Due to the technological development with the Internet and social media, markets are no longer created and controlled with broadcast marketing. People can now find and connect with people like themselves all over the world – and no longer limited to the people in their close proximity and to existing ties such as family members, friends, colleagues or neighbors. They can connect with anyone, and they all influence each other, immediately and with multiplier effects. The power is shifting from companies to consumers. It is a radical shift, but it was predicted already in the mid 90’ies by marketing guru Philip Kotler as a consequence of the Internet. So we shouldn’t be too surprised. Yet a lot of companies are. And they haven’t prepared at all for this. Companies and organizations are waking up to a new reality, and the wake-up call can sometimes be harsh. A number of things are changing, and I will mention four of these here.
1. Change and uncertainty is the new normal
To start with, today’s business environment is anything but static. It’s changing faster and faster, and in new ways. It’s becoming more and more unpredictable. This means that companies and organizations can’t do long-term planning like they used to. Instead they have to be prepared for change, to quickly adapt to new conditions and situations, such as changing consumer behaviors, new competition, new innovations, and so forth.
2. Diminishing return on optimization efforts
The second big change is that the return on optimization efforts is diminishing. The companies that lead the development in their industries, and get all the profit are those that are able to create new value. They don’t do that with optimization. They do it by innovating new product and services, by creating and developing relationships with consumers and others, by collaborating internally and externally, and by constantly learning how change theirs strategies
3. Growth and efficiency is not enough
Thirdly, being able to grow in terms of production volumes, market presence and market share is not enough to be successful, neither is it to produce and market products or services as efficiently as possible. Instead, continuous innovation and high responsiveness to change and customer demands is becoming more and more critical. This obviously can’t be addressed solely by streamlining and optimizing transactional processes, as we have done for the last few decades with the help of information technology. Innovation and responsiveness requires empowered people that can collaborate efficiently and effectively. That is why collaboration is the new productivity frontier.
4. Non-routine knowledge work is increasing in importance
Finally, we can see that work is shifting from manual work to knowledge work, but most importantly from routine work to non-routine work. Computers and software are taking over repetitive and routine-based knowledge work, just as robots have replaced workers doing repetitive and routine manual work in the factories. The work that is remaining and increasing is the non-routine knowledge work that is often highly interdependent such as problem solving, product development, sales and so forth.
Knowledge work is something completely different than most of the work that organizations have tried to improve and optimize during the 20th century. It’s fluid, dynamic, unpredictable, and non-repeatable. Knowledge workers need to look beyond the standard ways of doing things, to question information, rules, and ways of working. This is something completely different to how it is to work at a production line in a factory, where workers follow predefined and highly repeatable processes and procedure. Most organizations have been designed for efficiency and economies of scale, not for empowering people enabling collaboration, innovation and responsiveness.
Too often, knowledge workers feel like they are just cogs in a big machinery. And unfortunately, in most cases, their feelings are motivated. We see all over that employees are increasingly dissatisfied with their jobs. Employee engagement is falling. It is especially bad in large and distributed organizations. The consequences are many and severe. Innovation is stifling. Productivity is, if not falling, not improving. People are leaving, or they want to leave, their jobs. It is hard to sustain and improve quality. And it’s not possible to recruit and retain talent by the quality and numbers that are needed.
So what is causing this? I have grouped a number of causes into three overall themes; complexity, inflexibility, and disconnectedness.
As knowledge workers we often find ourselves stuck between a rock and a hard place. Workload and complexity at work is increasing, while we at the same time are expected to produce more, faster and faster. And adapt to new conditions. Not only that, we are expected to be creative and innovative as well. Still, if we look at an average day in the life of a knowledge worker, we struggle a lot with finding answers to basic questions, such as what is happening in our work environment, who is doing what, where I can fiend a piece of information, when it is my turn to contribute, and so on. This means that we spend a lot of time on things that are not creating value, just getting ready to create value. For example, Intel estimated that their employees spent one day per week on trying to find information and locating the expertise they needed to do their job.
