Edge Perspectives with John Hagel

Brokerage and Closure

Having just reviewed Scott Page’s “The Difference”, I wanted to also call attention to an important book published a little over one year ago – “Brokerage and Closure: An Introduction to Social Capital” by Ronald Burt, one of the leading academics on social capital and social networks.  In many respects, these books are great complements to each other. 

Page’s book makes a compelling case that cognitive diversity contributes to superior problem solving and predictive tasks.  He analyzes the nature of cognitive diversity and the specific ways that this diversity can contribute to superior problem solving and predictions. Yet, he spends very little time exploring the relationships across diverse individuals and how these relationships contribute to superior performance of the individuals.

This is where Burt’s book starts.  Burt doesn’t spend a lot of time analyzing categories of diversity in or across the nodes – he is far more interested in the structure of relationships that connect the nodes.  This is another important part of the puzzle. Page assumes that the diverse participants are connected and engaged in collaborative problem-solving or prediction tasks.  Burt reminds us that a lot of the value is in creating new connections and that not all connections are created equal. Relationships can amplify the power of diversity and diversity can amplify the power of relationships.

A warning for my business readers – although Burt writes in a compelling style, he still is very much writing in the academic genre, so the book is dense and far from a light read.  Yet, the insights he conveys make the reading effort richly rewarding.

For those not familiar with Burt, he is Professor of Sociology and Strategy (I love this – talk about crossing important boundaries!) at the Graduate School of Business at the University of Chicago. Fifteen years ago, he wrote a seminal book on “Structural Holes: The Social Structure of Competition.” That book argued that “structural holes” defined by gaps in connections among complementary resources in the competitive arena provide significant opportunities for entrepreneurial initiative.  As he succinctly put it, “competitive advantage is a matter of access to holes.”

Structural holes still form the centerpiece of Burt’s analysis but, in his new book, he focuses on two sets of activities required to generate value from structural holes – brokerage and closure.

• Brokerage is the function performed by people whose relationships bridge across structural holes in social networks – they help to connect non-redundant flows of information. 

• Closure on the other hand helps to build alignment among diverse individuals by creating rich connections with third parties that establish powerful reputation mechanisms. As Burt makes clear, closure is typically not the direct result of efforts by individuals but instead is a by-product of interactions that naturally arise when dense networks of relationships form.

Burt’s book explores the complex relationship between these two activities, especially the paradox of tension and interdependence. On the one hand, brokerage is about reaching out and embracing new flows of knowledge while closure is about focusing inward and enforcing conformity, rejecting that which does not fit.  At this level, brokerage and closure are deeply at odds.  On the other hand, brokerage cannot function effectively without the trust that closure creates.

Part of the paradox hinges on the Janus-like nature of closure.  Closure at one level is enormously beneficial – it helps to build the trust that is essential for collaborative activity and rich information flows.  On another level, though, closure tends to amplify existing opinion and reinforce group identities at the expense of openness to new participants or perspectives.

Resolving the brokerage/closure paradox is made even more difficult by the “closed networks of scholars that have sprung up devoted to brokerage or closure but not both.” In this respect, Burt himself is performing the role of a broker, helping to bridge two very distinct academic communities that tend not to interact a lot with each other. Burt’s offers this resolution of the tension between brokerage and closure:

Brokerage is about coordinating people between whom it would be valuable, but risky, to trust. Closure is about making it safe to trust.  The key to creating value is to put the two together.  Bridging a structural hole can create value, but delivering the value requires the closed network of a cohesive team around the bridge.

This is perhaps easier to state than to put into practice.  Burt acknowledges that the inertial effects of closure tend to predominate over time, even though in times of rapid change the value of brokerage increases relative to the value of closure. Getting the balance right is challenging under the best of circumstances.

Burt’s book is a rigorous exploration of social capital and the activities required to build social capital.  He expresses concern that

Clear-thinking observers can be frustrated with the vagaries of social capital left as a metaphor. Social capital is the Wild West of academic work.  There are no skill or intellectual barriers to entry.  Contributions vary from rigorous research to devotional opinion, from carefully considered to bromide blather.  Research and theory in economics, political science, and sociology are distributed across loosely related perspectives and specialties, each a group of connected experts purporting to have a productive view across groups.  The variety is as interesting and exciting as it is corrosive to cumulative work.

