Business as Usual is off the Menu

This paper was inspired by the Club of Amsterdams Summit for the Futury 2005. References to individuals in the text relate to some of the speakers at that summit. More on the Summit for the Future and other activities of the Club of Amsterdam can be found at www.clubofamsterdam.com.

Business as Usual is off the Menu

Mathijs van Zutphen

you better start swimmin' Or you'll sink like a stone For the times they are a-changin'

Bob Dylan

Change alone is unchanging.

Herakleitos
Welcome to the 21st century. Are you getting used to it or are you still adjusting to all the changes? Do you feel that a lot has changed? Or is there just so much more hype?. Perhaps only the pace of things has increased: shorter product life cycles, shorter ROI expectations, but otherwise its just business as usual right? Or do you feel that something else is changing as well? And what exactly is it that is changing? What defines our new reality? The changes are both superficial and profound, and these different levels are interacting with each other all the time. Let me take you on a short tour and introduce you to a few new facts of life that are important to realize as we move ahead into an uncertain future. Yes, things have changed. They are no longer like business as usual. Let me tell you a secret. The world is changing, and it is changing fast, but the meaning of the changes is not to be found in clearly visible superficial trends. The internet has changed things, mobile telecommunications have changed things. We shop from the comfort of our own home (is that really new?) and walk around with cell phones. We email, sms, chat, skype, and play games using a massive new worldwide communication infrastructure. We find new jobs, new friends, and fall in love in ways no-one could imagine a generation ago. These are all changes related to the development of digital technology. Powerful, but on the surface. Within one century (the twentieth) we witnessed an incredible amount of technological revolutions: in transportation (cars, airplanes), communication (phones, internet), and manufacturing (mass production, mass customization), and we are still in the process of accomodating and adjusting to the full impact of these changes on our global society. Age-old institutions like the nuclear family, the 1 All material copyrighted by author 2011 www.flatfive.nl

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nation-state and the catholic church are loosing their meaning. Familiar products are outdated shortly after they are introduced, as our world is transforming itself into something fundamentally different from what we were used to. From one generation to the next a whole new order of things is emerging. Is there any logic to the frantic change? Will the changes produce a new order, or is the whole system about to destabilize into perpetual chaos? In technology the rate of change is truly amazing, stunning We have gotten used to it, but never before has the speed of technological development, innovation, been this high. Remember AM radio, LP records, tape recorders, Betamax? Even before it is properly understood and adopted into the mainstream, technology is outdated. Yet its not just the increasing number of gadgets, or the scale or ubiquity of new technology that is having the greatest impact. Humans are essentially technological creatures; engineering is the key to our survival and success as a species. The bow and arrow changed our diet, the internal combustion engine changed the way we design our environment, the telephone reduced our vast planet to a global village. Technology is making things possible that were pure imagination a short while ago, and this is profoundly re-shaping the world. Our tools have an influence on what we do, how we work, how we build, how we share information and how we organize ourselves. Technology is clearly capable of changing things beyond the domain of technology itself, and that is essential to realize. Steam engine technology, together with the ability to build big turbines, changed the entire structure of society. Industry became the foundation of the economic system, and urbanization became the dominant social trend. Technology changes the way we do things, which changes the way we organize things, which changes the way we see things, and that kind of changes everything. The problem with this is that technology has no inner direction, no grand scheme, no social-historical agenda. Technology is just a trial and error way to improve the instruments we use to interact with our environment. Even history altering inventions (gunpowder, alternate current, the atomic bomb) are more often than not the product of serendipity or the work of a single genius, and they were accomplished more by inspiration and perseverance than by planning. Technology is what we use to get to where we want to go, it doesnt tell us where we want to go, or where we should be going. Technology has a lot of influence, but it has no direction (increase in complexity and efficiency is not a direction). The fundamental changes, and they are the ones I want to investigate here, are taking place in a different domain, and this domain is less obvious and explicit, because it is fundamental. Like the foundation of a house, it is invisible yet crucial. At the same time it is a domain that has been familiar to business since its beginning. It is the very thing business is based upon: the creation and exchange of value. This is where fundamental shifts are taking place. We will still do business in 2 All material copyrighted by author 2011 www.flatfive.nl

