Essential Value Chain
of the New Economy
an updated and expanded version of keynote speech
Founder of Community Intelligence Labs
"Consultation Meeting on the Future of Organizations
Brussels, May 23-24, 2000
Copyright © 2000, Community Intelligence Labs
"What's so new about the new economy?"
"Through conversation, knowledge workers create the relationships that define the organization. Conversationsnot rank, title, or the trappings of powerdetermine who is literally and figuratively "in the loop" and who is not.
Conversations inside and outside the company are the chief mechanism for making change and renewal an ongoing part of the company's culture. One of the many paradoxes of the new economy is that conversationtraditionally regarded as a waste of timeis in fact the key resource for competing on time." (Excerpt from "What's so new about the new economy?" a seminal essay by Alan Webber, published in HBR , Jan-Feb 1993)
The essential value chainwhen productive conversations are the source of wealth-creationis a chain of intangibles: knowledge, intelligence and wisdom.
Please join me in an exploration of their inter-relatedness and how value can be augmented at each stage.
The wisdom of enterprise
It's easier to understand "knowledge" through the lens of intelligence. It's easier to understand "intelligence" through the lens of wisdom. So, let me start at the end of the value chain the wisdom of enterprise: What is it and why is it in demand? Why now?
How did wisdom become a key factor of organizational evolution, of successful adaptation to the new economy? There are two essential frameworks for the new economy, which answer the question. They are known as "attention economy" and "experience economy."
We're living in an attention economy when there is an overabundance of information and knowledge. Time and attention are the scarcest resource. The competition for available attention is heating up; investing it wisely became a competence of increasing value. Employees spend it and doing so, earn a living. Free agents--inside and outside corporations--invest it and doing so, enhance their capability repertoire.
A factor of how well we use our attention is how well we balance its distribution between our current and long-view priorities.
Wisdom has to do with not only intuiting the long view, understanding systems in the context of their larger whole, but also acting in resonance with what is known as true and lasting. Only wisdom can guide effective decisions on how we invest our attention, both individual and organizational, in the conditions of galloping "complexity multiplied by urgency." (Doug Engelbart)
It's not only the attention economy that drives the demand for wisdom. Seen through the "experience economy" lens, todayıs customers are looking for more than products/ services; they want to have a memorable experience of buying and using them for achieving their aspirations. One of the largest buying powers in the US, "cultural creatives" value transformation higher than other types of market offers.
"No matter how acute an experience, one's memory of it fades over time. Transformations, on the other hand, guide the individual [and the organization - added by GP] towards realizing some aspiration and then help to sustain that change over time. There is no earthly value more concrete, more palpable, or more worthwhile than achieving an aspiration. Nothing is more important, more abiding, or more wealth-creating than the wisdom required to transform customers. And nothing will commend as high a price." (The Experience Economy, by B. Joseph Pine II and James H. Gilmore)
Where does the wisdom of enterprise reside, how can we notice and cultivate it? We used to think of wisdom as a quality of old, white-hair men or women. Thought of as an emergent quality of the intelligent enterprise, "systemic wisdom" refers to the ability of the organization as a whole to see and to know the pattern that connects. The broader access members get to the meaning-making activities of the organization, the better are its chances to increase its systemic wisdom.
The intelligence of enterprise
Organizations are living social systems. What makes them able to adapt and evolve is that they have a nervous system and intelligence, just like biological systems do.
The nervous system of an organization is embedded not in computers and hardware networks, but in the network of conversations which bring and maintain the organization in existence, and lets it learn from its experience.
Intelligence, the faculty that makes biological and cultural evolution possible, implies and guides the use of knowledge or "knowing," the capacity to respond to specific opportunities and challenges as they emerge. As wisdom refers to our effective use of intelligence, intelligence refers to our effective use of knowledge.
Intelligence is needed to guide the transformation of organizations into work systems that support all members in reaching their full potential. Only then will the organization manifest the strategic advantage of being capable of learning as fast as the changes in its environment demand.
"Today's environment is beginning to threaten today's organizations, finding them seriously deficient in their nervous system design. The degree of coordination, perception, rational adaptation, etc., which will appear in the next generation of human organizations will drive our present organizational forms, with their clumsy nervous systems, into extinction." (Doug Engelbart, 1970)
Intelligence is a product of the nervous system, and its evolution defines how well the organism/organization can perform the following functions:
Facilitate the exchange and flow of information among the subsystems of the organism and with its environment.
Coordinate effectively the actions of the subsystems and the whole
Store, organize, and recall information as needed by the organism
Guide and support the development of new competences and effective behaviors
The knowledge of enterprise
"Knowledge is information that changes something or somebody either by becoming grounds for actions, or by making an individual (or an institution) capable of different or more effective action" Peter Drucker
Knowledge is an emergent quality of productive conversations, that cannot be "managed" but inspired by work systems that reward learning and innovation. The main incentive for that is companies providing such an environment may attract better talents and more customers, and benefit from the positive feedback loop of market attention.
The main threat to the continuous expansion of our creative faculties, both individual and collective, is the deepening gap between the human condition and our capacity to understand it.
The same is true at the level of organizations and communities. Have you heard the frequently quoted statement of Lewis Platt, former CEO of Hewlett-Packard: "If HP knew what HP knows, we'd be three times more profitable."
An organization learns what it knows by cultivating its knowledge ecosystem in which information, insights, and inspirations cross-fertilize and feed one another, free from the constraints of geography and schedule.
The study, design, and improvement of individual and organizational knowledge ecosystems are the focus of Knowledge Ecology (KE).
Along with "organizational intelligence" and the strategy of "knowledge communities," KE is an essential framework and one of the key enablers of the "wisdom-driven enterprise."
Situated at the top of the value chain, wisdom-driven businesses will easily provide the highest quality work life experience to their members, and set an energizing context for societal evolution in the new economy.
If one of your goals is to maximize your organization's potential to continually augment its wisdom, intelligence, and knowledge, here are some high-leverage opportunities for focusing your investment in improving the creation and use of your wealth-generating assets:
Learn to generate, facilitate and connect a network of productive conversations in virtual and physical environments.
Be at cause for transforming fear and dominance in all work relationships into trust and partnering.
Review your business models and strategies through the lenses of "attention economy" and "experience economy," and update them frequently in response to fast-changing conditions.
Re-design your social, knowledge and business architectures, and optimize them for diversity, connectivity, and enjoying the full benefits of web-based technologies.
Let me close my remarks with a voice from the 60's that sounds particularly timely today:
"One of the great liabilities of history is that all too many people fail to remain awake through great periods of social change. Every society has its protectors of the status quo and its fraternities of the indifferent who are notorious for sleeping through revolutions. But today our very survival depends on our ability to stay awake, to adjust to new ideas, to remain vigilant and to face the challenge of change." (Martin Luther King; emphasis added by GP)
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© Copyright, 2001, Community Intelligence Labs
© Copyright, 2001, Community Intelligence Labs
Last updated on 06/18/00