The firm of the future may be ten million people working together for ten minutes
Corporations are the dominant mechanism by which economic activity is organized. Whether there are opportunities for social innovation in the corporate world is hence a key question for the prosperity and well being in the emerging post-industrial society.
Over the past years, intelligent technologies, peer-to-peer cryptocurrencies and the Internet have laid the foundation for a very small size and a very low-cost enterprise with the potential for managing very large numbers of business relationships. The impact of these new actors is still hard to grasp because we are used to thinking about work from a different perspective.
Our thinking arises from a make-and-sell economic model. Most managers still subscribe to this and think that the core of creating value is to plan and manage a supply chain. A firm is accordingly seen as an entity that is separate from the people who work there. After specific financial investments have been made, the firm is defined by the ownership of the assets and the power that the people who made these investments have. As a result of this model, the relationship between the company and the contributors of financial capital is very different from the relationship between the company and the people who work there, the employees.
We are passing through a technological discontinuity of huge proportions. The new programmable economy demands new approaches to value creation. In the mass-market economy, the focus was to create a quality product. With increased global competition that is not enough any more. The focus changes to a joint process of defining and solving contextual problems. You and your customer necessarily then become cooperators. You are together creating value in a way that both satisfies the customer and ensures a profit for you. New economic spaces beyond incumbent firms are emerging.
You could perhaps call the new reversed sequence an “on-demand-chain.” It is the opposite of the make-and-sell model. It is a dynamic chain of relationships and interdependences. It starts from interaction with the customer and leads up to the creation of the on-demand solution. As Steve Jobs put it in a different context: “you start with the customer experience and work backwards to the technology. You can’t start with the technology and try to figure out where you’re going to try to sell it.”
The programmable enterprise is able to dynamically integrate contributions from its entire network around the problem definitions of each individual customer context. The on-demand-chain means continuous change. Because the organization is in effect a process of continuous organizing, software needs to take the role of managers in organizing and coordinating work. Human managers become a bottleneck.
A programmable enterprise connects and scales up learning and makes the whole network smarter with every individual interaction, thus creating network effects. The benefits for the network partners are then not only financial. The most valuable thing is to have access to a common movement of thought. It means to be part of a network where learning scales up faster than somewhere else.
The contributions of post-industrial workers cannot be understood as fixed-wage generic inputs, but they can easily be understood as risk investments, in the very same way as we have understood shareholders’ financial contributions. We should ask whether the current social construct of allocating risks and rewards between different contributions is inevitable for some reason, or whether it is an outdated industrial era artifact that should be redesigned?
The programmable view understands enterprises as contextual interaction, rather than seeing them as entities outside of that interaction. The programmable view sees firms as continually evolving live networks. Work is not job roles, but context specific contributions. The challenge for the firm is to be inviting to as many applicable contributions/investments as possible, from as many people as possible. The firm of the future may be ten million people working together for ten minutes.
Smart contracts, modern cryptocurrencies and distributed trust systems enable a truly decentralized organization structure.
By scaling up learning and creating network effects, the networked business increases its intellectual capital as the nodes of the network do the same. The network acts as an amplifier of knowledge far beyond the capabilities of any traditional firm or any traditional education establishment. The opportunity we have is in artificial intelligence and cryptocurrency enabled organizational forms that don’t mimic the governance models of industrial firms.
A firm, then, is not a bundle of assets belonging to owners, but a bundle of dynamic, smart contracts between people. The goal is to help individuals into relationships that balance complementarity, the growth of (human) capital and symmetric claims to long-term financial returns. The industrial worker was compensated with a salary. The post-industrial worker wants equity.
Thank you Akseli Virtanen and your team for great conversations