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the future, we will have markets and profits, supply and demand, products and consumers, but business is going to be driven by different values, and different ways of exchanging these values. Business will be there, but Business as usual is off the

menu.
In times of chaos we have an innate desire to look for stability, and there is a logic to thatalbeit perhaps not an eternal one. When things change we look to the foundations upon which we stand to lend us support throughout the changes. Change is unsettling by definition, causing cautious creatures such as ourselves to become restless and confused. What can we still be sure of? Where can we find safety? Where is our solid ground? Which principles can guide us through the changes? Principles are primary, they come first, as the term itself suggests. We understand reality, and we justify our decisions, on the basis of principles; they are like natural laws, expressions of our deepest truths. The world around us might change, we might change, but we often preserve the principles we believe in throughout such changes. Trusting them to guide us through the storm. Not all questions dig equally deep. The question why is more profound than the questions what or how, since it addresses motivation or motive. When we ask why we are asking something about the purpose behind an action or a decision, and the purpose is what matters because that is what gives us direction. Directions reveal something about what we find valuable by expressing goals that are worth achieving. Underneath the why are the reasons that justify the effort and sacrifices involved in pursuing certain goals, in living in accordance with certain principles. These reasons and justification are what we find most important, they are our values, and they are the fundamental drivers of our actions. Our industrial era, supported by a materialist bias, has given us a functional yet limited interpretation of values: value is what we exchange in specific contexts we call markets. These transactional processes require some kind of measuring system, and so capital (money) has become the identifying mechanism of value. And this identification has become very strong indeed. In fact this restricted interpretation of value can be considered a cornerstone of our industrial worldview or paradigm; something like a meta-value or a meta-program. It is such a strong belief, that it is virtually immune to examination. Value is measured by money, ergo money is identical to value. Of course money has no immanent value whatsoever, but we seem to have forgotten that. Now then, will a reorientation to our fundamental values help us in our current crisis of grappling with rapidly increasing complexity and ever more change? The answer is no. This is so because it is the values underlying our paradigm themselves that are changing, and that will certainly take is into a new reality. We can change the way we do something; we can adopt new behaviour. That in itself doesnt mean we have to change our character or our deepest beliefs; or our values, but we cannot change

fundamental believes and values without changing everything else.

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We can now get into an inventory of values that are shifting, and so are changing everything on the menu. Property is off, sharing is on. Property is the foundation of our economic system; property rights are the backbone of our legal system. A number of things are happening that subvert the sanctity of property as such. New developments in business show us ways in which sharing rather than owning becomes the way of the world, making the concept of ownership, especially with regard non-tangible stuff like intellectual property, rather superfluous. The scientific world has been structured around knowledge sharing for a long time, even in the face of political or institutional obstacles knowledge sharing remains a crucial element of scientific practice. Sharing is really the central idea behind the concept of a Knowledge Economy. Knowledge that is not shared cannot grow or be applied to create value, it cannot contribute to innovation or invention. Now the virtue of sharing is entering the business world as well, although many players are extremely reluctant to accept the new values. Producers of information products (books, music, film, games) have been facing a significant problem ever since technology made it possible for consumers to produce copies at home. Now that everything is turning digital the problem is exacerbated through the use of peer-to-peer sharing software like Napster, Kazaa and Emule. Anything digital can easily be copied, and if consumers can make copies for free, why would they pay for it? The property rights of products that are being shared are exceedingly difficult to protect. Distributors of digital products are making an active effort, but gain little results. Copyright protection schemes often go against the interest of consumers (regional settings for DVDs) and are easily circumvented (hacked or cracked as the terms go). The cost of developing ever smarter copyright security technology is becoming a liability, so why go through so much trouble? It is not even very clear whether peer-to-peer sharing has any measurable negative effects on the revenue of companies in the media industry, although they claim it does. If I share a movie with my peers, allowing them to make a copy of off my hard-disc, are all these copies necessarily lost revenue to the distributor? Peer-to-peer sharing is here to stay. Even as corporations construct obstacles to sharing using regional codes and non-universal standards (DVD-R, DVD+R), copying film and music will only become easier; the trend is irreversible. Business models of vendors of information products will of necessity have to change. People will not buy what they can have for free. They business of business is to answer consumer needs not change consumer behaviour.The market for information products will no doubt grow, but added value will no longer be a function of ownership. The fact that people share information products is a good sign, it means they value the products so much they want others to have access to it. Ownership might become so difficult and costly to protect, it will be more profitable to let go of 4 All material copyrighted by author 2011 www.flatfive.nl

