Edge Perspectives with John Hagel

Managing Critical Talent

Thanks to a posting by Bruce Hoppe on his Connectedness blog last February, I came across an interesting study by Robin Athey, who leads Deloitte's research on organizational performance.  Deloitte has just published a white paper written by Robin called "It's 2008: Do You Know Where Your Talent Is?".

Robin does a very good job of re-framing the talent challenge faced by companies around the world.  As Robin points out, most companies still tend to focus on attracting and retaining talent.  Unfortunately, at the same time, they neglect the opportunity to more effectively deploy, develop and connect their employees.  As she rightly observes, if companies do a better job of deploying, developing and connecting their employees, they will have much greater success in attracting and retaining talent.  On the other hand, without more focus in these areas, companies spend much more than they have to in efforts to attract and retain talented people.

She makes a strong case as well that development of talent does not primarily concern investment in formal training but instead involves thoughtfully structuring experiences that accelerate learning:

The best way to develop critical talent is through the collaborative resolution of real-life issues ("action learning") . . . . People learn the most in situations that stretch them - the "trial by fire" experiences that put them slightly outside of their comfort zones. . . . People also learn from those they trust: bosses, subordinates, and mentors, both internal and external.

Given this perspective, it becomes clear that development, deployment and connection are all closely related.  Development does not occur unless talent is deployed into opportunities that stretch them and unless talent is able to connect with appropriate and trusted expertise to accelerate their learning.

I have three broad comments on Robin's excellent white paper.  First, I agree with everything she says, but she tends to adopt a relatively narrow "enterprise-centric view"  - an increasing amount of development, deployment and connection for talent occurs at the edge of the enterprise in collaboration with talent from suppliers, partners and customers.  This is the reason that JSB and I in our book The Only Sustainable Edge put so much emphasis on "productive friction" at the boundaries of the enterprise as a key driver of capability building.

Second, she correctly emphasizes that talent strategies must focus on the "critical talent" of the firm - "the first step is defining exactly which jobs are critical" - meaning "people who create the value an organization needs to succeed." I couldn't agree more (although I would tighten the definition to focus on distinctive or differentiated value), but then I would ask a second question: for any jobs which are not classified as critical, why is the company still retaining those jobs?  One of the reasons that companies don't do a great job on talent development, deployment and connection is that they are spread too thin, trying to do too many things.  For any non-critical job, the company should be aggressively trying to shed these jobs and collaborate with companies that view these jobs as critical.

Finally, Robin makes the case that talent is increasingly becoming a scarce resource, giving rise to active talent markets. I mentioned in an earlier posting that economic value gets created around scarce resources.  From my perspective, attention and talent are the two scarce resources that will shape value creation opportunities over the next decade.

Social Network Analysis

Social networks are becoming increasingly critical to understanding business performance.  On my web site, I posted an entry almost three years ago mentioning a variety of books on social network analysis and their relevance to business. I just came across a good bibliography by Patti Anklam and Bruce Hoppe that covers a broader range of resources that others might find useful in understanding social network analysis. Bruce Hoppe's Connectedness blog (where the bibliography was posted) is a good way to keep current on some of the developments in this field.

Goldhaber and Attention Economy

As analysts try to discern the contours of the Media 2.0 industry (to use Umair Haque's felicitous term), the economy of attention is emerging as a central construct.  Often this term is used rather loosely, but it has deep meaning.  Many years ago, I first read Michael Goldhaber's seminal writing on The Attention Economy and I have been greatly influenced by it ever since (a version appeared five years earlier in 1992 as an essay entitled "Attention and Software" in Esther Dyson's Release 1.0). I continue to be surprised at how little recognition it receives.

Goldhaber rails at all the hype about "The Information Economy":

Information, however, would be an impossible basis for an economy, for one simple reason: economies are governed by what is scarce, and information, especially on the Net, is not only abundant, but overflowing. We are drowning in the stuff, and yet more and more comes at us daily. That is why terms like "information glut" have become commonplace, after all. . . .

There is something else that moves through the Net, flowing in the opposite direction from information, namely attention. . . . Attention, at least the kind we care about, is an intrinsically scarce resource. . . .

Earlier, I suggested that when information flows one way through the Net, attention has to be flowing the other.  Now I want to say that it would be even better to think in terms of attention of some kind flowing both ways.

Consider an ordinary conversation. You could describe it as the exchange of information, but except in a highly technical sense that is rarely a very accurate description of what takes place.  A conversation is primarily an exchange of attention. . . what really matters in every conversation is the exchange of attention - an exchange that normally must be kept more or less equal if one party or the other isn't likely to lose interest.

Goldhaber spells out the implications of some of these basic insights:

In a full-fledged attention economy, the goal is simply to get either enough attention or as much as possible . . . getting attention is not a momentary thing; you build on the stock you have every time you get any, and the larger your audience at one time, the larger your potential audience in the future.  Thus obtaining attention is obtaining a kind of enduring wealth, a form of wealth that puts you in a preferred position to get anything this new economy offers. . . . since it is hard to get new attention by repeating exactly what you or someone else has done before, this new economy is based on endless originality, or at least attempts at originality.  By contrast, the old industrial economy worked on the basis of making interchangeable objects in huge numbers.

Now, I don't accept all of Goldhaber's speculations about the implications of an attention economy.  For example, he anticipated that all organizations would become temporary and that money would diminish in importance as a medium of exchange.  But his basic insights are profound and pinpoint some of the forces that will reshape the the structure and economics not only of the media business, but business in general, including such fundamental notions as brand (something I will be writing about shortly).

