Emergent Organizations- An Impressive Model for Adaptive Business Culture

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Picture Credit: Doug Priebe, Shutterstock

This is the first article in an ongoing series on the Emergent Era. Learn how to write for Quartz Ideas. We welcome your comments at ideas@qz.com. (Comment: IAI believe that this is one of the most important insights I’ve read about business innovation in years. What’s compelling to IAI is that this presents a workable model for the Adaptive Business Culture).

In the wake of Brexit and the election of US president Donald Trump, it’s clear that big global changes are afoot. But before we can begin to explain how these unexpected, tumultuous events will impact our lives, we have more fundamental questions to answer. How has our widely accepted picture of reality fallen so far behind the true scope and pace of change? How can the systems we use to synthesize our collective opinions and motivations keep pace? What other major, near-term events might be in our blind spot?

The answer is so large that it has become difficult to see, yet it has urgent implications for everything we do. It’s this: as our planet-wide, instantaneous digital nervous system grows, it is causing a mass reorganization of people, money, information, and things. Our digital information flow has become the main driver of change—and we need new frameworks to understand and anticipate what’s coming next.

One of those frameworks is known as emergence. Up until recently, it’s been used primarily to explain natural systems. Basically, the term describes how, when individual agents interact en masse according to a set of simple rules, highly complex structures and behaviors emerge. The billions of neurons that join together in a brain, the multitude of birds in a flock, and the individual ants in a colony are all examples of emergent systems in nature

We’re seeing this same dynamic everywhere today—but in human systems. Emergent properties are what allow the ranks of individual circuits, weak on their own, to join together into a powerful computer. And because of computers, and especially their continuing extension into the physical world via the Internet of Things, emergence has become one of the key forces reshaping our institutions and essential systems.

One characteristic of emergent change is that it seems impossible until it happens, at which point it feels overwhelming, sudden, and inevitable. The moment when water droplets and wind combine into a hurricane is one example. Another example is the moment when, at about 11:00pm Eastern Time in the United States, election predictions made a wild and irrevocable swing in favor of Trump.

In business, emergence explains the huge leaps in value and expansions in functionality that have punctuated the lives of successful start-ups. When a network of people, linked by a new information stream in the form of an app or connected device passes a certain threshold in size, emergence kicks in, and the network doesn’t just get bigger, it transforms.
As of 2016, for example, Facebook has grown so populous that it is no longer just a social network. Through changes in the atomic content contributions of its two-billion plus users, it has become a de facto political organizer, advertiser, news company, video company, and a marketplace for goods and even jobs. By the time you are reading this, it is likely to have acquired or evolved even more functions. Similar things are happening across the world as other networks, like Tencent’s WeChat in China, continue to expand rapidly. Together, these platforms link together 2.55 billion people, just a little over a third of the world’s population.
For business, the environment created by this massive shift toward connectivity means that the most valuable companies for some time to come will continue to be those presiding over the reorganization of assets and experiences around the digital information flow.

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Picture Credit: IAI – Modified picture of the October 2016 Supermoon

Two of Silicon Valley’s most celebrated and studied start-ups, Uber (worth $62 billion as of this writing) and AirBnB (worth $25 billion), are precisely these types of companies. Neither invented or makes the key asset they trade in (transportation in the case of Uber and lodging in the case of AirBnB). But both provided a new stream of information that equipped individual agents (people with smartphones) to respond in new but consistent ways to the real time location of those assets. The interaction of Uber and AirBnB users as a network lead to the emergence of new behaviors and new markets built on them.

It’s as if ants were given a new set of rules by which to respond to their immediate environment, or brain cells a new set of commands to relay signals. In any system with the potential for emergence, a small change in what economist Thomas Schelling calls micromotives can lead to radically different macrostructures. And in The Emergent Era, with its profusion of new, ambient information streams, human micromotives are changing all the time.

To get a sense of the sheer scale of our new information streams, consider that in the next 18-24 months, a full one-third of the global population will be going online for the first time. By 2020, there will be over 50 billion machines connected to the internet. This presents a unique challenge to those who have to shepherd organizations through this period of change. All the rules and subsequent benefits that have come with command-and-control style bureaucracies no longer apply. The word bureaucracy itself is an artifact of old information technology. A bureau is a writing desk, a physical enclosure for information, fixed in one place, around which power and people tend to accumulate like fat around a cell. Bureaucracies were necessary when information was scarce. But in The Emergent Era, bureaucratic structures act as bottlenecks for information and inevitably throttle change. Organizations should instead use these six concepts to adapt to life in The Emergent Era.
 1. Organize around information flows; ditch hierarchy and bureaucracy.