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the whole concept and adopt the new value of sharing. Sharing is a way in which users value and distribute your products into their own personal networks. Such distribution channels are unique and impossible to reach or manage by traditional means such as advertising. There are great opportunities in understanding this. Why threaten and bully the people who share your information products, why not encourage it and come up with ways to leverage the irriversable trend? Selling is off, giving away is on. Production of effective and bug-free software is a painstaking process that takes time, effort, concentration and skills. Once you have a succesful product, why would you ever give it away for free? Many business models revolve around the continuous milking of the proverbial licensing cow (e.g. Microsoft). Giving software away does not fit into our current economic paradigm, but it is happening all over the place. A whole host of free web services is available: file sharing, blogging, email, mailgroups, knowledge exchange, content management. Free information is available through resources like Wikipedia and countless other portals. A range of software applications is available for free; useful tools like browsers, media-players, firewalls, chat modules, internet phone. The open source movement, with the operating system LINUX being the most dramatic example, shows most clearly the shift away from proprietary products. LINUX is being developed by a community of experts that received no explicit rewards for their efforts, it is free for all to use, and open to any alteration or improvement. The central idea behind all these examples is that the value is not in the ownership of the intellectual property, or the selling of the product; the value is in skills necessary to benefit from the product. Value lies in knowing how to, in being able to provide additional services around the free software. This will surely change the business model of many a producer of intangible information products. The open source movement has created so much business value it might be considered the key example of the new value of giving away. It seems that the idea is catching on elsewhere in the computer business. IBM illustrated its own compliance with the new rules by recently releasing 4000 patents, donating them to the open source community for all to benefit. Some experts expect all software applications on personal computers to be essentially free commodities within a few years. Holding on is off, Letting go is on. Buddhist call it upadana, the grasping mind, and it is part of the cause for human suffering. Of course the desire to possess and pursue is not considered a spiritual neurosis in our Western cultural outlook, it is a revered quality. The more you pursue, the more success you will reap. Obsession is a respected driving motivation. Once you achieve something, hold on to what you have. Protect your ownership, your conquest, at all cost. 5 All material copyrighted by author 2011 www.flatfive.nl

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Never break up a winning team? Nonsense. Simon Jones, Managing Director of MITs media lab Europe, explains that the strategy of constantly forming new combinations, breaking up successful existing teams, is essential in activating creativity and innovative potential. The constant change feeds the creative process. Shareware, open source, all these phenomena illustrate this new value. Once you have made an effort to produce something, the next step is to let it go, donate it to the world around you and no longer claim possession. You have to be able to let go, so that you can move on to the next creation. Knowledge is off, Creativity is on We speak of our modern world as a knowledge society without really understanding what the concept means. Knowledge has always been essential to the creation of value, even an archaic profession like farming is significantly dependent on knowledge of plants and natural principles. We have in this sense always lived in a knowledge society. We use the term knowledge economy now really to emphasize the increasingly non-tangible aspect of our economy. Knowledge has become a product that can be bought and sold. However, knowledge production is following the same outsourcing trend we have witnessed in manufacturing: production moves to locations where labor is cheaper. Knowledge has become a commodity, and price competition has become the name of the game in knowledge production. A central insight behind the Summit for the Future conference is that competitive advantage in Europe and other (post-) industrial countries will depend increasingly on innovation. Knowledge does not produce innovation. Organizations that produce knowledge (R&D labs, universities) do not of necessity produce creative new ideas that spark innovation or value creation, in fact they often fail, as Richard Hawkins points out poignantly. Creativity requires completely new organizational structures and practices. So we find ourselves in somewhat of a dilemma. The future of our knowledge economy, our ability to compete globally, depends not on knowledge but on the creative use of knowledge: innovation, yet we find ourselves obsessed with the protection of knowledge and traditional ways of increasing knowledge. Forget IPR, patent rights, and expensive legal protection mechanisms. So you are in possession of knowledge? So what? It is what you do with knowledge that is key. Individual reward is off, collective reward is on Our often-praised individualism is essentially a system of competition. This has been apparent from the advent of individualism onwards. Value is created as individuals compete with each other. Rewards are therefore individual. Our salaries are an example, it would be unthinkable to not be rewarded on the individual level. The idea that my own reward might depend on the effort of others, and that cooperation is a part of the evaluation of my own results is a heresy in our individualist paradigm. 6 All material copyrighted by author 2011 www.flatfive.nl