Although the tasks of knowledge workers come in all shapes and sizes, many of them rely on a number of basic capabilities, such as finding information or locating expertise. These capabilities are vital to knowledge worker productivity, but also to innovation, and it is evident that poor capabilities generate a lot of waste.
Of course, we constantly get new tools and features that are intended to make us more productive. But when these are introduced, there often is no guidance, and they are rarely customized to fit our needs. In addition, we already have this huge pile of complex products to deal with, and we need to make the new ones find their place in this already complex environment. This technology-centric approach adds complexity instead of reducing it, instead of making things simpler for us. A study by Oracle UPK and Neochange found that productivity of enterprise application users had fallen almost 1/5 over a period of only three years. It’s like giving everybody Friday off. How can that be? I would argue that it’s the increasing complexity that is hampering productivity.
The second theme is inflexibility. By this I mean that our organizations and the systems that are there to help us get our work done are designed in a way that makes change, creativity and improvisation hard. Instead of empowering knowledge workers, our organizations often constrain and prevent us from being productive and innovative.
First of all, there is a mismatch between what science knows and what organizations do when it comes to how they try to motivate knowledge workers to perform better. In most organizations, existing performance models are built on extrinsic motivators, or carrots and sticks if you like. These models worked pretty fine for routine, left-brain, rule-based work of 20th century, but they are not working very well for right-brained, creative, and self-propelled people performing non-routine and highly collaborative conceptual tasks. For example, bonuses and commissions don’t work for this kind of work. As a matter of fact, science shows they have the opposite effect than intended; the higher the extrinsic rewards, the worse the performance gets.
Organizations are apparently making important decisions about their future based on the wrong assumptions. The left circle in this venn diagram represents things that have been considered important for trying to maximize the productivity of manual routine work. The right circle represents things that are important for motivating knowledge workers doing non-repetitive work. There is still little understanding and experience of how to do the things the right circle, so organizations and managers tend to stick with the things they know how to do. Those are the things in the left circle.
Furthermore, knowledge workers need to have flexible working conditions. When it comes to knowledge work, work is not a place, it is something you do. Most knowledge worker tasks can be performed from any location, even those that require close collaboration with others. Organizations need to support this, not only to increase performance, but also to make people more engaged at work. Research shows that what employees of all age groups want is the flexibility to determine for themselves where, when, and how they work, and that increasing workplace flexibility has a positive effect on employee engagement and thereby also on employee productivity. A Virgin Media Business study found that 40% of the surveyed organizations often overhear employees complain about being tied to their desks and 7 in 10 organizations believe flexible working would make their employees both happier and more productive, boosting employee engagement.
Finally, we have a theme that I call disconnectedness. It is about people and information being disconnected from each other, and thereby unable to share, cooperate and collaborate as is required to be productive and deal with the challenges organizations face.
Collaborating isn’t as easy as it sometimes might sound, especially not in large and distributed organizations; there are too many barriers to collaborate naturally across an organization and across locations. In a complex and constantly changing work environment, it becomes even harder to find time and energy to overcome these barriers. It is only natural that we tend to share, cooperate and collaborate with people in our close proximity and that we already know and trust, failing to help and collaborate with others or share information that they might have use for. People work in silos. Silo thinking is a typical phenomenon in large organizations. Teams tend to focus on the parts they are responsible for and specialize in. They sub-optimize and focus on their own goals. They become organizational barriers that limit communication and impede sharing, collaboration, and innovation within the enterprise.
Organizations have also created digital work environments to optimize personal productivity and teamwork, but doing so they have neglected the fact that knowledge work is increasingly relying on collaboration in networks across locations and organizations and stretching far beyond teams. It might seem as a paradox, but the modern and increasingly digital work environments have in fact made people more isolated and unaware of what is happening at work.
This disconnectedness means that people become less engaged. And in a rapidly changing and complex work environment, this has serious implications, such as lost productivity and innovations. Or worse – talent is wasted and people leave.
What do to about it?
So what should organizations do to avoid the negative consequences of complexity, inflexibility and disconnectedness? The simple answer is that they should start working towards increased simplicity, flexibility and connectedness. What they should do and how, I will return to in my next post.