pursuing this kind of strategy actually spend very limited time on the one to five year horizon – their view is that, if they get the other two horizons right, everything else will take care of itself.

On the 10 – 20 year horizon, they focus on two questions: First, what will our relevant market or industry look like 10 – 20 years from now? Second, what kind of company will we need to be in order to be successful in that market or industry?

To be clear, they’re not seeking a detailed blueprint of the future 10 – 20 years but instead are focused on the most powerful and predictable trends that will significantly affect industry structure. One successful pioneer in the personal computer business back in the early 1980s had a zoom out view that could be summarized in two sentences: “Computing is inexorably moving from centralized mainframes to desktop computers. If you want to be a leader in the computer industry, you will need to be a leader on the desktop.”

That’s certainly not a detailed view of the future, but it was clear enough that it enabled the company to make the right choices in the short-term. This leads to the zoom in part of the strategy.

On the 6-12 month horizon, the focus shifts to identifying 2-3 business initiatives (no more, only 2-3) that could have the greatest impact in accelerating the movement of the company towards its zoom out destination over the next 6-12 months. For each of these business initiatives, the two key questions are: Do we have a critical mass of resources deployed against this initiative? What are the metrics that we can use during the 6-12 month period to assess our progress towards achieving the impact that we are seeking?

If you sit in a leadership meeting of a company pursuing this approach to strategy, you’ll find that the executives shift quickly and seamlessly across these two horizons as they continually seek to refine their zoom out view based on the progress (or lack thereof) of their zoom in initiatives while at the same time evolving their zoom in initiatives to more effectively target the zoom out opportunity.

The zoom out, zoom in approach to strategy is a powerful way to overcome two related challenges for large, existing companies. First, it pulls executives out a short-term mindset regarding the business and helps them to build alignment around a shared long-term view of relevant markets or industries. Second, it helps them to develop tighter focus and overcome a natural tendency to spread themselves too thinly across too many business initiatives, none of which receive a critical mass of support. Most importantly, the focus that they develop is related to a longer-term opportunity, not just prioritizing among the multitude of short-term events that command their attention on a daily basis.

This approach to strategy employs a broad range of scenario development tools and approaches to draw executives out of their comfort zone, but it differs from scenario development as commonly practiced on multiple levels. First, it forces the executives to pick not just the most probable scenario, but the scenario that they will commit to pursuing. Second, it explicitly addresses the potential to shape scenarios and the probability of their playing out. Most scenario exercises treat the future as an external given and therefore it’s only necessary to assess the likelihood of various outcomes. Third, and most important, the zoom out, zoom in approach requires the participants to commit significant resources to several short-term initiatives that are driven by the longer-term zoom out view of the market. This is not just an abstract, conceptual exercise – it has real impact on near-term resource allocation.

Crafting a corporate narrative

So, how does this all contribute to the development of a compelling corporate narrative? The zoom out, zoom in strategy approach can provide a very useful context to craft a corporate narrative. And the focus on crafting a narrative that is a call to action to others outside the company can help to overcome some of the common pitfalls in developing a powerful zoom out view of the business.

The zoom out view can provide a structured way to identify and focus on promising opportunities that are emerging from long-term forces playing out over decades. The narrative framework provides an important filter for prioritizing opportunities. Too often, executives of companies understandably tend to focus on opportunities exclusively through the lens of their own company. They take an inside-out view of the future.

The most effective zoom out, zoom in approach is one that starts by zooming out to anticipate how customers are likely to evolve and what their most significant emerging unmet needs are likely to be. Seen through this lens, we are likely to see emerging opportunities from a customer perspective. Of course, there will always be a need to bring this back to the company to confirm that there’s a significant opportunity for the company in addressing these unmet needs.

But, if we do this right, we now have the makings of a long-term opportunity that could be a powerful call to action to many others outside the company, ranging from customers to third parties that have the ability to offer complementary products and services to augment whatever the company can offer to customers.

The key is to make it clear that the opportunity out in the future is not inevitable, that there are challenges and obstacles that stand in the way, and that achieving the opportunity will require action from many parties. But the motivation to move forward will come from a clear view of why many parties can benefit from pursuing the opportunity, not just the company crafting the narrative. Ideally, the opportunity is one that will in fact expand as the number of participants grows, unleashing network effects that will draw more and more participants in over time.

The zoom in part of the approach also can play a critical role in crafting a credible narrative. The most powerful narratives are ones where relatively modest actions in the near-term can yield tangible impact in advancing participants towards the longer-term opportunity. These are much more motivating than narratives that require millions of dollars of investment and years of development before any impact can be achieved.

By pursuing zoom in initiatives, the company crafting the narrative can start to build credibility for the broader narrative by showing near-term impact in accelerating movement towards the longer-term opportunity. This can inspire those being called to action to focus on near-term impact as well.

