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The Big Shift in Platform Business Models

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

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

The most basic shift for platform owners

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

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

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

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

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

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

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

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

Three more shifts for platform owners

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

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

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

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

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

Evolving business models of participants

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

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

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

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

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

But what about the big squeeze?

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

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

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

Bottom line

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

Business Practice Redesign

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

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

Where do workers spend their time?

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

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

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

Learning faster to accelerate performance improvement

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

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

So, here’s a question:

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

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

The assumptions behind the question

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

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

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

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

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

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

Our next wave of research

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

A call for help

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

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

Bottom line

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

Make This the Best Year Ever

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

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

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

Crafting a personal narrative

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

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

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

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

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

And what about those resolutions?

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

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

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

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

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

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

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

Bottom line

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

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

United We Stand, Divided We Fall

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

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

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

What's the fear that we're feeling?

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

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

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

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

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

So, can we shift from fear to hope?

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

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

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

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

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

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

Acknowledging the challenges

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

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

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

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

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

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

What's the quest that can unite us?

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

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

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

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

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

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

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

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

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

Bottom line

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

Flows, Fragility and Friction

I’ve long been a fan of flows but, in the spirit of paradox, I’ve also been a fan of friction. But, wait a minute, friction slows down flows – how could I possibly favor both flows and friction?

Until recently, I hadn’t even been really aware of the paradox in my perspective, much less thought systematically about ways to resolve the paradox. I’m not sure I can fully resolve the paradox, but I want to use this posting to reach out and ask for help in exploring both the paradox and its potential resolution.

Let me first provide some context.

From stocks to flows

I've written extensively about the Big Shift that’s transforming the global business landscape. One of the key frameworks that I’ve used in describing the Big Shift is that we’re moving from a world of stock to flows. What I’ve meant by that is that business for the past several centuries at least has been organized around stocks of knowledge as the basis for value creation. The key to creating economic value has been to acquire some proprietary knowledge stocks, aggressively protect those knowledge stocks and then efficiently extract the economic value from those knowledge stocks and deliver them to the market.

The challenge in a more rapidly changing world is that knowledge stocks depreciate at an accelerating rate. In this kind of world, the key source of economic value shifts from stocks to flows. The companies that will create the most economic value in the future will be the ones that find ways to participate more effectively in a broader range of more diverse knowledge flows that can refresh knowledge stocks at an accelerating rate.

So, knowledge flows become the key to creating economic value. The good news is that we're in a world where knowledge flows are expanding and accelerating at an exponential pace on a global scale. This is happening for many reasons. A key factor is the deployment of rapidly improving digital technology infrastructures. Another important factor is the rapid urbanization of the world’s population. As we move into more and more dense urban settlements, there’s a significant increase in knowledge flows shaped by the growing interactions of people in these urban areas.

More generally, I’ve been heavily influenced by the Constructal Law developed 20 years ago by Adrian Bejan, a Professor at Duke University, who expressed the law in the following way: “For a finite-size system to persist in time (to live), it must evolve in such a way that it provides easier access to the imposed currents that flow through it." In essence, he’s made the case that all kinds of systems ranging from our circulatory systems within our bodies to our cities to our planets evolve to enhance flow. In other words, flow is not only good, it’s essential to our survival and evolution. I wrote a review of Bejan's seminal book on this topic – Design in Nature – that can be accessed here.

The dark side of flows

So, then, what’s the problem? Well, too much flow could be a bad thing. Right now, we’re beginning to realize that all this connectivity enabling much richer flows on a global scale also has its downside. We’re all familiar with the flash crashes associated with high frequency trading on electronic markets. Stories of significant security breaches multiply as we become more connected. Extreme events cascade out of nowhere to disrupt activity on a large scale. It turns out that too much flow can make our systems more fragile.

There’s another indirect way that too much flow produces more fragility. As human beings, we have a natural tendency to seek out those who think and act like us.

We can see this play out in social media where we tend to hang out with people who are like us. As Bill Bishop, in his book The Big Sort so persuasively demonstrated, we have a growing tendency to settle in geographic neighborhoods where the people share our beliefs and values. The more we do this, the more our own beliefs and values are reinforced and the more resistant we become to the different beliefs and values of others. There’s growing flow because we really enjoy having the positive reinforcement that comes from frequent interaction with people who are like us and we are likely to more frequently engage with others from our community. It’s also efficient – we’re much more likely to come to agreement and act on something quickly if we all share the same basic perspective.

But, the problem is that the flow of interactions is more and more contained within the communities that think like us and we become less willing to engage with those who might challenge our beliefs. And, the more polarized we get, the more fragile we become as a society, vulnerable to falling into violence when faced with the slightest provocation.

More flow with less fragility

So, how do we get more flow with less fragility? My instinct is that requires friction – institutional arrangements and personal practices that tend to slow down flows and reduce the likelihood that these flows will cascade into the breakdown of systems.

What do I mean by friction? I’m not really sure, but I have an instinct that it can take many different forms. For example, in the case of trading markets, it might take the form of buffers that require some reflection or more analytics before acting upon information.

In the case of individuals interacting with each other, productive friction might come from welcoming others with diverse perspectives and experiences as an opportunity to challenge our own beliefs and evolve to much more creative approaches than would be likely if we just interact with others who have similar perspectives. Sure, it might take us longer to come to some agreement or resolution, but the outcome would much more innovative and help us to learn faster. The key to keeping friction productive is to foster mutual respect for all the participants even though we might disagree on the topics or challenges under discussion.

Find the right kind of friction by focusing on the highest impact flows

But clearly not all friction is good – too much friction and friction of the wrong kind can flatten flows. Perhaps the key to focusing on the right friction is to shift our framework for thinking about flows. Too often, especially in the technology world, flows get reduced to data flows and the emphasis is on the efficiency and speed of the flow – how quickly can it get from point A to point B?