An adaptive business culture begins with a radically open communication system. It’s only when people have access to real-time data and believe they have permission to both pass it on and act on it, that you get the speed and resiliency that characterize emergent structures.

Emergent systems in nature are a good reminder of what the stakes are. If you erase the pheromone trails left by ants, the colony loses direction. Disrupt the human nervous system, and the result is confusion or paralysis. Unlike natural systems, there is no automatic mechanism in human institutions to keep the lines of communication open. That job falls to everyone who is responsible for shaping a company’s culture and core beliefs, at every level, and often at every moment of the day.
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Picture Credit: Pinterest
 2. Empower individuals

Really empower them. No matter what our official title in an organization may be, everybody needs to get over the illusion that by controlling others, we can control outcomes. Because of accelerated change, we are all, by necessity, becoming collaborators rather than merely managers and employees. In the Emergent Era, it’s best for organizations to mimic emergent systems in nature by distributing the decision making process as widely across the network as possible. In effect, to empower individual “cells” to relay signals and respond to their local conditions as they see fit, when they see fit.

 3. Replace long lists of rules with a good M.O.

By M.O. I don’t just mean modus operandi, a characteristic way of doing things. I also mean “mission objective” and “mindset orientation.” A good M.O. is an intuitive habit of mind that connects the larger vision of an organization with the immediate, tactical objectives of a person or team. It is part habit and part intuition, somewhere between mission and mindset. Leaders provide a vision while allowing their teams to find their own route to achieving it, with room to experiment along the way.

An M.O. can be a powerful tool for unleashing creativity within an organization, because it combines skilled perception with speed and fluidity of execution. An employee with a well-developed M.O. will have a knack for recombining the skills and assets of their organization in new ways in the same way that a jazz improviser recombines notes. Both make decisions partly according to a kind of muscle memory of the established rules and partly according to the unique possibilities and requirements of the moment.
 4. Establish feedback loops. They are critical.

Don’t be afraid of feedback—seek it, give it, use it—but make sure it’s the right feedback. Healthy, adaptive systems tend to be highly feedback tolerant. That doesn’t mean they merely amplify the signals that flow through them; they sometimes dampen those signals by incorporating “negative” feedback. Despite the negative connotation of the phrase, the results of negative feedback are actually positive. It’s the mechanism our bodies use to maintain the right temperature and blood sugar levels, and it’s the way people and processes in organizations stay in accord with larger strategies and goals.

In a company where the information flow is obstructed by bureaucracy, or by managers who create a culture which disproportionately rewards people who confirm existing beliefs, healthy feedback is impossible. For a system to be adaptive, it needs to create regular conditions tolerant of both positive and negative feedback.

5. Learn to Live in the “In-Between”

Learning to live in the In Between is a mindset change—perhaps the defining mindset change—of The Emergent Era. It means abandoning the idea that we can operate with total knowledge, or even with the certainty that the tools we have are sufficient to address the possibilities and problems that face us.

As these new digitally-shaped structure formed, what’s emerging is also disrupting. It isn’t fully clear, and it hasn’t scaled. But emerge it will. There will be many new things that emerge, even if they aren’t fully formed, or we dismiss them as too insignificant, or worse, too crazy. More data faster is creating more options, but not absolute certainty. We must be creative how we deal with constant change, track early signals int he noise, create multiple options and most importantly, keep moving forward.
 6. Tap into the power of minds and machines together.

The work of the future won’t be dominated by people or technology. It will emerge from the collaboration between people and technology.

 As tools, the progress of AI and machine learning in all industries is starting to follow a pattern. Repetitive work is being obviated, freeing up humans to provide the finesse, creativity, or strategic thinking needed to finish the job.

For companies and individual employees, the combination of a good M.O. and a powerful A.I. will seem at first impossible, then inevitable, and finally invincible. In the Emergent Era, companies that combine a transparent, reliable information flow, a sound feedback system, and meaningful intelligence will see solutions to their problems consistently and spontaneously emerge—before they become a catastrophe or emergency to confront. Emergence-ready organizations need to adopt an agile, adaptive decision-making formula optimized for our accelerating world—with its unprecedented levels of speed and unpredictability.