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But individuals can produce only so much value. In fact, as we move into an economic model that values creativity and innovation more than products and knowledge, we find that teams are much better at producing quality ideas. Everyone who has ever had a successful and inspiring collective brainstorm session will have experienced the synergy involved; groups produce better ideas than individuals, and the end result is more than the sum of its parts. MIT Media Lab Europe was an innovation factory with an exceptionally effective organizational philosophy, former manager director Simon Jones explains. One aspect of this philosophy is the focus on multi-disciplinary teams. The team creates the innovation together, in cooperation. There is competition, but between teams, not between people. Success is not rewarded to individuals but to teams. The result is always a team effort, contributed to by unique individual skills, but fundamentally a creation of the group. Team rewards show up elsewhere. Scientific practice has long understood the value of cooperation, e.g. knowledge sharing, across institutes and borders, and team efforts to tackle problems are an integral part of scientific practice. Shared Nobel prizes are the scientific equivalent of team rewards. Scarcity is off, Abundance is on. A fundamental idea underlying our economic system is the concept of scarcity. It is used to explain the mechanism behind markets. Scarcity on the supply side increases demand, and hence produces a higher market price. Higher prices are good for profits, and so scarcity and profit form a strong bond. Scarcity is good. As we move into an economy that produces less tangible goods we are abandoning the notion of scarcity. Knowledge is not scarce, the internet makes it abundant. Our traditional view leads us to believe that creativity, good ideas that drive innovation, are rare and special things. We believe only rare and special people posses creativity and are able to produce innovations because of a unique creative capacity. We have allowed ourselves to become so alienated from our true nature and the ubiquitous power of the imagination that we have created this myth of the rarity of creative talent. And it is a myth. We are finding out that creativity is abundant. Innovation methods like TRIZ (www.xtriz.com) make effective and successful innovation a matter of following a certain path, using the right tricks, choosing the right perspective. Innovation permits a structural approach, the way music does. Spontaneous creation and systematic process are not enemies. In Jazz creativity is a result of training as much as in other contexts, with musicians studying different structural approaches to melody. You still have to add the ideas yourself, but a structural approach makes the creative process more effective. No more creative scarcity: innovations, solutions, inventions, creative ideas, they can be produced easily, in small teams, with little effort, by all of us.

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Hierarchies are off, empowerment is on With the advent of agriculture in Mesopotamian society around 7000 years ago, for the first time the possibility of an economic surplus arises. Pre-agricultural societies, in the meso or neo lithium, were completely integrated into their surroundings. A few such societies still exist today. In such a society hoarding is irrational, and economic surplus does not exist, you take from nature what you can immediately consume and share. As cattle is domesticated, and various form of grain based agriculture are developed, a good harvest means excess. The first banking system in Sumer was essentially a system to deposit keep track of quantities of grain. With surplus comes the possibility of seizure, and hence domination of the food chain: the life blood of society. From this arise the first prototypical forms of organized societies, with all powerful kings who live like tyrants off of the surplus of the city-state, epitomized in the story of Gilgamesh. Our system of power is such that few have most of the power, and most have none. Under the influence of enlightened theories of individual value, andmore importantlyas European monarchies started making room for a mercantilist middle class, power has slowly been decentralizing. Today we have fairly democratic societies, of the representative kind, in the affluent world. The global picture however shows an extreme inequality in the distribution of power, as Tom Lambert dramatically emphasized during his keynote address. Dominance, the value underlying a social organization of power that favors asymmetric distribution of wealth, and exploitation of a weak majority, has made European countries, and spin-offs like the US, exceedingly wealthy, in the same way it created a wealthy class within these western nations. Domination is good if you belong to the winning class. Of course there is an inherent instability there, you can exploit a majority only to a certain degree; if you go too far you will provoke revolt. In order to avoid such threats, apart from actually sharing part of the power, elaborate conceptual systemsvalue systems reallyhave been constructed to explain the inevitability of exploitation, thus legitimizing the Dominance paradigm. Most religions contain some sense of obligatory servitude to a powerful lord of the universe. Darwinism, qualified with the adjective social, is the scientific theory used to justify the domination of one group over another within society. The success of the system of dominance has made our society grow in size, influence and complexity. So much in fact that central power has become completely dependent upon elaborate bureaucracies for the management of this complexity. These organizations are so large and intransparant they tend to lead a life of their own. Some say that bureaucracies are truly the seats of power, but if that is the case it is only the power to obstruct, delay and stifle. In essence, the institutions we use to govern, manage, and make things work, are powerless in the light of many of the changes we witness today. Alvin Tofler writes:
The truly astonishing fact today is that our governments continue to function at all