If the goal of expanding flows within our society and economy is to accelerate learning rather than to simply expand data flows, we might create a more useful framework for optimizing both flows and friction. What kinds of flows are generative, meaning that they promulgate even more productive flows over time? What kind of friction gives us opportunity for reflection and productive debate so that we can learn faster and come up with even more creative ideas and approaches over time?

Perhaps the old adage that to go fast, you must first go slow, has some merit here. Rather than just focusing on accelerating existing flows, maybe the key is to find ways to nurture the flows that can be most productive in generating even more flows over time.

Bottom line

I’m not sure about all of this, but getting the balance right between flow and friction will be key to building societies and systems that can accelerate performance improvement without exposing us to excessive fragility that increases the risk of collapse. In other words, it will be key to human progress.

What do you think? Are all flows created equal? If not, what forms of flows can be most helpful in helping us to achieve more of our potential, getting us to higher and higher levels of performance as individuals, as institutions and as societies?

Is all friction the same? If not, what forms of friction will help to reduce fragility while increasing our ability to learn faster as individuals, as institutions and as societies.

I need your help. Let the flow begin and let’s hope that some friction emerges as we seek more insight into the most effective ways to balance flow and friction.

The Unmet Need for Trusted Talent Advisors

In a world that’s changing ever more rapidly, we all need trusted advisors. It’s a significant unmet need that creates a very attractive business opportunity. This has been a central part of my research and writing for almost 20 years since I published a book on the topic, Net Worth. Most recently, I returned to this subject in a blog post.

Today I want to make an important distinction between two major trusted advisor opportunities. So far, most of my writing has been about “trusted customer advisors” – businesses that will proactively help us to connect with the products and services that are most relevant to our needs and aspirations as we confront a growing array of options competing for our attention in the marketplace. Digital technology infrastructures are for the first time making it possible to take this business model and make it a mass market offering, rather than something that is only accessible to the very wealthy.

But there’s another trusted advisor opportunity – something that I call the “trusted talent advisor.” What’s that? It’s someone who proactively helps us to learn faster by developing a deep understanding of our individual context, capabilities and aspirations and connecting us with services and resources that will help us to achieve more of our potential.

Forces shaping the unmet need

Why is this becoming so important? Because we live in a world of mounting performance pressure where we can’t afford to stand still and rest on the certificates and accomplishments of the past. Unless we accelerate our ability to learn and achieve more and more of our potential, we are at increasing risk of experiencing growing stress, becoming more and more marginalized and ultimately dropping out.

And to add to the pressure, our educational systems are fundamentally broken. We’re paying more and more for diminishing value. Think about it. What’s the model of education?

You go to school for a specified number of years and receive a certificate verifying that you have mastered certain skills and then you leave education behind and go into the workforce to apply what you’ve learned. And, while you go to school, your key assignment is to “fit in” – to be successful, you need to adapt to the institution and listen carefully to the sage on the stage who will transmit to you the knowledge and skills required to be successful. This model worked very well in more stable environments where the key challenge was to learn a fixed set of skills and fit into institutions driven by scalable efficiency.

In a world that’s increasingly going exponential, shaped by digital technologies and a proliferation of knowledge flows on a global scale, the half lives of any given skills are shrinking at a rapid rate. Learning becomes a life long imperative, not something that we can compartmentalize into a certain number of years at the beginning of our lives. Learning becomes far less about absorbing existing knowledge from a sage on a stage and much more about developing a growing capacity to create new knowledge and skills in collaboration with others in our unique context.

Rather than trying to “fit in”, our key to success increasingly becomes the ability to “step out” – exploring challenges and opportunities that have never been encountered before. Most fundamentally, the imperative is to find, connect with and pursue a passion that will motivate us to learn faster and take the significant risks that entails – we need to cultivate the “passion of the explorer.”

What's required to address that unmet need?

So, who’s going to help us do this? It’s a growing unmet need that creates a significant business opportunity. What we all need is someone who knows us very deeply and better than anyone else and who will use that knowledge to proactively recommend actions that will help us to learn faster. We need someone whom we can trust to be on our side – aggressively helping us to achieve more of our potential, wherever that might take us. We need someone who will challenge us to get out of our comfort zone and to abandon beliefs that are becoming obstacles to success. And we need that person to be at our side, through thick and thin, regardless of where our journey might take us.

Now, at one level, we’ve all had exposure to people who help us in becoming better. Many of us have been fortunate enough to have mentors who have provided valuable advice at critical turning points in our lives. Most of us who have close friends who challenge us to become better and help us along the way to achieve more in our lives.

On a commercial level, there are lots of players emerging to address elements of this need. I’m struck by the growth of executive coaches, personal trainers and mindfulness advisors. At another level, we have the growth of incubators and shared workspace providers that offer some of the services I am describing in a business context.

But most of these providers are still targeting narrow slices of our needs in terms of talent development – they don’t seek to address all of our talent development needs in a more holistic way. The trusted talent advisors that I’m describing would connect their clients with these more specialized providers when the need arises, but they would be focused on becoming an overall orchestrator of specialized services, driven by a deep understanding of our overall needs and aspirations. By the way, one of the key services of a trusted talent advisor would be to connect us with a small community of people who are in a similar context and driven by similar passion so that we can learn faster by sharing our experiences, holding each other accountable and encouraging each other when unexpected obstacles arise.

And there’s a growing amount of technology, loosely grouped into the Internet of Things, artificial intelligence and data analytics categories, that provide an opportunity for trusted talent advisors to gain growing insight into who we are, what we’re doing and what we’re accomplishing. It’s this growing technology infrastructure that makes it feasible to take the trusted talent advisor business model to the mass market, rather than just restricting it to the very affluent.

