A Blog by Jonathan Low


Jul 8, 2013

From Nodes to Networks: Why the Past Is No Longer Prologue

Institutions seek certainty. Making numbers, achieving goals, reaching objectives and, in effect, delivering the predicted in predictable ways remains a bulwark of business analysis and evaluation.

This worked reasonably well for the hundred years or so when linearity ruled performance. Governance followed, happy, to not have to worry too much about the unexpected. It was great while it lasted, but we are now in uncharted territory. And for those who've been afraid to look out the proverbial window, it doesnt look much like home.

The challenge is also the opportunity. But focusing on the one at the expense of the other can lead to errant conclusions. The regimentation business copied from the success of the Allied military victory in World War II was comforting because it aped a structure that had worked spectacularly well - and because it assured a structured delivery of information and feedback up and down the line. Little, if anything, was left to chance and the clarity of the processes themselves reduced anxiety as well as the number of mistakes.

In the contemporary economy, however, linearity has been supplanted by networked knowledge, relationships and responsibility. This diffuses and redirects as options arise. It creates serendipitous moments but may reduce clarity. It rewards independent decision-making and a bias for action but may run counter to traditional notions of team work.

During times of innovation, uncertainty and adaptation, the past may not be predictive of the future. It may even provide misleading information. The question that arises for managers in every realm is what to do about it. From which factors do they take their cues? Where do they find useful guidance?

The answers, ironically, may well be found in historical examples. Explorers venturing beyond the realm of the world known to their contemporaries and themselves were forced to rely on instincts honed by years of experience, by their training and by their optimism or faith in the future. Organizations and the people who keep them going face a similar world. New markets, new technologies, new - and invariably faster - timelines, less information, more pressure to make correct decisions.

Ultimately, success lies in knowledge, in relationships, in sharing, listening and discussing options with others one trusts. In short, in the self as part of the networks this evolving system has encouraged organizations to enable in order to capture the weak signals that constitute the future's only indications to the searchers who seek its meaning. JL

Greg Satell comments in Digital Tonto:

History, as we know it, is over not because we’ve figured it all out, but on the contrary because we’ve unleashed forces that render the future inscrutable.
In 1992, Francis Fukuyama published his book, The End of History in which he argued that, with the cold war over and liberal democracy triumphant, the major historical narrative dialectic of history was over.
He was, of course, somewhat mistaken.  The world today looks much more like Samuel Huntington’s vision of The Clash of Civilizations than anything else.  There doesn’t seem to be any less division and strife now than before.
However, it’s hard to escape the conclusion that something has fundamentally changed, albeit the shift is technological rather than cultural (a fact which Fukuyama himself alluded to in a later book).

1. From Linear Advancement to Accelerating Returns

For most of history, stasis was the rule.  There were different people, various empires, power struggles and perhaps the occasional discovery, yet life went on pretty much as it always had.  The events we read about in the history books had little impact on most who lived at the time.  A thousand years could go by and daily life would be much the same.
That’s changed in a resounding way.  Life is substantially different than even a decade ago and completely unrecognizable from a century ago.  It used to be that when you entered a business, the past would be a good guide to the future.  You would mostly know what your career would look like the day you entered it.  These days, however, business models have a short shelf life.
The difference lies in accelerating returns.  Our technology no longer follows an orderly, linear path, but improves exponentially.  For instance, we can expect our computers to be 100 times more powerful in ten years, 1000 times more powerful in fifteen years and a million times more powerful in thirty years.
And it’s not just computers either.  We’re starting to see similar trends in gene sequencing and solar power, so we can expect medicine, energy and other industries to advance at the pace we’ve come to expect only in electronics.  If you’re planning on the future to unfold at the same pace as the past did, you’re likely to run into trouble.