Shaping strategies

Those of you who have been following me for a while will start to see several threads in my writing start to weave together into a tapestry. In this blog post, I’ve focused on how my concept of corporate narrative can be enhanced by pursuing a zoom out, zoom in approach to strategy.

But there’s another thread worth mentioning. I wrote an article for Harvard Business Review many years ago on the power of shaping strategies. Rather than falling into a reactive mindset, sensing and responding to whatever is happening around us, I argued that there’s a growing opportunity to pursue shaping strategies that seek to restructure entire markets and industries by mobilizing a growing number of third parties to invest in a new industry structure.

Hopefully, one can see how corporate narratives can provide incentives to mobilize third parties to act in pursuing the opportunity to restructure the market or industry. And, one might be able to see how a zoom out, zoom in strategy approach can help to generate a compelling corporate narrative and provide the foundation for a shaping strategy designed to mobilize others.

Bottom line

There’s another thread underneath all of this. We need to harness the power of pull so that small moves, if they’re smartly made, can set big things in motion. Corporate narratives pull a growing number of third parties together to pursue a long-term opportunity. If framed in the context of a zoom out zoom in strategy, these narratives can help to provide growing leverage, learning and loyalty for the company crafting the narrative.

To harness the power of pull more effectively, ask yourself the following questions about the company or organization you are involved with:

• Do we have a shared view of what the most significant unmet needs of relevant customers will be 10 – 20 years from now?
• Do we have a shared view of what kind of company we’ll need to be 10 – 20 years from now?
• Have we framed a corporate narrative that is a powerful call to action for others outside our company to address a long-term opportunity?
• Are we pursuing a small number of short-term initiatives aggressively enough to demonstrate significant near-term impact?
• Are we reflecting regularly on all of the above to ensure that we are evolving and refining these approaches to generate even more impact?

Where Are You Headed? What’s Your Narrative and Purpose?

In my last blog post, I explored the distinction between purpose and narrative in the context of institutions. I’m going to shift here to explore how these concepts operate at the level of the individual. There are some similarities, but there are also some differences.

For those who haven't read my previous posts, let me start with some definitions. 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. 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. You can find more on this here and here.

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.

Exploring personal narratives

So, what’s the connection between narrative and purpose at the level of the individual? Here, I must tread softly since I know there’s a whole discipline of “narrative psychology”, and I happen to disagree with most of the ways these folks discuss narratives. I’m not saying they're wrong and I’m right; I’m simply suggesting that I have a different approach to narratives that may provide some additional insight and value that the conventional approaches do not.

Narrative psychologists tend to approach narratives as stories. A personal narrative in their view is an individual’s construction of the story of their life to make sense of how they have lived their lives. It’s backward looking, exploring the past to gain insight into why you have lived your life the way you have. There’s certainly value to be had from this exercise.

But my view of personal narratives emphasizes the future, rather than the past. In my approach, personal narratives are really about your view of the future. What’s the big opportunity or threat that you perceive out in the future that ultimately will shape all of your choices and actions?

There’s another difference. Narrative psychologists tend to focus on the individual and how they have lived their lives. The narrative is about the individual. In my framing, a personal narrative is really about your call to action to others – what is it that you want them to do to help you address that opportunity or threat out in the future?

Exploring your own narrative

So, why does this matter? While I believe we can gain significant insight by looking into our past, I ultimately believe that our greatest value will come from asking what kind of opportunity or threat out in the future is most meaningful to us at this point in time. Of course, our view of that opportunity or threat is likely shaped by our experiences in the past, but the key starting point for me is to take a hard look first at our view of the future today.

Few of us have made that view explicit to ourselves, much less reflected on it, and yet it will shape all of our key decisions and actions as we move forward. Equally important, I believe we need to shift our focus from ourselves to others. No matter how strong and smart we are as individuals, we’ll be a lot stronger and smarter if we can connect with and work with others who are motivated by the opportunity or threat that we’ve identified.

Now, in that context, a look into the past can be very illuminating. How has our view of the future evolved through our lives and what help have we sought from others? Has that view of the future been a productive one, a view that has helped us focus on the things that really matter to us? Has that view of the future been one that could motivate others to join us on the journey and invest significant time and effort from their side to make more progress on the journey? Is there a higher impact view of the future now that could help us to achieve even more impact in areas that really matter to us?

And that brings us to purpose

That inquiry leads quickly into the question of purpose. What kind of future impact is most meaningful to us and are we most committed to achieving? Is that opportunity or threat that we see out on the horizon really the one that matters the most to us personally or are we simply reflecting some broader societal perceptions?

I fear that too many of us still focus our narratives on opportunities that have been defined for us by others. Achieve success in the profession that your parents pressured you into. Get married and raise good kids. Be a good citizen.