Why is this such an interesting business opportunity?

There’s a big white space remaining to be targeted. This business is a particularly interesting opportunity because it’s likely to be driven by powerful economies of scope. What do I mean by that? Think about it. The more this business knows about you, the more helpful it can be to you. If the provider only knows a narrow slice of who you are, the provider can be helpful in a limited way, but it will never match the potential value of someone who knows much more about you. And the more clients this business serves, the more helpful it can be to each client, because it can start to see patterns in terms of what drives accelerated learning and performance improvement for people like you. In short, the broader the business, the more value it can deliver relative to more narrowly focused providers. These economies of scope are likely to drive  the emergence of very large businesses over time.

Of course, acquiring such deep and broad knowledge about you will require deep trust. You need to be convinced that this provider is on your side, representing your interests alone, and won’t use this data to your disadvantage. It’s for this reason that I’ve suggested that the winning business model for a trusted advisor will be one where the clients pay the advisor, rather than having an advisor who is dependent on advertising revenue or commissions received from vendors. If you’re paying the bills and retain ownership rights to the data you are providing to your advisor, the advisor is much more likely to be on your side of the table, representing your interests.

There’s certainly a significant opportunity for existing educational institutions to target this growing unmet need. One powerful way to begin that journey would be to focus on building sustained relationships with alumni, not as targets for fund-raising, but instead as people who have just started out on their learning journey and finding ways beyond more classes to become trusted advisors to these alumni. But making the transition to trusted talent advisor will be very challenging and painful for traditional educational institutions, requiring them to ultimately transform virtually everything they do. New entrants will have the advantage of taking a clean slate approach to building a trusted talent advisor business.

In my writing on the likely evolution of business models, I’ve proposed that there are three key dimensions for the evolution of business models in our exponential age. The trusted advisor represents the highest form of evolution across all three dimensions.

But what about scalable learning?

In my broader writing on the Big Shift, I’ve proposed that all of our institutions will need to transition from scalable efficiency models to scalable learning models. Would that eliminate the need for trusted talent advisors? Wouldn’t all of our institutions then help us to learn faster? Well, no – there’s a paradox here: the more important scalable learning becomes, the more valuable trusted talent advisors become.

Here’s the challenge – institutions by their very nature are driven by their specific institutional mission. They will help you to learn faster within the context of that mission. But what about your mission? Your passion? As long as there’s a close fit between the institutional mission and the individual passion, the institution will help you to learn faster in areas that matter. But I suspect that there will always be a significant role for someone who is completely committed to help you learn faster as an individual given your specific aspirations and passion, regardless of the institutional setting that you find myself in at any point in time.

Is there an even bigger opportunity?

One more point before I wrap up. There’s an open question on the table. I’ve now outlined two trusted advisor business opportunities – the trusted customer advisor and the trusted talent advisor. Could one provider address both of these opportunities in the consumer space? Are these inherently two separate business opportunities?

There’s a part of me that wants to believe that these are in fact two sides of the same coin. As I’ve argued elsewhere, I believe that part of the Big Shift is a movement away from consumption as a status symbol (e.g., the type of car we drive, the size of our home, etc.) to creation as the source of status – what have we created and how many people have adopted our creation? To the extent that this plays out, it might make more sense to build a trusted advisor business that bridges these two arenas and focuses on helping each of us to achieve more of our potential through all the goods and services we access.

Bottom line

There’s a very powerful new business opportunity emerging. So far, it hasn’t been effectively addressed. It represents a significant white space in terms of value creation and value capture at global scale. But, given the powerful economies of scope that will drive this kind of business, there’s an urgency in pursuing it if you find it interesting. This is not the kind of business that will welcome fast followers. The race is on. Have you left the starting gate?

Scaling Learning in an Exponential World

What does scalable learning really mean? I’ve been writing and talking about this for a while now including here, making the case that this will be a key driver of institutional success in the years ahead. In the course of conversations, I’ve discovered a lot of misunderstandings regarding what I really mean by scalable learning, so let me take this opportunity to clarify my perspective.

Why is scalable learning so important?

In the Big Shift, we’re rapidly moving from a more stable environment to a global landscape that is shaped by exponentially improving digital technology infrastructures. In the face of these exponential changes, if we’re not learning faster, we’ll rapidly fall behind. But what does learning really mean? In the context of a rapidly changing world, learning means developing new shared practices that can increase impact in a world of mounting performance pressure.

Free learning from the prison of the training room

First, let me emphasize that the learning I’m talking about doesn’t occur in a training room – it occurs in our day to day work and living environments. If we’re talking about developing new shared practices, it’s far more effective to do that in the environment where these practices are going to be applied, not in some artificial environment. Training rooms are fine for transmitting existing explicit knowledge, but not very effective for developing new shared practices.

Expand learning well beyond knowledge management platforms

Knowledge management platforms have largely been organized around sharing existing knowledge. While this may be marginally helpful, the key imperative in a rapidly changing environment is to find ways to develop new knowledge, rather than merely sharing existing knowledge.

Tacit knowledge is far more valuable than explicit knowledge

In rapidly changing environments, it’s important to realize that tacit knowledge trumps explicit knowledge. The latter can be articulated and written down and it usually takes time before it can be expressed clearly and coherently to others. Tacit knowledge is within our heads and we have a hard time even expressing it to ourselves, much less to anyone else. Because tacit knowledge is generally newer knowledge, emerging from new experiences that we’ve encountered, it’s often the most valuable knowledge, providing us with insight into how to act in a rapidly evolving environment.