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No sane pilot would attempt to fly a supersonic jet with the antique navigation and control instruments available to Blriot or Lindbergh. Yet this is approximately what we are trying to do politically.1

Effective governing requires efficient information flows between the different levels of policy and execution. In the midst of an information explosion it is likely that these flows will jam, congest, and generally become ineffective, no matter how much technology you implement. As information inefficiency becomes a reality, policy becomes de facto impossible. Our belief that these traditional domination-based structures prevent chaos from occuring, i.e. that hierarchies are effective ways to manage complexity, is being seriously challenged. The significant feature of the hierarchy is that power is centralized, decision and execution are seperated by layers of bureaucracy. Organizations with a centralized decision paradigm are hopelessly inadequate in dealing with changing conditions in their surroundings as well as with the internal dynamics. Decisions are so many, and they are related to so many aspects or parameters, that it is impossible to liftas it wherea decision out of its operational context and expect to make useful choices. Decisions flowing up and down hierarchical channels spell the death of the organization. Examples abound. The institution and its resources essentially serve the decision making-processes themselves, and nothing else. They are divorced from purpose, and cannot have any legitimacy in the new world. Empowerment is the new name of the game, where decisive power is delegated to the appropriate (decentral) context, and people are entitled to decide on issues and processes relevant to them. The leading principle on the basis of which people will organize themselves is no longer a central power, but a shared purpose. This is merely an issue of organizational structure you might say, but at a more fundamental level the same shift is happening: superiority is being substituted by the idea that all participants have valuable contributions to make to the shared purpose. Issues of superiority become simply irrelevant, and so dominance disappears as the principle that has been the very fundament of our social structures. The future of political action, policy reform and social innovation lies in initiatives from citizens. Bror Salmelin, head of the European Commissions New Working Environments Research Unit, explains that rather than attempting to spark innovation in dedicated institutes, like universities or corporate R&D labs, we should be thinking about mobilizing the creative and innovative power of 450 million European citizens. Such concepts truly revolutionize our view of social structure and value chains. Empowerment becomes an absolute condition to achieving this kind of collective, shared, creative, responsible society of groups of individuals connected to each other across traditional boundaries. 9 All material copyrighted by author 2011 www.flatfive.nl

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Organizations are off, communities are on. Globalization, migration, economic interdependence, an ever shorter product life cycle, calls for more democratization and participation, all these developments require organizations to design policies, or at least make effective decisions. At the same time decision processes are slow, intransparant and subject to a complex of sometimes opposing forces. As traditional policy creating institutionsgovernments and their departments, management teamsfind it increasingly difficult to influence events in a fast changing environment controled by unknown parameters, the need for decisive action only increases. Of necessity alternatives to traditional organizations will emerge, for decisions cannot be procrastinated for too long in todays world. We see more and more forms of organization with a political or social content arise out of communities. These communities rally around an issue that makes sense to the participants as individuals. That is the power of communities. There are many examples. In the virtual world we have newsgroups, essentially topic related web based discussion groups, and mailing lists, which achieve the same communicational goals through email exchange. We see Internet based networks like LinkedIn, MySpace, eCademy, or Xing, grow, as people start to see the benefits of presenting themselves in these contexts and connecting to others, whether it is for personal or professional reasons. In the mortar and brick world citizens initiatives like 2004 Nobel Peace Prize winner Wangari Mathaais Green Belt Movement are having a powerful impact on people, society and the environment. We have witnessed powerful examples of the mobilization of political action with protests against WTO policy in Seattle and Genoa, courtesy of the communications facilities provided by the multi-nationals the protests were directed against. Thomas Schael, Marketing Director of an online community of people who share knowledge (www.knowledgeboard.org), intends to accelerate the revolution with technology specifically designed to encourage the creation of communities. He has himself witnessed how easily and naturally communities can grow, and is convinced of the power of such forms of self organization. Governance is off, Leadership is on The idea that people need governance is as old as our oldest monarchies. Even long before the Pharaohs ruled their desert domain the dominator king wielding absolute power over his inferior subjects defined the prototype of society, conspicuously illustrated in the epic of Gilgamesh. Citizens are effectively dispossessed of their ability to make their own choices and determine their own destiny. Subjection to the will of the king is absolute, no transgression is allowed. This idea still pervades our liberated, democratized, and individualized society, which is stillafter all reinforced by rigid institutional structures. The concept has been with us for so long, has become such an essential aspect of the mythology of our culture, it has become 10 All material copyrighted by author 2011 www.flatfive.nl