Burt’s book is tightly organized around four “stylized facts”:

• Brokers perform better than others in social networks – they typically “receive a premium in compensation, recognition and responsibility.”

• This superior performance results from the improved vision that brokerage offers in terms of detecting and developing new ideas.

• Appropriately balanced, brokerage and closure can work together to amplify performance

• Closure’s reputation mechanism is a powerful inertial force and, left unchecked, reinforces the status quo

As I have already hinted, one of the frustrations in reading Burt’s excellent book is that he doesn’t delve deeply enough into the management practices required to effectively balance brokerage and closure.  He makes a compelling case that these two reinforce each other and he also highlights the continuing risk that closure will prevail at the expense of brokerage.  So there’s a lot of incentive to get the balance right, but how precisely does one do that?

At the end of the day, Burt’s perspective is also largely a structural and static view of social networks and the advantages created by brokerage positions in networks.  In his final chapter he offers some tantalizing, but ultimately unsatisfying, hints about the need for a perspective on network dynamics, something that he suggests will be forthcoming from his own research program.  In particular, he draws some intriguing contrasts between the equilibrium views of conventional economics and the more dynamic, process views of Austrian economics, suggesting that the latter offers a much richer foundation for understanding network dynamics.

This is a powerful intuition.  A more dynamic perspective may ultimately be key  to overcoming the tension between brokerage and closure.  If we move from static diversity to dynamic specialization, we create opportunities to build trust that are simply not available in the  more challenging zero sum world of equilibrium economics. We would then complete a powerful triad – diversity, relationship and dynamics – to offer a much more robust view of the opportunities to create strategic advantage.

So, what should executives take away from all of this?  First of all, an increased awareness that our firms are much more optimized for closure than brokerage, yet enhanced performance, especially in times of great change, hinges upon shifting the balance more in favor of brokerage activity.

Second, network analysis provides an opportunity to be much more insightful about the structural holes that provide opportunities for improved performance.

I would add a third observation – that all structural holes are not created equal.  The structural holes on the edges of economic activity – whether it is the edges of firms, industries, economies or demographic segments – are particularly rich with opportunity for performance improvement.

Finally, if all of this is true, executives who want to strengthen brokerage activities across the most promising structural holes need to master the management techniques associated with outsourcing, loose coupling and productive friction.

Difference and Friction

I can think of no better day than Martin Luther King Day to focus on Scott Page’s new book, The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies. The book was officially published today and it provides the most penetrating and systematic exploration yet available of various forms of diversity and precisely how diversity enhances both problem-solving and predictions.

To be fair, Page is not directly concerned with exploring racial diversity (a form of “identity diversity” in Page’s taxonomy).  Instead, he focuses on cognitive diversity and unpacks four “frameworks” of cognitive diversity:

• Diverse Perspectives: ways of representing situations and problems

• Diverse Interpretations: ways of categorizing or partitioning perspectives

• Diverse Heuristics: ways of generating solutions to problems

• Diverse Predictive Models: ways of inferring cause and effect

While sympathetic to the case for identity diversity, Page cautions that “. . . we can take the connection between identity and cognition too far. Identity diverse people can think alike . . . If well managed, identity diversity can create benefits, provided it correlates with cognitive differences and provided the task is one in which diversity matters.”

A blog posting can hardly do justice to the sophistication and nuance of Page’s argument. As Professor of Complex Systems, Political Science and Economics at the University of Michigan and an External Faculty Member of the Santa Fe Institute, Page is adept at crossing disciplinary boundaries to define points of view and muster evidence to support those perspectives.

Let me instead just highlight some of Page’s more provocative findings.  First, in discussing problem-solving, he develops a perspective that “diversity trumps ability: random collections of intelligent problem solvers can outperform collections of the best individual problem-solvers.”  To be clear, Page labels this a conditional claim that only holds under specific circumstances, but he helps us to understand why this assertion is often true.

Page then turns to predictive tasks and highlights two key conclusions from his analysis:

. . . that diversity and accuracy contribute equally to collective predictive performance, and that a crowd’s collective prediction must always be at least as good as the average prediction of a member of the crowd.