Tacit knowledge becomes accessible through shared practice

Because it’s so hard to express, tacit knowledge is not easily accessible. The best way to access it is to work together and to observe the practices that emerge from this tacit knowledge. By working together, we also develop deeper, trust-based relationships that create a safer environment for us to explore new insights with others in our group that we have a hard time expressing to ourselves.

Tacit knowledge emerges from productive friction

The key is to move beyond accessing existing tacit knowledge and to work together to develop new tacit knowledge. This involves addressing unexpected needs and opportunities through the development of new practices. While we each may have some ideas about the practices that would have greatest impact, we are far more likely to develop higher impact practices if we come together and challenge each other’s ideas to come up with new practices that none of us would likely have developed on our own. This requires productive friction: the willingness to challenge and debate each other’s ideas in an environment that encourages diversity and mutual respect.

Let theory emerge from practice

Rather than sitting around and debating for prolonged periods, it’s far better to move as quickly as possible to action to test various approaches and determine which practices can lead to the highest impact on a consistent basis. As we accumulate practice in new environments, we can then start to look for patterns that will generate theories about why these practices lead to such high impact. Given how rapidly our environments are changing, these theories will likely lag our practices. We need to be continually evolving our practices to refine our theories.

Encourage learning in all parts of the organization

We are under increasing performance pressure and we can’t afford to silo our learning in certain parts of our institutions. Everyone in the organization needs to be learning faster by evolving new shared practices, whether they are research scientists in a laboratory or janitors trying to maintain our facilities. The institutions that will succeed in the Big Shift are those that help everyone to accelerate learning, rather than restricting it to a privileged few.

Focus on results and let learning be a by-product

We need to flip our learning mental model on its head. Rather than focusing on learning as the primary goal, we should shift our focus to accelerating performance improvement and let learning be a by-product. The goal is to improve performance more rapidly – that’s why focusing on developing new shared practices is so powerful. It provides us with results that we can measure and learn from, rather than investing heavily in training programs and taking people out of their working environments. Performance improvement accompanies learning, rather than lagging behind it.

Create environments that accelerate this kind of learning

If we took scalable learning seriously, we would apply design thinking and design methodologies to systematically redesign our work environments with the primary design goal of accelerating learning and performance improvement. I have been unable to find a single company that has attempted this, although our research uncovered 75 examples of companies that had redesigned slices of work environments with the result of accelerating learning.

Create and find ecosystems that can scale learning

And, if we take scalable learning seriously, we won't stop at the four walls of our enterprises and narrowly focus only on our employees. Instead, we'll seek to participate in expanding ecosystems that will help us to build deep, trust-based relationships with a growing number of third party participants that are all driven by a desire to learn faster together. Our research has helped to identify the characteristics of these kinds of ecosystems here and here.

Cultivate passion as a key driver of learning

No matter how much we redesign our work environments and expand participation in learning ecosystems, we’ll never harness the full opportunity of these environments unless we catalyze and amplify a specific form of passion among all of our participants – the passion of the explorer. We discovered this form of passion in our research on environments that produce sustained extreme performance improvement. The bad news is that only about 12% of the US workforce has this form of passion today. That’s not an accident, since our existing institutions, built on a rationale of scalable efficiency, rather than scalable learning, find this form of passion deeply suspect and do everything they can to squash it or at least restrict it to after-hours activities.

Provide effective leadership to scale learning

Like most things in organizations, the leaders help to define the culture and values. If leaders don’t embrace scalable learning, it will never scale. Here’s the challenge. The mark of a strong leader in a scalable efficiency environment is someone who knows everything, who can be relied upon to provide answers no matter what the issue or question. In a scalable learning environment, the most effective leaders are those who have the most powerful questions and who invite others to come together to discover the answers. They help to focus others on the questions that really matter. Perhaps even more importantly, they express vulnerability by acknowledging that they don’t have the answers and want help in finding the answers. In sharp contrast to scalable efficiency environments where having questions is a sign of weakness (you’re supposed to know what needs to be done), this signals to others that it’s not only OK, but essential, to have questions and to ask for help in discovering the answers.

Focus on trajectory, not snapshots

Finally, let me add that performance in a scalable learning environment is continuously evolving. Rather than focusing on snapshots of performance at any specific point in time, scalable learning organizations are relentlessly focused on the trajectory of performance – not only whether performance is improving over time, but whether it is accelerating. If it’s not accelerating, it’s not good enough. In an exponential world, we need exponential improvements in performance.

Bottom line

Hopefully, this brief post has helped to clarify what I mean by scalable learning. It’s certainly not learning in the traditional sense. It’s a very different and very powerful form of learning that, if effectively harnessed, can help all of us to achieve much more of our potential while having a far greater impact on the world around us. But, if we take it seriously, we’ll need to re-think everything. The time is now.

What’s the Future of Jobs?

What better time to reflect on the future of work and jobs than Labor Day? I’ve written about this extensively with my latest foray on a recent blog post.

Is STEM our future?

Today, I want to be a contrarian. The conventional wisdom is that the best way to prepare students for the future of work is through a STEM education (science, technology, engineering and math), although a few might recommend STEAM (adding art as a token concession to the quantitative basket). Let me challenge this on several levels.

First, it maintains a disciplinary focus to education at a time when our disciplinary boundaries are becoming prisons that prevent us from fully understanding the rapidly changing world around us.

Second, it suggests kids should go into disciplines that are particularly vulnerable to automation, especially if we focus on the quantitative and systemic dimensions of these disciplines. Sure, data analysts are in hot demand now, but how long will it be before artificial intelligence automates much of this activity? Robots are already designing and building their compatriots.