To make money, focus on the areas of the economy where scarcity reigns, rather than abundance. Goldhaber appropriately points out that attention is rapidly becoming the scarce resource in our economy. Of course, it has always been a scarce resource - after all, we each have only 24 hours in the day.  But what is changing is relative scarcity - relative to the growing abundance of products, services, content and people vying for our attention and relative to the steady erosion of shelf space and other distribution channel bottlenecks, our attention is becoming a much more scarce resource. It is one of the key reasons that customers are gaining more power in global markets - they own the scarce resource that will ultimately determine who creates value and who destroys value. We are accustomed to analyzing business performance in terms of return on assets but, if one understands the implications of Goldhaber's insight, executives will need to focus on a new form of ROA instead - return on attention. Instead of looking at market share, we will be looking at share of attention (of individual customers) and share of wallet (again, of individual customers).

For some additional commentary on Goldhaber's ideas, see Phil Jones' wiki essay on "The Attention Economy".  Clay Shirky also has a provocative essay entitled "Who Are You Paying When You Pay Attention?", although he never explicitly refers to Goldhaber.  I mentioned Umair Haque earlier - he has some interesting perspectives on Media 2.0 in two presentations available as PowerPoint files here and here.

European Backlash

The French and Dutch have spoken and everyone is trying to decipher what they said.  We know for certain they have strongly rejected the proposed European Union constitution, putting into jeopardy the long-standing movement towards the political and economic unification of Europe.  But what is behind this rejection?

Many analysts are attributing the rejection to fear. The Wall Street Journal quotes European Commission President Jose Manuel Barroso as talking of a "federation of fear" emerging in Europe. At the surface, it appears that fear was a factor, at least in France where unemployment rates are high and the specter of "Polish plumbers" and Muslim laborers from Turkey pervaded the pre-referendum discussion. In the Netherlands, with a lower unemployment rate but slower GDP growth and employment growth, fear may have been less intense, but certainly the public is feeling more economic pressure as the government cuts back on its spending on entitlement programs.

But what really seemed to bring the French and Dutch people together was resistance to political centralization.  At a time of significant economic challenge as competition intensifies on a global scale, the voting public in both countries simply did not buy the proposition that Eurocrats in Brussels would be in a better position to address their needs than their own government officials.  Of course, the so-called constitution (better described as a treaty) did not help matters with voters.  Variously described as a 325 page, a 470 page or a 485 page document (whatever, it's a lot of pages - a 325 page version of the Constitution is available as a 1 Mb. pdf file here), it offers little assurance that Brussels would be responsive to the European public. As one analysis summarized the proposed changes, the constitution moves powers away from elected governments to the Commission in Brussels, it shifts powers away from the European Council consisting of the elected heads of governments to unelected members of the European Commission and the European Court of Justice, it leaves the European Parliament relatively powerless and it expands significantly the power of the European Court of Justice, perhaps the most unrepresentative body of all.

Skepticism among voters about the growing power of Eurocrats in Brussels certainly does not translate into confidence in their own government officials.  What is truly remarkable about the votes in both countries is that they soundly rejected the recommendations of all major political parties and leading newspapers to vote in favor of the constitution. These votes reveal the profound chasm that has emerged between the public and their own political and press elites.

The "no" votes reflect a failure of political leadership.  This failure in part stems from the need for a new grand narrative.  As George Parker observed in an analysis in the Financial Times on June 3, 2005:

The EU has a serious existentialist question when its citizens cannot remember why it was created, they do not appear to like what it has become and they are frightened of what it will be in the future. . . . As the union's original emotional power over its citizens - its ability to deliver postwar security and prosperity has waned - they have started to see the EU more as a bureaucratic machine.

Whatever form this new grand narrative takes, European leaders would be well-advised to reconsider the current march towards centralization and "harmonization" of regulatory policies.  The answer to Europe's economic challenges is likely to lie less in the halls of the EU headquarters and more in the active experimentation and innovation in public policy in provinces and countries around Europe.  This certainly seems to be one of the key drivers of economic growth both in China and India, where local and provincial governments vie to attract entrepreneurial talent and investment.  Adam Segal's Digital Dragons: High Technology Enterprise in China analyzes the role that this experimentation in local policy has played in the evolution of China's high tech industry.

Kenichi Ohmae's  The End of the Nation State: The Rise of Regional Economies provides a broader and more provocative perspective on the growing economic importance of what he describes as "region-states", defined as "an area (often cross-border) developed around a regional economic center with a population of a few million to 10-20 million."  His words on the European Union, written ten years ago, retain their relevance:

In Europe, for nearly four decades, the continent's leaders have been trying to implement the Treaty of Rome.  But they have been outrun by events. . . . just when nation states began to lose their primacy as economic actors, Brussels created a supernation state.  This is ironic.  It is also tragic.  Of all the developed world, Europe has the richest and densest history of regionalism. . . . In a borderless world, it could draw upon and leverage that heritage with immense profit.  Instead, it has purposely organized itself to stamp that heritage out.

Maybe the people of France and the Netherlands intuitively sense that their future lies in another direction.  Perhaps Europe's leaders should take this opportunity to reassess their initiatives on a more fundamental level.  They might even discover a new and more powerful grand narrative built upon decentralization, talent building and innovation, both in business and public policy.  Certainly the public in two of the six countries that founded the original European Union have soundly rejected the current direction.