But even in this new era, some things will remain the same. Emergent organizations will still need leaders to hire the right people, define goals, values, and beliefs, and provide and point to sources of inspiration and renewal. Ant colonies and brain cells don’t need visionaries—but human institutions always will.

 

Angie’s List: Home Repair Referrals, Trust but Verify and IoT Land

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Picture Credit: DataDrivenNetworks.com

Update: In early October, according to the Street, “As Angie’s List (ANGI) continues to implement a turnaround effort, the consumer review site’s M&A path is getting more complicated. The Indianapolis company announced Friday that former Bankrate (RATE) CEO Thomas Evans had been elected chairman of the board. Evans replaces John Chuang, who resigned as chairman and director. Director Steven Kapner also resigned.” Barry Diller’s IAC Interactive bid at $8.75  (about $500M) from November 2015 was rejected as too low.

NEVER underestimate a driven female entrepreneur who is motivated by a journalism model, want high renewals, and seeks out loyalty from its membership ranks. When Angie Hicks Bowman started “her list” in 1995 as a call-in service, she insisted on having home repair service provider reviews provided by paid network members to build credibility. As a customer reviews-based search engine for paying members, as a directory site, a homeowner pays a yearly fee to be a member and has access to the site where they can browse business profiles and search for home service providers. Members can also read in depth reviews of service providers that were written by other members. “When talking about services that we cover — you know, having a roof done on your house, replacing your furnace — these are high-cost-of-failure transactions, and the need for high-quality information is important. I think there should be more accountability online,” she told Huffington Post host Mike Sacks in 2013.

So these referral networks are a compliment to a measurable media marketing site like Blue Corona which offers a user friendly website and SEO optimized content , as do many other web site contractors. But what Angie’s List has achieved a high loyalty rate based on trust (service providers can be listed for free here but can’t submit their own skewed reviews, though maybe “members” do.) Of course, as the graphic above demonstrates, all business activity is focused on data-driven networks tied to the ever present “cloud” which is undergoing a data explosion due to the Internet of Things. (IoT). The latest estimate is the “Internet of Everything” — all of the people and things connected to the internet — will generate 507.5 zettabytes (1 zettabyte = 1 trillion gigabytes) of data by 2019, according to Cisco.

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After logging $344M in revenues in 2015, Angie’s List has begun to morph into a broader consumer space that now includes health care services under (relatively new) President and CEO Scott Durchslag (who turned around [some] Best Buy? and Expedia, and grew Skype). Scott clearly states the Angie’s List mission: “to relentlessly elevate the local home services experience.” So here are the key elements of this turnaround which link quality to perceived value:

  • Update the www.angieslist.com platform to accelerate innovation, launch new marketing initiatives and add new features and services including a service provider dashboard;
  • Shift sales efforts from a “transactional model” (hello, Wells Fargo) to a service quality/ customer relationship model so that members and business clients get their issues and concerns addressed;
  • Eliminate “member pay walls” so that membership grows, reviews increase and then service provider jobs grow as a bi-product;
  • Develop and deliver new personalized, customized and data driven tools and products to help service        providers better manage and grow contractor businesses;
  • Allow members to specify what advertising they want to see and then that permission can be monetized        with selected advertisers and your existing service providers (IAI occasionally engages in consumer surveys); and                      Picture Credit: NGDATA
  • Online consumers should emphatically reject the idea that force-fed advertising is acceptable and accept that there is NO SUCH THING as a “free” Internet service as Facebook has aggressively shown by redefining the meaning of “private information”).

At the root of the Internet of Things was data collection in the energy industry, especially for utilities. In the coming Green Revolution, IoT will enable a community of customers with shared interests in energy efficiency retain the benefits from their conservation efforts. McKinsey points out that IoT works best with networks but has some serious privacy concerns for households (are you listening GoogleAmazonAppleIBMYahooFacebookTwitter?) as there are already concerns about: 1) identity theft, 2) household hacking and 3) privacy intrusion.

McKinsey frames it correctly here:

The Internet of Things refers to the networking of physical objects through the use of embedded sensors, actuators, and other devices that can collect or transmit information about the objects. The data amassed from these devices can then be analyzed to optimize products, services, and operations. Perhaps one of the earliest and best-known applications of such technology has been in the area of energy optimization: sensors deployed across the electricity grid can help utilities remotely monitor energy usage and adjust generation and distribution flows to account for peak times and downtimes.