Third, it seems to be driven by the sense that we’ll all need to become “techies” in order to survive in a world increasingly shaped by technology. Yet, the wonderful capabilities of these new generations of technologies are that they quickly blend into the background and can be used by anyone without a tech education. Think of the computing power embedded into our smart phones today – the equivalent of mainframe processing power just a few decades ago – that can now be applied with just a few taps in proliferating applications usable by anyone.

Fourth, if the children are not deeply passionate about these disciplines and simply going into them because they will provide a sustainable career, they will most likely fail as the mounting performance pressure leads to growing stress and ultimately burn out.

Alternatives to STEM

So, what’s the alternative? The only real alternative to prepare our kids for the new era unfolding around us is to radically redesign our educational systems. What we need are learning environments that will draw out and nurture capabilities that today are only in the background, if present at all – capabilities like creativity, imagination, curiosity, and emotional and social intelligence that transcend conventional disciplinary boundaries.

Until then, the best advice we can give our children is to search wherever they can (and certainly beyond the four walls of the classroom) for a sustaining passion that excites and engages them and to not stop until they have found it. Once discovered, they then need to do whatever is necessary to pursue that passion and find ways to turn it into a remunerative job.

Work versus jobs

Which leads me to my next contrarian position. I’ve just come back from a conference where the consensus appeared to be that we might continue to work in the age of machines but that few, if any, of us would be able to turn that work into jobs that provide us with income to support ourselves (much less our families). Frankly, this position baffles me.

I believe that we all have an insatiable desire and need to achieve more of our potential, even though for many of us that desire and need has been suppressed by an educational system designed to prepare us for jobs that offer very limited opportunity to achieve more of our potential. Moreover, I also believe that we will be willing to pay those who can play a material role in achieving more of our potential and in providing us with products and services tailored to our individual needs and interests.

The way I see it, there will be a flourishing of jobs that will leverage digital technology infrastructures but that can provide a healthy living to more and more people who discover that they have a passion for this kind of work. What are some examples? Let me just quickly roll through a list (and I couldn't resist having them all start with the same letter):

Craftspeople and artists – I believe we are headed back to the future, a world where more and more of the products we buy will be produced by talented craftspeople who can inspire our own creativity and imagination

Customizers – these are people who have a talent in taking more generic products and services and creatively tailoring them to the specific needs and interests of each person

Curators – people who develop a deep expertise in particular domains of products and services and can quickly and effectively help us to find the product or service that best meets our needs and interests – they don't have to be high tech products, but all forms of products including beds, gardening tools and surfboards

Coaches – these are people who help us to accelerate our learning and performance improvement in a broad range of domains that are meaningful to us, ranging from job skills to wellness and relationships. Once again, these skills don't have to be high tech skills – they could be cooking, pottery making or swimming

Counselors – people with a deep intuitive sense of the individual who can help us with motivational or lifestyle issues that are preventing us from achieving more of our potential, including drug abuse, fear or self-absorption

Compelling experience hosts – those who can help us to explore domains in ways that enhance our learning or spirit of adventure. This could cover a broad range of experiences from travel and exercise to learning about new tools that can help us express our own creativity and imagination

Community hosts/moderators – people who are talented in convening gatherings (both in physical space and virtual space) that bring together people and foster interactions that draw out new insight and motivate us to harness that insight so that we achieve more of our potential. By the way, these community moderators could emerge in many domains, ranging from specific crafts to helping neighbors achieve a greater sense of community

Captivating performers – these are people in a variety of domains including sports and entertainment who can engage and inspire us to achieve more of our potential by tapping into our imagination and showing us what is possible

I could go on, but let me suggest that ultimately the jobs of the future will focus on serving four basic human needs – exploration, connection and creation as well as the learning required to do the first three more effectively.

But, where's the money?

So, will we be able to earn a living from these activities? I believe so, for a variety of reasons.

First, our cost of living is likely to decline significantly in the years ahead as we reap the benefits of technology. This technology is already helping to significantly reduce the cost of producing and delivering the products and services we need to meet our basic needs, ranging from food and energy to the devices we use to connect to the rest of the world. There admittedly are certain domains (at least in the US) like education and healthcare that are experiencing rapidly rising costs, but I believe these domains will be significantly disrupted in ways that unleash the opportunity to make these services more accessible to a larger segment of the population (perhaps the focus of a future blog post).

There’s another factor likely to reduce our cost of living over time – the move from ownership to access. We’re shifting from the need or desire to own large physical assets like homes or cars to seeing the value of simply accessing these resources when and where we need them. Access will tend to reduce the amount we need to spend to get the benefit of these assets.

Second, we’ll likely have to move from being employees to becoming entrepreneurs in order to create these jobs for ourselves. I’ve written extensively about concentration and fragmentation trends in the economy elsewhere. While I’ve made the case that we will still see very large and concentrated businesses in a variety of domains that are driven by significant network effects or economies of scale and scope, these businesses will tend to be very capital intensive and actually require relatively few employees to prosper (the one exception being the “trusted advisor” business opportunity). As a result, most people will tend to make a living in the fragmenting parts of the economy, where most if not all of the job opportunities I outlined above will reside.

To harness these job opportunities, we’ll need to be prepared to leave the largely illusory security of working as an employee and instead build our own small business by seeing an untapped opportunity and being willing to take the risk of investing our time and effort in addressing that opportunity. In doing this, we'll be able to leverage new generations of technology like 3D printing that are making the means of production more affordable and accessible, as well as digital funding, talent and commercialization platforms that will help us to connect with the resources and customers we need to build a business.

Success will be modest, at least in the sense of not becoming the next unicorn. That’s the consequence of operating in a fragmenting part of our economy – small businesses will prosper, but find it increasingly challenging to become very big. But we will likely be able to create a comfortable living for ourselves, our families and perhaps a few other trusted collaborators.