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an implicit, invisible principle of organization. Such powerful yet unconscious principles often seem impossible to change. Yet things are changing. Rapid technological change in the business environment, and increased competitive pressure caused by globalization of operations require other decision-making processes. A management model based on control, on governance, is needlessly cumbersome and slow. The competitive edge on process innovation that the Japanese and other Asian tigers have created is a direct consequence of their leadership model. The sage king of oriental mythology and philosophy is one who empowers the people. A less visible leader is better, and it is really the king who serves the people than the other way around. This has allowed decisions about improvements in the manufacturing process to be implemented quickly and effectively. The desire to control has proven to be an expensive anachronism. A leader is not one who governs, but one who creates leaders around himself. A leader empowers his people, and it is the people themselves, and not their leaders, who create the value that benefits all. Success is off, failure is on Everyone loves a winner, right? We worship the heroes from the world of sports or entertainment who flaunt their success unabashed in glossies and TV shows. Examples of success, they are truly considered winners. A person is judged in terms of social or economic success, in Europe as much as in America. We focus on success, analyze it, broadcast it, wallow in it, envy it, and desperately pursue it ourselves. Success, especially in combination with smug complacence, leads to failure yet failure, combined with perseverance, is the road to success. MIT Media labs experience shows the value of failure, making failure a central aspect of the organizational model. Nothing is more educational than a failed project. As such it is the greatest contributor to eventual success. It is said that Thomas Edison had to try out 10.000 different ideas before he was able to finally produce a functioning lightbulb. One might say there is an inevitability about success, but it must be reached through the combination of failure and perseverance. This is something we can now start to understand and appreciate. Monopolies are off, diversity in markets is on. The biggest winner in a business context is rewarded with a monopoly, Microsoft currently being the most manifest example. A new wave of mergers and acquisitions seems set to create more global monopolies in the areas of pharmaceutical products consumer goods, and banks. But these are manifestations of a dying paradigm. Monopolies do not produce lasting competitive advantage. In fact, they most likely produce the opposite. The dynamics of an increasingly interdependent global economy of manufacturers of components simply does not condone monopolies. As products become more complex, relations between producers of different components 11 All material copyrighted by author 2011 www.flatfive.nl

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become more important. Strategic decisions become interdependent and have consequences far beyond their immediate context. This is exemplified by IBMs decision during the development of the first Personal Computers to outsource the production of processors (to Intel) and the operating system (to Microsoft) in the early 1980s. It effectively destroyed Big Blues monopoly, and reduced the former giant to just another player in a dynamic market place, in addition to creating two of the most powerful new companies in the world. Change is too rapid to rely on the perceived safety of a strong position in a limited area of the supply chain. Charles Fine has introduced the term temporary advantage2 to express the immanent instability of a companys position in its larger (supply chain) context. Survival in the world of temporary advantage means a constant shifting and adjusting of strategy. Monopolies are impossible to defend in such a context, and that is a good thing. We dont need monopolies, monopolies are bad for innovation, and thus bad for business. They increase complacency, decrease the quality of customer services and obstruct development and growth. National is off, Global is on To most of us globalization is a process that has been slowly influencing our economies and the world over the past few decades. Of course the reality is that we have lived in a globalized economy ever since the advent of capitalism and the earliest European colonizations, but we have never felt globalized. Our minds are molded in ways that make us prefer to think in terms of national identities. In international policy nation-states are the dominant entities, even as the global reality is shaped by multinational corporations with no connection to nationality at all. In contrast to this view the students present at the Summit taught us a valuable lesson. They have grown up in a world that effectively is global. To them, and more so to even younger generations, it does not make sense to design policies or think about challenges within the confines of a national perspective. They see events fundamentally as global issues, they email and chat to friends all over the world, and share their views with exchange students from different continents. They view themselves as global citizens. The understanding that causes and effects have a global impact is a fact of life to them. The interdependencies between communities and citizens of this planet are so obvious, the concept of nationality is like an obstruction. In the world today, one cannot not think globally. Reaction is off, Vision is on The future is unpredictable, a vast unending era ahead of us; mysterious, dark, unknowable, forever beyond our reach. We proceed cautiously as we progress onwards through the inevitable passing of time, carefully holding on to what we know about today, cautiously inventing conjectures that are re-adjusted as the future becomes the present. Why are we so modest? Certainly not out of a natural sense of humility. Homo Sapiens as a species is everything but modest. The truth is that we are creating the 12 All material copyrighted by author 2011 www.flatfive.nl

