The Future of Knowledge-excerpt


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Excerpt from Verna Allee's latest book, The Future of Knowledge: Increasing Prosperity through Value Networks, Butterworth-Heinemann, September 2002.

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It’s All about Relationships

The value network perspective makes it abundantly clear that success today is all about relationships. We sometimes are dazzled by technologies and what they can enable us to do. But the bottom line is that business is about exchanges and transactions that happen between real people. Even when people never see each other or speak directly, only real people can make decisions and initiate action. Technologies may fill the role of decision-makers at times, but only based on what a real person would do.

When business is viewed as a linear process, a set of functions, or simply material transactions, it not only diminishes the role of people¾it makes invisible the all-important human relationships. The value network focus puts people back into the business model in such a way that every individual can see who they need to be in relationship with, and what their responsibility is in that relationship.

It is entirely possible to have business relationships with almost no intangible value being exchanged or generated. However, enduring business relationships are rarely built solely on tangible transactions, especially when dealing with sophisticated or complex products and services. The value network view demonstrates that knowledge and intangibles build the critical business relationships and create the environment for business success. We do not so much build a business but rather grow or “weave” a web of trusted relationships.

Companies and organizations that build healthy and rewarding relationships, usually find they have engaged in intangible exchanges for months, or even years, before the tangible activities kick off with an order or a request for service. Once intangibles become visible, people can easily define their importance in building good relationships, and are more willing to invest resources in producing and delivering them.

Integrity Is not an Option

One of the hallmarks of systems thinking is respect. Whole-system awareness brings humility and genuine respect for the system we are working with, and for the limitations of our own understanding. It is easy to assume we know more that we do and that we are smarter than we really are. We hurry to fix one part of the system, only to find another part jumps up and bites us. Respecting the integrity of the whole is not an option; it is one of the new fundamentals of systemic thinking.

Integrity of the Whole

In every system, the whole is greater than the sum of its parts. This means a single transaction, even a group of transactions, is only meaningful in relationship with the value network as a whole. A single participant is only meaningful in relationship with the other participants.

Living networks are so interdependent, that the removal of a single node or relationship can reverberate through the whole network. Removing a key participant or critical transaction can affect the value dynamics across an entire enterprise or business web. Breaking an operating principle, assumption, or agreement, implied or explicit, can destroy the integrity of the whole system, turning positive reinforcing loops into negative ones. A living system dies when its pattern of organization has been destroyed.

Integrity of the Participant

One participant cannot manage a whole system. Not even all participants working together can really “manage” the system, even through agreed behaviors and values. However, for maximum benefit each participant does need to understand how the whole system is working, so they can fully participate, gain the greatest value, yet help maintain the integrity of the whole system.

Participants must understand network principles so they can manage their own inputs and outputs in ways that support the vitality of the whole value network. Every individual must learn the art of negotiated self-interest. In order to negotiate intelligently, people need ways to identify and leverage the value gained from every tangible or intangible they receive. Further, each participant must find ways to enhance or increase the value of what they are contributing to other participants, and to the value network as a whole.

Fair exchange is an essential element for a healthy value network. Knowledge and other intangible exchanges become richer and more frequent where there is trust. Trust widens the pipeline. If people don’t trust each other, they don’t exchange knowledge and ideas, and are reluctant to extend favors. When people are treated fairly and can trust the other members of their networks and organizations, they are far more likely to fully participate and make their greatest contributions. Everyone has the responsibility for maintaining the highest possible personal integrity to build the climate of trust.

Integrity of the Leader

These new network fundamentals are driving business leaders to higher levels of integrity and fairness than ever were required in the past. In the digital world there are no secrets and corporate leadership is becoming increasingly transparent. In the old competitive environment, a business could treat one external partner badly and still be successful. Today, such behaviors erode the entire web of relationships. While many business executives continue to operate by the industrial age competitive values, we can anticipate that the most successful companies of the future will be those that honor relationships and embrace the ethics of honesty and fair exchange.

The Prosperity Potential

I began this book by suggesting that an intangibles economy offers a far better foundation for prosperity than one based only on tangible and monetary value. Money is a commodity that is controlled by only a relatively few members of society. Knowledge and favors are within the power of everyone to create, distribute and exchange. In the right climate of trust, positive reinforcement fuels a continuing cycle of intangible wealth creation.

There is no need to overthrow the old economic order to usher in a new abundance. We did not overthrow agriculture when we moved to an industrial economy; it was absorbed into a new economic order. We will continue to include money and tangibles in the range of things we might negotiate. But with intangibles we expand our economic possibilities and opportunities.

Tangibles operate by the laws of physics. They have their own laws and dynamics that we are well familiar with. Intangibles operate by the law of social value, and we are only now learning their true role and contribution to value creation. I anticipate that our business understanding will evolve to a larger perspective and a new economic synthesis¾that understands all of these exchanges from an expanded worldview. Right now, our questions about intangibles are anomalies that we do not understand quite yet. But as we pursue our questions, they will serve as the gateway to our future knowledge.

Conclusion

In this book we have traced the future of knowledge along several dimensions.

· We explored how our business knowledge is evolving to the next level of complexity so that we may learn to see, understand, and work with complex systems and network dynamics.

· We have reviewed some of the new tools and methods that are helping us improve and apply collective intelligence in our business settings. We are acknowledging that knowledge is a social process that emerges in and travels through networks, communities, and webs of conversations.

· We have considered how the Internet is enabling the natural network pattern of organizations to emerge as new forms of enterprise, network organizations, business webs and economic clusters.

· We have seen the economic future of knowledge as an intangible asset, negotiable, and deliverable that can be leveraged to create value and usher in a new prosperity.

Living systems and complexity theory offer up a rich array of principles and network dynamics, that are essential for understanding the role of knowledge in value creation, in communities, and in organizations. Not everyone agrees that organizations are living systems, or that social systems behave like living systems. Many of these concepts are controversial when applied to business. As we struggle to understand network dynamics and the changing world of enterprise, we can anticipate lively debate, false starts, and dead-ends. On the other hand, we will also experience some amazing breakthroughs as true systems thinking becomes more familiar and we develop new managerial tools.

Any business modeling approach has limitations. But in today’s complex business environment, where competitive advantage often rises from innovations and relationships, a network perspective is the foundation for helping people address complex, systemic issues in organizations, business webs, and economic webs. As our understanding increases, we will be able to work more deliberately with our models. Not only with the physical aspects, but with the intangible aspects as well, including emotive exchanges that forge real relationships and open us to the creative in each other. With that understanding, we can more consciously evolve the systems, structures, values and relationships that will lead us to a more hopeful future.

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