If we’re targeting opportunities like the ones highlighted above, I believe that we can create jobs for ourselves. This work taps into basic human needs that we all have. Think of it in terms of Maslow’s hierarchy of needs. As the basic physical requirements for human survival become increasingly affordable, we will naturally move up the hierarchy to focus ultimately on self-actualization. And, if you believe, as I do, that our potential for self-actualization is ultimately unlimited, there will be an ever growing demand for products and services that can support us on this journey.

Bottom line

If it’s not already clear, I’m an optimist regarding the potential for jobs, while recognizing the challenges we will certainly face in making this transition as the future of work gets redefined. The jobs that are emerging are far more fulfilling than the jobs today that require us to leave our humanity at the door in order to take home a paycheck at the end of the month. These jobs are within the reach of all of us, provided that we discover and pursue our passion.

The Demise of Advertising Business Models

In a blog post earlier this year, I explored the emergence and evolution of new business models enabled by digital technology infrastructures. At the very end of that blog post, as a teaser, I mentioned in passing that advertising business models are unlikely to be sustainable as the Big Shift unfolds.

Now, that’s a pretty bold statement given that it’s one of the most widespread business models, especially in the media business and Internet businesses. This business model is also being aided by technology that helps advertisers to target their audiences more precisely and to follow people in physical space through their smartphones, rather than simply waiting for them to get in front of their TV or their computer. How could I possibly suggest that the advertising business model may not be sustainable?

Well, one big red flag is the spread of ad blocking technology. According to Fortune magazine, use of mobile and desktop ad blocking software grew by 41% worldwide and by 48% in the U.S. between Q2 2014 and Q2 2015. According to PageFair, use of this software quadrupled between 2013 and 2015 to 200 million monthly active users. If advertisements are so useful to consumers with all this wonderful targeting, why is the use of ad blocking software exploding globally?

A new metric – return on attention (ROA)

To understand the dynamics underlying these numbers, we need to explore a paradox about consumers – we are becoming more and more powerful at the very same time that we are experiencing more and more pressure. What do I mean?

Growing power is simple – as consumers, we have far more choice regarding products and vendors, more information about those choices and more ability to switch from one vendor to another if we don’t feel that our needs are being met. But, at the same time, we’re all experiencing increasing pressure in our work lives and our personal lives. Our jobs that we used to take for granted are becoming less and less dependable. We find ourselves working harder just to maintain our current positions, much less getting ahead, while our personal lives (including sleep) cannot be ignored. Time has become a very precious asset and we feel increasing pressure to get more and more value from each unit of time that we spend. We need to find ways to increase our impact in each minute and hour of the day.

In this kind of environment, we’re all on a quest to increase our return on attention – a new form of ROA that will increasingly determine success. What are the components of ROA? There are three:

• Achieve more of what is valuable and meaningful to me for each unit of time spent
• Make the time spent as engaging and enjoyable as possible
• Reduce the amount of time spent wherever possible unless it contributes significantly to value received

Now, I’ve written often about the growing importance of this form of ROA, including here and here. In the past, I’ve focused in particular on the challenge we all face in our personal lives with more and more vendors competing for our attention. This challenge will only intensify as we see growing fragmentation of product and service businesses.

But there’s another piece to this puzzle that deserves more attention and that’s our desire and need to learn more and faster. We want to make the best choices possible and that becomes more challenging when we not only have more choices, but those choices evolve at an ever accelerating pace. And, once those choices have been made, we want to get as much impact and value from those choices as possible. We’re moving away from a traditional consumer society where the value resided in ownership of the object itself to one where the value resides in the usage of the product and the impact that we can achieve from that usage. Now, we feel an increasing need to learn more about the ways we can use the product to get even more value.

New approaches to increase return on attention

In this changing environment, vendors of products and services will need to become more adept at accelerating learning of consumers, both in the pre-purchase and post-purchase phases. As I discussed in my earlier blog on business models, this will involve a profound shift in mindset from doing transactions to building rich and sustaining relationships that will enable the vendor to become more and more helpful to the consumer.

What are some of the implications of this shift? It will certainly vary by product or service, but there are some broad opportunities to be explored. For example, most vendors do not come close to leveraging their Internet presence given this growing need of consumers to learn and to increase their return on attention. One simple tool is to ask the visitor some short and quick questions that will help to personalize content and interactions to more directly meet their needs. The key here is to give value back to the visitor as quickly as possible. This will reinforce in their minds that you were able to be more helpful when they gave you some information and will increase their willingness to offer more information in return for even more value. In designing these interactions, it’s important to ask: what is the minimum information required to deliver maximum value back to the visitor?

A bigger stretch is for the vendor to resist the temptation to keep others out of the interaction with the visitor to the website. Remember, the key goal is to help the visitor learn faster. Often, that can be done by connecting them to third parties that could be particularly helpful in sorting through the choices they need to make or the approaches that will help them to get the most value from the product or service once they have bought it. It might even involve connecting them with other customers so that they can learn from each other. The key is to create a website with a rich set of experiences shaped by a broad range of resources mobilized from third parties as well as other customers.

And it’s not just about re-thinking websites. What about re-thinking the physical retail store experience? Today, the focus of more and more stores is on transactions – maximizing selection to increase the likelihood of a purchase. Salespeople have been steadily reduced as shelf space has been steadily expanded. As I’ve written in a major research report on the future of retailing, this is likely to be a losing proposition relative to the infinite shelf space that is available from online retailers. I would suggest that the future of physical retailing will increasingly lie in creating rich “experience bazaars” that help to amplify return on attention for the consumer.