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future right now, in our decisions and actions and the inevitable consequences they have. We have a strong tendency however to disempower ourselves in relation to our future, as if not we but someone else, perpaps even some (malignant?) divinity, steers our destiny. Why not make the realization that the future is something you create the starting point of our decisions? Wendy Schultz explains how the concept of prefered futures captures this idea. It is important for futurists, and all other mortals as well, to not just discuss possible scenarios but to make choices about them. We have to not just think about the future, but build it in a deliberate manner. Creating a vision means shaping the future, that is the significance of the Vision thing. Stephen Covey means to teach us the same when he speaks of starting with the end in mind as a crucial habit for shaping our lives3. Trivial as it may seem, creating a future is as simple as imagining what you want it to be. Our vision becomes what mathematicians call a chaotic attractor: an implicit yet definite shape that unites all complex dynamics into a single whole and draws events in the real world into its subtle self-organizing form. Prediction is off, Chaos is on In our planning we have learned to predict coming events by extrapolating from the present. Now the future remains fundamentally unknowable, but this attitude gives us some leverage. For example: expected GDP growth is a matter of calculating past GDP growth, adding a number of predictable trends, e.g. increased consumer confidence increases demand which increases output, and you can qualify what will happen in the future. This mode of operation is no longer effective. The Club of Romes 1972 doomsday report Limits to Growth failed to live up to its predictions. The perceived connection between economic growth and inflation was demolished by the stagflation era in the 1970s and 80s. Systems thinking has been the school of thought preoccupied with such counter-intuitive phenomena. The unexpected events are produced by emergent properties, properties of systems that cannot be described or explained in terms of properties of their constituent parts. These phenomena are produced by subtle influences of implicit parameters, interdependent, and capable of producing profound effects out of small fluctuations. Nowhere is the dynamic complexity more apparent than in our globalized financial markets, which suck in ever larger quantities of currency. In this case the dynamics are produced by the expectations of participants themselves. In the words of philantropist and financial wizard George Soros:
The more the theory of efficient markets is believed, the less efficient markets become.4

We need to become aware of this principle of complexity and interdependence, lest we forever persist in our destructive ignorance. The internet boom and bust of the late 1990s shows how rapid developments combined with ignorance creates global 13 All material copyrighted by author 2011 www.flatfive.nl

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business disasters. Generated by an irrational exuberance about the impact of the internet, investors lost their capacity for scrutiny and sound judgement. The burst of the bubble came as a welcome adjustment, yet led to an unjustified lack of confidence in the power of e-business models, and subsequent undervaluation of shares. Specialization is off, integration is on In his 1980 explosive analysis of modern history The Third Wave, Alfin Toffler describes specialization as one of six key principles behind Second Wave societies, i.e. societies that have industrialized and adopted the values implicit in the industrial system. We have designed our production processes along a division of labor, each assembly line worker is involved with a small fraction of the entire process. Division of labor is the seed of specialization, but it has matured well beyond manufacturing. In all levels of society we find professionals who are really specialists in some limited area of activity. Science has eagerly incorporated the principle of specialization to produce a veritable jungle of disciplines and sub-disciplines in which we understand more and more about less and less. All this specialization serves a desire for efficiency and control, but it is stifling the creation of ideas. As Richard Hawkins, senior strategist at TNO, explains, universities are no longer capable of producing valuable innovations. The specialists inside their field patiently toil ahead, but create little innovation. New ideas arise where different disciplines touch each other, and innovation is created across traditional institutional boundaries. Specialization is standing in the way of creativity and progress. We need to integrate knowledge domains across disciplines, open communication channels between experts, and rid our selves of institutional and conceptual boundaries. Static balance is off, dynamic balance is on. There exists a traditional concept of balance as an equilibrium, a static opposing of forces that creates stability, like a scale with equals weights on each side. Such a static concept of balance is no longer applicable to the powerful dynamic balance that can be used to harness creativity. One of the drivers behind the success of MIT Media Lab Europe is the way it incorporates constant change. All employee contracts last two years, and are never renewed. Fresh blood is continuously flowing through the organization. Projects have immutable deadlines, and teams are constantly under pressure. No peace and quiet, no status quo, no standing still. Managing Director Simon Jones uses the metaphor of a modern fighter jet. Jets are inherently unstable systems that are able to operate by constant corrections executed by a complex system of computerized sensors and feedback loops. The airplane is constantly on the brink of being uncontrollable, and that is what gives it its agile maneuverability and power. It is refered to in Capoeira as the balance in unbalance.