Page also looks at the role of preference diversity – “differences in what we value.”  Here he makes a distinction between fundamental preferences (preferences about outcomes) and instrumental preferences (preferences about how we get what we want). In discussing the role of preference diversity, he observes:

Diverse perspectives, which we have touted as a panacea, have a dark side – they lead to the discovery of lots of possible alternatives.  If people have diverse fundamental preferences, they less likely agree when they have more possible choices.  On the flip side, diverse fundamental preferences, which cause so many problems when making choices, prove beneficial for problem-solving.  What we desire influences how we look at problems, the perspectives we choose.  Thus, collections of people with diverse preferences often prove better at problem solving than collections of people who agree.  Difference of opinion not only makes a horse race, it also makes for effective, albeit sometimes contentious, teams.

This is an important point and, for my money, Page does not emphasize it enough.  Diversity aids problem-solving enormously, but it also generates significant friction.  We have come to believe in the business world that friction is bad but, in fact, certain forms of friction are essential to innovation.  Even in the absence of diversity in fundamental preferences, people with diverse perspectives and tools and the best of intentions are naturally going to clash over potential solutions to problems that they believe are important before they converge around an answer. JSB and I have explored the growing importance of productive friction in driving innovation in both an HBR article (purchase unfortunately required) and our book, The Only Sustainable Edge.

Page’s book is enormously helpful in making the case for certain forms of diversity in enhancing both problem-solving and predictions.  It is perhaps too much to ask for him to also explore the institutional implications of all of this.  On the margin, Page makes some useful suggestions on this front in the final section of his book but, as he admits, it is only a preliminary start.

I left the book feeling that Page is much too sanguine about the capacity of existing institutions to embrace and reap the benefits of diversity.  In stepping back from Page’s compelling analysis, I became even more convinced of the need to re-think at a fundamental level most of the institutional architectures that we have come to accept as givens – firms, schools, governments, NGOs, etc.

We are already seeing new institutional forms emerge on the periphery of existing institutions with the potential to embrace diversity in far more effective ways than most conventional institutions, whether it is in the many different forms of creation networks (e.g., open source software initiatives and process networks) that JSB and I explore here and here (registration required) or the X Prize initiative or the Creative Commons initiative or the Santa Fe Institute that Page is affiliated with, just to name a few.

Those who understand the power of cognitive diversity and even preference diversity need to explore the institutional mechanisms that are most powerful in mobilizing the appropriate forms of diversity, focusing diverse participants on appropriate problems, motivating them to engaging in collaborative problem-solving and creating the appropriate governance mechanisms to resolve disputes and facilitate convergence.  On the one hand, the very meaning of institutional boundaries needs to be re-examined in a world where greater cognitive diversity yields superior insight.  On the other hand, new ways to think about value appropriation become critical if new institutional forms are to become sustainable.

Page points us in the right direction, but there is much opportunity – and need - to innovate at the institutional level in order for the path to become clear. In many respects, the analogy with Martin Luther King holds up.  MLK provided a compelling vision of a society that embraced the potential of all of its participants and celebrated the diversity that made American society so robust.  The specific institutional mechanisms required to realize this vision may not even yet be clear, but we all had a much deeper sense of the destination as a result of his persuasive communication. 

MLK had a knack for creating friction, but he also had a talent for turning it into productive friction rather than dysfunctional friction. As we confront the institutional implications of the value of cognitive diversity, we are likely to see much friction as existing institutions wrestle with the need to expand the scope of cognitive diversity. We can only hope that this will be productive friction, although it can rapidly turn into dysfunctional friction that will produce waves of creative destruction as new institutional forms replace the old.

Retailers and Customers

I love patterns, especially emerging and evolving patterns.  In this context, anomalies are troubling, but always an opportunity for learning. For me, the Gap represented one of those anomalies for many years.

Almost a decade ago, I detected an intriguing pattern regarding the unbundling and rebundling of firms (purchase unfortunately required). Those of you have been following me for a while know the drill – I believe that most companies are an unnatural bundle of three very different types of businesses:

• Infrastructure management businesses – high volume, routine processing businesses – think of managing a logistics network or manufacturing assembly operations
• Product innovation and commercialization businesses – coming up with creative new products or services, getting them to market quickly and accelerating adoption
• Customer relationship businesses – getting to know a set of customers extremely well and using that knowledge to be more helpful in configuring tailored bundles of products and services to meet the needs of individual customers

These three business types have very different economics, skill sets and even cultures, yet they are tightly integrated into most companies today.  The first wave of outsourcing can be understood as the systematic carving out of the infrastructure management businesses from companies, but we’re just on the cusp of a second wave that will unbundle product innovation and commercialization businesses from customer relationship businesses. 