What do I mean? What about focusing precious retail space on creating a broad range of experiences that are not just enjoyable but that help the consumer to learn faster about choices pre-purchase and about the most effective usage of the product post-purchase? In the future, some retailers may maintain a product focus to their store – for example, consumer electronics – but many retailers may end up adopting a customer segment focus like people who are about to have their first child or people who are about to retire. If the focus is on accelerating learning, having a clear understanding of customer context becomes much more central to designing the right learning experiences. In more and more cases, the business model for physical “retailers” may shift from making a margin on the product sale (since, more often than not, the actual purchase may be executed online) to actually charging for the value of the learning experience itself. The “showroom effect” dreaded today by most physical retailers may in fact define a very rewarding future – if they evolve their business model accordingly.

While these kinds of online and physical store experiences are quite different from the experiences that most vendors create for us today, they could be very rewarding for the vendors. Vendors also will be increasingly driven by a return on attention metric in their marketing. How much do they need to spend to get a unit of attention from a consumer and how much revenue can they ultimately generate from that unit of attention In this context, these learning experiences created for the consumer can also be significant learning experiences for the vendors. They will learn far more about their consumers and their unique contexts than they ever did with conventional transaction based business models. That learning can be used to become even more helpful to the consumer, in terms of designing more valuable experiences for the consumer and in terms of designing (or re-designing) products and services that deliver even more value to the consumer.

Some more metrics – return on information (ROI) and return on skills (ROS)

If we take this logic to the next step, two other metrics become more and more important for both consumers and vendors – ROI and ROS. In this case, ROI stands for return on information. From a consumer perspective, how much value do I receive in return for whatever information I provide to a vendor about myself? From a vendor perspective, how much revenue can the vendor generate from the information they receive from their consumers?

And ROS? Here, it means return on skills. As mentioned earlier, we in consumers are under increasing pressure to develop greater skills both in terms of picking the right products or services and, equally importantly, in getting as much value from the products and services once we have bought them. The key question for us as consumers is how much time and effort must we spend to develop the skills that are most important to us? On the other side, vendors need to rapidly improve their skills in serving evolving consumer needs more effectively – how much time and effort are they investing to evolve these skills and how much value are they generating for themselves from these skills?

It turns out that all of the emerging business models that I outlined in my earlier post are focused on accelerating learning for both the customer and the vendor. As these business models gain traction, we will also need to re-think our approach to marketing and that in turn will challenge the business models that today rely on advertising as a primary revenue source.

Bottom line

Here’s the thing. As vendors become more adept at increasing return on attention for their customers, their need to advertise is likely to diminish. If they are more and more helpful to their customers, word of mouth will spread among customers and they will flock to the vendors who can improve their return on attention. And, it won’t be just word of mouth among customers. On the product side, curators are likely to emerge to help customers sort through the ever expanding variety of products and services given deep expertise in certain categories of product and services. On the customer side, I have written about the emergence of trusted advisors who will invest in deeply understanding us as individual customers and become more and more helpful to us in recommending products or services we may not even have asked about.

With all of these resources to draw on, what is the value of conventional product advertising to the customer or to the vendor? It’s likely to diminish in importance. As I’ve written elsewhere, the power of pull will replace the diminishing power of push. We will see much more helpful forms of marketing evolve – an approach that I’ve called collaboration marketing. In this rapidly evolving world, companies that continue to rely on advertising as a business model are likely to experience growing pressure. Customers will gladly pay for the opportunity to increase return on attention and find ever more sophisticated ways to evade the classic push model of advertising.

This isn’t going to happen overnight. Companies have both the blessing of time and the curse of time. The blessing is that there is time to evolve and develop new business models. The curse is that, because this will not happen overnight, there is an understandable but very dangerous tendency to become complacent and not move aggressively enough to avoid the cliff ahead.

Robots Can Restore Our Humanity

Red alert! Robots are getting more versatile and artificial intelligence (AI) is getting exponentially smarter! Our jobs are in jeopardy and no one is safe! We’ve all seen the headlines. Anxiety and fear are steadily mounting that we are on the edge of a profound transition (some might even call it a Big Shift) that will put us out of work and on the streets.

Some respond that this is simply a resurfacing of a Luddite fear of new technology that has erupted every time new technology breakthroughs occur. The ultimate result in each of those historical eras was to destroy certain jobs, but also ultimately to create even more jobs in other domains. Job destruction was transitional.

But this time there’s a difference. Previous technology breakthroughs – think of the steam engine, the railroad or the telephone – all had a dramatic impact on certain jobs, but not all jobs. What’s different about this new wave of technology is its potential ability to replace virtually every job known to humanity.

Robots are targeting a growing array of manual jobs while artificial intelligence embedded in ever more powerful computers is going after the desk-bound knowledge worker. Even the most highly educated and trained workers – doctors, for example – aren’t exempt. Artificial intelligence is becoming more accurate in diagnosing diseases while precision robots are beginning to make inroads into surgery rooms. Even some of those headlines about the robots coming are written by AI programs.

So, what should we do about this? Resign ourselves to becoming servants or slaves of our robotic overlords (but what would we do as servants, since the technology could do it far more reliably than we could)? Go to the beach and let robots do all of the work (but who would pay us so that we could afford those mai-tai’s and tacos)? Mobilize to pass laws now to prohibit the further development of the technology?

No, we need to do something quite different – rather than view this new wave of technology as a threat, we need to view it as an opportunity to redefine work at a very fundamental level. If we do it right, we might actually be able to evolve a form of work that taps into our uniquely human capabilities and restores our humanity. The ultimate paradox is that this technology may become the powerful catalyst that we need to reclaim our humanity.

What is work today?

What do I mean? Well, let me step back and provide some context in terms of the work we do today. What is work? While there are certainly some exceptions, most work today in developed economies is the product of an industrial era that emerged over centuries, shaped in part by the machinery and tools that enabled us to move from an agricultural economy to an industrial economy. As we moved into the industrial economy, business leaders evolved a compelling institutional model that allowed them to scale operations and create employment opportunities for a rapidly growing workforce.