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Contradiction bad is off, contradiction good is on In logic there exists a rule that ensures that contradictions by definition lead nowhere. The rule is called Ex Falsum Sequitur Qoudlibet (from the contradiction follows everything), and is an essential ingredient in the Reductio ad Absurdum argument, where a contradiction, the Absurdum, is derived in order to prove the opposite of what was assumed. Contradictions imply the breakdown of the system in which they occur, for this reason they have to be avoided at all cost. Valeri Souchkov, an expert in the TRIZ method of systematic innovation, explains that contradictions are, in fact, good. Contradictions form the essence of a problem, and so they are the root of the solution. A well-formulated contradiction points the way to the solution. Finding the contradiction becomes a coveted step in the creative process that leads to innovation. This attitude is reminiscent of Ayn Rands view of contradictions, as expressed in Atlas Shrugged. When you encounter a contradiction, it is time to check your premises, at least one of them will have to change. Breaking down the boundaries of the well known, courage to reject familiar principles, these are ways towards new insights and inventions. Accepting the contradiction creates the kind of Zen-like mindset that is very beneficial for truly creative innovation. Uniformity is off, diversity is on Uniforms are powerful cultural symbols. Military uniforms impress; corporate dresscodes (navy-blue tree piece suits) give us a sense, or illusion, of professionalism; schoolyard conventions guide conduct by determining what cool brands are acceptable. All uniforms are criteria we use to gain social acceptance. We subject ourselves to these (implicit) codes in order to fit in. Speaking of concepts like national identity or cultural values, we do the same. We try to find a mold, and postulate that all those we consider peers should fit in, presupposing that that is what an individual wants above all else: to fit in. We even attempt to stand out, and emphasize our uniqueness, by following conventions. No-one understands this better than the marketeers behind rebel brands supposed to express individuality Uniformity does not serve progress in our new knowledge economy. Innovation and creation are products of diverse minds, intermingling perspectives, irreconcilable positions, and flexible thinking: the opposite of uniform behaviour. Innovation in this sense requires the abolishment of uniform ways of thinking, combining and organizing. If we regret the disappearance of traditional values in our multi-cultural reality, we should realize that we need even more of it. In fact, the cultural diversity within the European Community creates a powerful competitive advantage in a world where value creation is increasingly driven by creative innovation, according to Bror Salmelin. Whats on the Menu? So what does all this mean to you? What are the implications for you and your business (your suppliers, your clients, your market)? We are not all equal in our 15 All material copyrighted by author 2011 www.flatfive.nl

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ability to welcome change and accept a shift of our fundamental believes. Some of us like change better than others. Some of us are good with structures, some of us are better with people, some of us thrive on creating new visions. The point is not that you have to change, you can stick to business as usual. The choice is up to you, but regardless of your choice the changes I described are real. In the end you are responsible for your own future. Its time to check your own values and presuppositions about the world. The wise response to changing times is not more control, or more efficient business as usual, it is an appropriate mix of welcoming the chaos, while managing the risks. In the coming years your teams and your organization will become more diverse, and will incorporate people with different value systems, and that is a good thing. Just as in nature, an increase in diversity helps to stabilize an ecosystem. Monoculture is the companion of death. You may want the changes I describe to influence decisions about what kind of people you are going to get on your team, and what kind of activities you will reward. In the end business, like many other aspects of life, can become a celebration of uniqueness and the creation of value. Not all tangible, not all quantifiable (and certainly not always in the one dimensional format of money), but value nevertheless. These ideas are written down here to unhinge your mind from the comfort of familiar presuppositions. They are meant to wake you up, provoke you, empower you at the same time, and above all help you develop your own ideas about the crucial issues behind the changes that surround us. It is important that we shape our future deliberately, and that we make ourselves responsible for doing so.
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Alvin Toffler, The Third Wave Charles Fine, The Double Helix. 3 Stephen Covey, The Seven Habits of Highly Effective People. 4 George Soros, The Alchemy of Finance

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