That’s the short story. Of course, the pace and trajectory of unbundling (and related rebundling) differs across industries and geographies – the patterns are complex and fractal.

Take retailing as an example.  Most retailers don’t own product businesses – they are primarily customer relationship businesses (merchandising) and infrastructure management businesses (store operations). When I first wrote about the broader unbundling pattern in the late 1990s – there was one big anomaly that many people kept pointing out to me – the Gap.  In the late 1990s, the Gap was a real highflier, with a share price that rose from about $10 to about $50 over a five year period.  It could do no wrong. It was taking the retail world by storm.

And it seemed to fly directly in the face of the pattern I outlined above.  Here was a highly successful retailer that was not unbundling, it was in fact adding a third business type – product innovation and commercialization – to the two business types that retailers typically operated.  I can still recall the triumphant smirks of executives who would cite the Gap and say “OK, John, what do you have to say about that?”

At the time, I said that it was an anomaly whose success hinged on getting the product innovation and commercialization business right – at the time, they focused on basics like khaki pants and wearable tops so it was not as risky as the more fashion-oriented part of the apparel business – but that trying to manage all three business types simultaneously would make it very hard for the Gap to sustain its success.  Of course, that came across as a lame attempt to downplay a troubling exception to the pattern I was describing.

Well, starting in 2000 the Gap began to hit the wall and it never really recovered.  Earlier this week, the company announced that it was weighing its strategic alternatives, including a possible sale of the company.  Rumors are swirling about private equity firms discussing how to team up to take the company private.

As is often the case in business, when the troubles first started to surface at the Gap, the search began for the guilty.  Mickey Drexler, the mercurial CEO of the Gap at the time and the guy who drove much of the growth of the retailer, was fired in 2002 and Paul Pressler, a well-respected executive from Disney, was brought in as CEO. Significant turnover throughout the management ranks has occurred since 2000, yet the business challenges persisted.

What if the problem is not about people, but something even more fundamental?  What if the problem stems from having to manage three very different business types in an increasingly competitive market?  When evaluating “strategic options”, one can only hope that the Board of the Gap takes a hard look at the strategic option of unbundling. In many respects, this would be a “back to the future” play for the Gap – the retailer’s first wave of growth, before it started adding its own in-house apparel designers, was driven by its aggressive promotion of jeans designed and made by Levi Strauss. Rather than shrinking the business, this unbundling may actually provide a platform for another wave of profitable growth.

Now, of course, retailers can still guess wrong in terms of fashion trends even if they do not have their own product design business.  But it is easier to guess wrong if you have your own designers who often become locked into certain styles.  Retailers with their own designers start to look inward to their designers for insight about trends, rather than interacting with a broad range of independent designers who are likely to have much more diverse views of potential market opportunities.  Attracting and retaining the best creative talent in-house also can become challenging if this talent has to cope with the divergent cultures required to run infrastructure management businesses and customer relationship businesses as well as product businesses.

But the Gap should go beyond simply shedding its product business.  The company should re-think what it means to be in the customer relationship business.  Retailers pride themselves on being in the customer relationship business, but when you take a hard look at their operations, most large retailers are really much more focused on the infrastructure management business.

Let’s take a simple, yet very revealing, indicator of business focus.  What are the relevant metrics of profitability?  Most retailers focus relentlessly on profitability by store and, even more granularly, profitability per foot of shelf – these are facilities-based measures of profitability.  True customer relationship businesses focus on profitability by customer, yet few retailers (with the possible exception of some direct marketers) even have a clue of their profitability by customer.  Ask them which 20% of their customers generate 80% of their profitability and you get a blank stare. Ask them about customer churn rates and they start looking for a way to change the subject.

Or, take a stroll down the aisles of your nearest “big box” retailer.  Try to find someone to talk to in order to get a suggestion for a product you need or to get a question about a product answered. Good luck. It is pretty hard to talk about being in a customer relationship business when you are not available to talk to a customer. Big box retailers are the epitome of an infrastructure management business – reducing operations to high volume, routine processing activities with as few people as possible.  They dream of even eliminating the cashiers and automating the check-out process.