That institutional model can be described as scalable efficiency. What are its core components? First, tightly specify all activities required to generate output. Second, highly standardize all of those activities so that they are done in exactly the same efficient way anywhere in the organization. Finally, tightly integrate all of those activities so that we remove all of those inefficient buffers that often separated activities required to yield a specific output.

This scalable efficiency model was developed initially in the factory, but over the past century it has spilled out into every domain of human activity within large institutions. Think of call center operations, logistics operations, performance reviews, sales and marketing campaigns – they’ve all been molded into the scalable efficiency model, driven in no small part by the business process re-engineering wave that reshaped business processes in the last few decades of the twentieth century. Even hospitals and schools weren’t exempt from this scalable efficiency model – one by one, all of our major institutions succumbed to the seductive appeal of efficiency at scale.

But here’s the problem: if that’s what work is, if it’s just about executing tightly specified and tightly integrated tasks in a standardized way, guess what? What we’ve just described is a computer algorithm. Robots and AI programs can do this kind of work far more efficiently than we ever will. As humans, we get distracted, we make mistakes, we get sick – we’re not all that reliable and predictable. If that’s what work is, we’ll all be replaced by robots and AI eventually. It’s just a matter of time. And with exponential improvements in performance, it won’t take that much time.

What could work be?

But, is that all work could be? What if we used this as an opportunity to step back and reassess what work might be if we were really intent on harnessing our distinctively human capabilities? What if we focused on creating work that focused on systematically tapping into our creativity, imagination, and emotional and social intelligence? What would work look like? It would certainly look fundamentally different from the work that most of us do today.

And, here's the thing: it's exactly the kind of work that is required to accelerate performance improvement in a rapidly changing and uncertain world. The irony is that, as we move from a more stable to a more rapidly changing world, the scalable efficiency model that served us so well in the past becomes increasingly dysfunctional.

I can hear the skeptic saying, wait a minute, some of us are capable of creativity and imagination but that’s really a very small portion of the population. What about the rest of us?

My response is: go check out a children’s playground and show me a child that doesn’t have creativity and imagination. We all have that potential and a strong desire to express that potential. The challenge is that we have been processed by a series of institutions, starting with our school systems, that were designed to squeeze out these attributes in the name of scalable efficiency.

Even if we are all capable of this kind of work, the next objection might be whether there would be enough demand for that kind of work to keep us all productively employed. Perhaps I’m an optimist on this front, but I believe that we, as humans, have an insatiable demand for products and services that will help us to achieve even more of our potential. Rather than gaining status from consumption (the hallmark of the industrial society), we will increasingly gain status from what we create and how widely our creations are used by others. As our creativity and imagination unfold, we’ll find more and more demand for new approaches that will help all of us to have even more impact.

What would be required to evolve work?

If that’s what work could be, we would need to pursue institutional innovation aggressively – re-thinking at a fundamental level the most basic rationale for our institutions. Is it really scalable efficiency? While that may have served us well in centuries past, is that still the rationale that will drive the growth of the next wave of institutions? As I have written elsewhere, I believe we will need to redesign our institutions driven by a new rationale – scalable learning. That rationale would require us to re-think work and evolve the kind of work that I have just described.

Don’t get me wrong. This form of institutional innovation won’t be easy, especially within our large, existing institutions where all kinds of institutional barriers will resist this transition. Perhaps the biggest barrier of all, though, will be our mindsets – our beliefs and assumptions, often unstated, about what is required for success.

How do we overcome these obstacles?

What will be the catalyst to make this happen? It certainly won’t be the threat of job elimination on its own. Under increasing pressure to become more efficient, our institutional leaders will line up to find ways to cut employment rolls, especially as the cost of the technology required to replace jobs rapidly declines.

No, something else will be necessary. There are two forces that will ultimately catalyze and drive this shift. First, large existing institutions will experience such mounting performance pressure that cost cutting alone will not be sufficient. Large institutions will be forced to shift their focus from cost cutting to increasing value creation and, given the ability of new forms of work to rapidly increase value creation, institutional leaders will become more open to reassessing the nature of work.

Second, we as individuals are all experiencing mounting performance pressure and finding that our existing institutions are constraining our ability to develop faster, so we'll be motivated to jump ship so that we can develop more rapidly on our own. We'll begin to realize that, unless we can more effectively integrate our passion with our profession, we will never develop as rapidly as our rapidly changing environment requires. As the means of production become more affordable and our ability to commercialize our work through platforms increases, we will find this a more attractive and sustainable option, especially in the growing arena of specialized and tailored products and services. I explored this trend in our work on fragmentation and concentration trends in the economy.

Bottom line

Robots and AI may be the catalyst we need to finally jettison the increasingly outdated industrial model of scalable efficiency. In its place, we’ll evolve fundamentally new forms of work that tap into more our distinctively human capabilities and potential. Not only will we as individuals develop opportunities to learn faster by working together in very different ways, but our institutions will move from a world of diminishing returns to a world of increasing returns, where the more of us who join together, the faster we will all learn. Performance improvement will begin to accelerate in ways that previously would have seemed unimaginable. The technology that seems so threatening now may actually become our ally, amplifying our performance improvement by freeing us from the tasks that today keep us tightly locked into the routines of the past and providing us with the data we need to spark even more imagination and creativity.

Please note: "Robots Can Restore Our Humanity" is the proposed topic for my talk at next year's SXSW where I hope to delve much deeper into this opportunity. But, to do that, I need your support.  Please go here to vote for this topic http://panelpicker.sxsw.com/vote/63726