2. From Regional Economics to Global Networks

It used to be that innovation was centered around a certain time and place, like the Florence of the Medici in the 14th and 15th centuries or the Cambridge of the Bloomsbury Group at the beginning of the 20th.  That’s still true to a certain extent.  Silicon Valley, for instance, still rules the technology landscape, but not nearly as much as it used to.
Today, Apple’s biggest competitor is not across town, but in South Korea.  The engineering talent in Bangalore or Beijing (or Kiev, for that matter) is as good as you’ll find anywhere. Most of the fastest growing economies are in Africa and Central Asia.
The reason is that we’re all connected now.  2.4 billion people or about ⅓ of the world’s population are online.  Mobile phones are becoming common even in the most remote places on the planet.  When authorities started rounding up the members of the hacker group Anonymous, they found them strewn across the world, from Australia to Ankara.
If ordinary people can collaborate across time zones with no formal structure, knowledge has no place or time.  Competitive advantage increasingly resides in the cloud, which is why reverse innovation has already become a force to be reckoned with.

3. From Nodes to Networks

Those who subscribe to the great man theory believe that history’s course is determined by the impact of highly capable individuals.  While many disagree, it’s hard to argue that talented individuals have not played a part.  However, by now it’s clear that intelligence has evolved, partly through the global networks mentioned above.
Open source software such as Linux and Apache are not driven by visionary leaders, but by the power of collective intelligence.  As Steven Johnson notes in Future Perfect, many of the same techniques are being deployed for open government and sites like Innocentive harness the power of collective intelligence to solve tough industrial problems.
While many still focus on great individuals, in fact, it’s the network not the nodes that create real change.  Teams, not stars.  Platforms, not brands.  Movements, not messiah’s.
A further development is the widespread use of machine intelligence, which has become pervasive in areas like in planning travel itineraries and recommending products, but also runs a large amount of market trading and other high level functions.  In the future, the list of things that computers can do better than humans will expand quickly.
More than ever before, we’re flying by wire, forming our own intent, but executing our actions through computer software informed by the actions of millions of others.

4. From the Economics of Scarcity to the Economics of Abundance

In 1968, biologist Paul Ehrlich published The Population Bomb, which quickly became a bestseller.  A few years later, the Club of Rome followed up with its report, The Limits to Growth.  Both offered dystopian visions of the future:  Overpopulation leading to famine and war.
Alas, it never came to be.  Population has indeed roughly doubled since then, but poverty and war have fallen off drastically.  The world is a richer, better fed and drastically less violent place than it was forty years ago.  We are, by any standard, dramatically better off (unfortunately, good news rarely sells, which is why we hear so little of it).
The advance of technology and accelerating returns will create even more abundance in the years to come.  Natural gas fracking has uncovered massive reserves while renewable energy will likely become cheaper than fossil fuels.  New techniques such as vertical farming will feed us more efficiently and automated manufacturing will make better products at lower costs.
While all this seems fantastic, we’ve seen it before.  Our computers are vastly cheaper and millions of times more powerful than they were in the 70’s.  As the informational content of other products and services increases, it shouldn’t be surprising that the economics of information is becoming more widely distributed.

The Poverty of Historicism

Business strategy has long been held hostage to the myth of the visionary.  Like the grand strategists of old, titans of industry sought to understand long term trends through a keen sense of history and parlay those insights into superior business strategy.  Later, corporate strategists used data analysis to achieve much the same thing.
Opinions differ on whether this approach was ever successful or merely a case of survivorship bias (the success of Henry Ford is obvious while the failures of the hundreds of other automobile startups in the early 20th century have long been forgotten).  Yet one thing is clear, technology has shortened the lifespan of any crucial insight to a few years.
As Rita Gunther McGrath writes in her new book, The End of Competitive Advantage, “Prediction and being “right” will be less important than reacting quickly and taking corrective action.”  Even the revolutionary iPhone was quickly overtaken by the fast following Android.  How sustainable do you think your strategy is?
In the future, we can expect technology cycles to continue to shorten, making planning cycles less realistic and less tenable.  History, it seems, ain’t what it used to be.


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