But, the question that rarely gets asked is whether those are the things that really matter to you or did you just fall into them because that’s what you thought others expected of you?

The most successful personal narratives are those that are shaped by a genuine and deeply held sense of personal purpose. Why are you here on this earth? What do you most want to be remembered for? What kind of impact will give you the most satisfaction?

I hasten to add here that, unlike many people, I don’t equate purpose with some broader sense of social good like curing world hunger or reversing climate change. Those kinds of things may indeed be your purpose, but purpose for many can be much more mundane. It could be fixing appliances, cleaning clothes, carving amazing things out of wood, or just maintaining a building for its residents. These may seem mundane to you, but to many individuals it is what gets them really excited and gives them fulfillment.

High impact purpose requires passion

For me, personal purpose is ultimately about passion – a very specific form of passion that I call “the passion of the explorer” and that I’ve discussed at length in blog posts and research reports (for examples, look here and here). This passion starts with a long-term commitment to making an increasing impact in a specific domain. People with this form of passion aren't satisfied with simply learning about a domain or having impact in that domain – they're determined to make an increasing impact through action over time. As a result, they have a questing disposition – they're excited by, and seek out, challenges that will help them to get better faster. And, they also have a connecting disposition – their first reaction when confronted with an unexpected challenge is to seek to connect with others who can help them get to a better answer faster.

Few of us have been fortunate enough to discover our passion, much less integrate it into our profession. Our survey of the US workforce suggests that at most 13% of workers are passionate about their work. Yet, I believe we’re all capable of passion and we all hunger inside for this passion – it is after all, a powerful way for us to achieve far more of our potential.

So, what happened? Our institutions, driven by a quest for scalable efficiency, have taught us from our first day of school that our key goal is to fit in, accept the priorities of the institution, and perform predictably and reliably. You don’t matter; the institution does.

How does this shape our personal narratives? We tend to focus on opportunities or threats that are meaningful to our institutions and not to us. We also tend not to ask for help because, in a world of scalable efficiency, asking for help tends to be viewed as a sign of weakness. In contrast, people with the passion of the explorer are driven to ask for help because they see the potential for even greater impact by working together.

Is it any wonder that our personal narratives tend to be frustrating and ineffective? They’re not really ours. They’re what we think others want to hear.

Connecting personal narratives and purpose

This is the powerful connection I see between purpose and personal narratives. Purpose is about what is really meaningful and exciting to the individual, not the institution – it is about uncovering our passion of the explorer. Until we discover that passion, we’re never going to be really effective in mobilizing others to join us in our quest and we will remain frustrated, isolated individuals struggling to achieve impact in areas that don’t really matter to us.

At the end of the day, it really is about connecting with and leveraging the support of others – that’s what successful personal narratives accomplish. If we haven't found our purpose that shapes how we frame the opportunity ahead, whatever opportunity we land on will lack credibility to others. We're remarkably good at determining whether someone is genuinely excited and driven by an opportunity or is simply playing a game defined by others. If you as an individual are not genuinely excited and driven by an opportunity, how can you expect others to get excited by the opportunity?

Also, if we’re not really asking for help from others in our personal narrative, how can we possibly expect the support we all need in a world of mounting performance pressure? Asking for help expresses vulnerability, it acknowledges that we can’t accomplish something on our own. That expression of vulnerability builds trust. Building trust helps to motivate people to join together and embark on some challenging journeys together.

But, wait, what’s the likelihood of getting much help if the opportunity defined by our purpose is a deeply personal one? Doesn’t that by definition preclude help from others who are driven by their own deeply personal purpose?

The purpose may be a deeply personal one, but the opportunity defined by that purpose is something that likely will be meaningful to many. And it will become even more meaningful to others if they see how deeply committed you are to it, not just in words, but in action. The key is to show through your own actions how deeply committed you are to achieving impact. Others who care about impact in the same domain will soon take notice and eagerly respond to your request for help. Take the example of someone who is passionate about fixing appliances. The opportunity that would become the basis of a personal narrative is to minimize downtime of appliances, something that many could embrace as an opportunity worth working for.

Bottom line

There's an untapped opportunity to achieve far more of our potential. We all have personal narratives that are guiding our lives and shaping our relationships with others, yet few of us have taken the time to make those narratives explicit and to reflect on whether these are truly the personal narratives that could maximize the impact that is most meaningful to us.

Here are some questions we might ask that could help us evolve our narratives in ways that are most meaningful and impactful for us:

• What is the opportunity (or threat) that guides my narrative today?
• Have I discovered a passion that could frame my purpose?
• If yes, does this opportunity (or threat) reflect my passion and purpose?
• If I haven’t yet discovered my passion, what can I do to explore further and connect with a passion that is most meaningful to me?

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?