What If We’re Thinking About Organisations All Wrong?

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What is an Organisation For?

Why do we have organisations?

There are plenty of answers. If we’re talking about firms, some would say that they are machines for making profits for the owners.

Or organisms that are capable of doing more together than people can do on their own as individuals.

Or cliques of people that fight with each other over access to resources.

Mostly, we think about our organisations as what they create: coal, or iPhones, or billable hours, or educated students, or relief from hunger.

If we think about organisations in that way, then we organise ourselves to produce whatever that output is as efficiently and as effectively as possible.

But what if that’s the wrong way to think about organisations?

Organisations as Idea Machines

What if, instead of creating stuff, organisations are really about moving ideas?

That is the argument that Alex Pentland makes in his new book Social Physics. It’s a good book. The tone of the writing is often annoying, but the research that Pentland and his team at MIT have put together over the past decade is mind-bogglingly good. They have gathered absolutely massive data sets on how people interact socially, within organisations, and within communities.

They use the six technologies driving disruption outlined by Chunka Mui and Paul Caroll in The New Killer Apps to map out what works now.

The technologies are: mobile devices, social networks, cameras, sensors, cloud computing and emergent knowledge. Together, these are the technologies that change the nature of our organisations.

Here is what Pentland says about organisations (page 105, emphasis added):

The social physics view of organizations focuses on patterns of interaction acting as a kind of “idea machine” to carry out the necessary tasks of idea discovery, integration and decision making. Leaders can increase its performance by promoting healthy patterns of interaction within their organizations (including both direct interactions, such as conversations, and indirect interactions, such as overhearing or observing). … Instead, when we think of our organizations as idea-processing machines that harvest and spread ideas primarily through individual interactions, then it is obvious that must establish healthy patterns of idea flow.

He defines idea flow in a post on Wired:

Idea flow is the spreading of ideas, whether by example or story, through a social network — be it a company, a family, or a city. Being part of this flow of ideas allows people to learn new behaviors, without the dangers or risks of individual experimentation, and to acquire large integrated patterns of behavior, without having to form them gradually by laborious experimentation.

… The collective intelligence of a community comes from idea flow; we learn from the ideas that surround us, and others learn from us. Over time, a community with members who actively engage with each other creates a group with shared, integrated habits and beliefs. Idea flow depends upon social learning, and indeed, this is the basis of social physics: Our behavior can be predicted from our exposure to the example behaviors of other people.

But this changes everything!

If we start thinking about organisations primarily as idea-processing networks, then a lot changes about how we should go about our operations.

We need to focus on the flow of ideas through our organisations, not the stock of ideas we control. This is one of the key ideas in The Power of Pull by John Hagel, John Seeley Brown and Lang Davison. Here is how Hagel puts it:

We are moving from a world where the source of strategic advantage was in protecting and efficiently extracting value from a given set of knowledge stocks – what we know at any point in time. As knowledge stocks depreciate in value at an accelerating pace, the focus of economic value creation shifts to effective and privileged participation in knowledge flows. Finding ways to connect with people and institutions possessing new knowledge becomes increasingly important. Since there are far more smart people outside any one organization than inside, gaining access to the most useful knowledge flows requires reaching beyond the four walls of any enterprise.

One interesting contrast: Pentland argues that effective idea flow allows us to learn from the experience of others. This is true. And yet, we still must generate knowledge ourselves. Hagel, Brown and Davison say:

We can’t participate effectively in flows of knowledge–at least not for long–without contributing knowledge of our own. This occurs because participants in these knowledge flows don’t want free riding “takers”; they want to develop relationships with people and institutions that can contribute knowledge of their own. This is a huge hurdle for most executives who were trained to guard their knowledge carefully. Yet if they remain “takers” they will find themselves rapidly marginalized. Knowledge flows tend to concentrate among participants who are sharing with, and learning from, each other.

The second implication of this shift in thinking is: hierarchy often inhibits idea flow, instead of encouraging it. This is important for innovation – as Jorge Barba points out. John Kotter explains why:

Innovation means openness to constant discovery, constant learning, constant going in whatever direction now makes sense. There’s no way you can put that in your yearly operating plan. You can’t say, “I’m sure this is what we will learn in March and that will tell us to go left or to go right so I will put it in the plan and budget”. It’s a dynamic process, much like what you see with entrepreneurs, who only have yearly corporate-looking operating plans when they’re forced to write them by funding groups (plans which the entrepreneurs tend to think are fantasies because there is no way to predict a year in advance and if you do and hold by your silly predictions you will kill learning and innovation).

Finally, this means that getting communication right is critical to leading organisations. This has implications for how we manage, as outlined by Greg Satell:

Many managers like to run a tight ship that is focused on the task at hand—all business and no chit chat. Yet Pentland’s research has found that the most important predictor of success in a group is the amount—not the content—of social interaction. It is exposure to peer activity that drives learning and changes in behavior.

Generally, this has not been controversial in high-level professional environments, but it is generally discounted in jobs with clear cut goals and easy to monitor procedures. Yet, as Pentland describes an article published in Harvard Business Review, he found that it is just as important in even low-level jobs.

And it also has implications for how we act as individuals. Here is Pentland again (page 118):

People can teach themselves to be charismatic connectors – they are made, not born. The trick is to do what creative people do: they pay attention to any new idea that comes along, and when something is interesting, they bounce it off other people and see what their thoughts are; they also try to expand their social networks to include many different types of people, so they get as many different types of ideas as possible. They use the coffee pot or the water cooler to talk to the janitor, the sales guy, and the head of another department. they ask what’s new, what is bugging them, and what they are doing about it, and trade their ideas for ones they’ve picked up from other people. Not only is it fun to be an idea collector, but people will appreciate help in being kept plugged in.

All of this adds up to transforming the way that we think about managing firms. In two different both thought-provoking posts, Bob Marshall and Bud Caddell both grapple with what this means. Marshall talks about using fellowship as the key frame for organising – and he talks about how this is different from more common frames.

If we think about our organisations as idea-processing networks, then we need to change the way that we act. It’s another shift that is simple, but not easy. However, there’s a growing body of evidence that says that this is what we need to do.