Of course, merchandisers live or die based on their ability to anticipate the evolving needs of the market.  Some retailers have become very sophisticated in understanding certain customer segments – teens, techies, suburban soccer Moms, etc. In this sense, they are very customer focused. But that’s a pretty shallow notion of customer relationship – all businesses have to do that to stay in business.

True customer relationship businesses set a much higher bar.  Deep, lasting, trust-based relationships with customers – the hallmark of a customer relationship business – are generally built one customer at a time.  They require the investment to learn about each customer’s needs and then they require the skills to take that understanding and turn it around into relevant, timely suggestions regarding products and services that might be most meaningful for that customer.  Think of a good Mom and Pop retailer where the clerk knows you by name and greets you with a suggestion about an interesting new product when you walk in the door.

Ah, but that’s not scalable, the skeptic will say.  Ever heard of Amazon? They do something pretty much like that for millions of customers.  Ah, but that’s on the Internet and not in a physical store, the skeptic responds.  True, but that’s one of the problems – with few exceptions, we still draw hard lines between physical facilities and virtual services.

Now, this is not just an opportunity; it is rapidly becoming a necessity, shaped by the shift from shelf space scarcity to attention scarcity, something I have written about frequently.  In the face of this shift, retailers have two choices.  They can become vast, automated warehouses with a high return on assets – in other words, infrastructure management businesses.  Or they can find creative ways to build real relationships with customers in ways that significantly increase the return on attention for their customers – in other words, customer relationship businesses.

This is the vast blue ocean that awaits enterprising retailers.  It will require extraordinary innovation, inspired perhaps by examples of open distribution in unlikely places like India (not in conventional retailing, which is generally very inefficient, but rather in such unexpected arenas as financial services and diesel engines).

As the Gap assesses its strategic options, it might start by asking the most fundamental question of all – what business are we really in?  There’s a lot of money to be made by getting the answer to that question right.

Gaming and Learning

As the world around us fragments into endless niches populating a kaleidoscope of Long Tails winding their way around the world, where will economic value reside?  Certainly there will be a lot of economic value within individual niches, but the real money will be made by those who can navigate across the edges of niches and help us to see and connect with resources deeply embedded in distant niches.

Put into more tangible terms for enterprises, they will need to become more specialized and carve out their own economic niches (although these niches can be very large) while at the same time continually appropriating and evolving new capabilities – something that JSB and I have called “dynamic specialization”.  This in fact becomes a meta-capability, with its own perspectives, skills and practices. But where are firms going to look to help build this meta-capability within their own ranks?  Well, look to the edge – in this case, video games.

Many years ago, I was a senior executive at Atari.  Ever since, I have had a strong interest in video games. Despite their broad usage and economic scale (exceeding the sale of movie theater tickets in the US) and the valiant efforts of analysts like Steven Berlin Johnson, video games have always retained an “edge” identity, viewed with suspicion by “high culture”. My collaborator, JSB shares a similar fascination with the gaming world.

Recently, JSB has joined up with Douglas Thomas, a professor at the Annenberg School for Communication at USC and editor of Games and Culture: A Journal of Interactive Media, to explore some of the broader implications for learning of one particular form of video games – massive multiplayer online games (MMOGs) like World of Warcraft.  Two products of this collaboration deserve particular attention – an article in Wired and a working paper at USC.

The article in Wired, entitled “You Play World of Warcraft? You’re Hired!”, has received a lot of attention, in part because it is written in such an accessible style.  It highlights an important distinction between intentional learning and accidental learning:

Unlike education acquired through textbooks, lectures, and classroom instruction, what takes place in massively multiplayer online games is what we call accidental learning. It's learning to be - a natural byproduct of adjusting to a new culture - as opposed to learning about. Where traditional learning is based on the execution of carefully graded challenges, accidental learning relies on failure. Virtual environments are safe platforms for trial and error. The chance of failure is high, but the cost is low and the lessons learned are immediate.

JSB and Thomas focus in particular on the role of games like World of Warcraft in building leadership talent:

In this way, the process of becoming an effective World of Warcraft guild master amounts to a total-immersion course in leadership. A guild is a collection of players who come together to share knowledge, resources, and manpower. To run a large one, a guild master must be adept at many skills: attracting, evaluating, and recruiting new members; creating apprenticeship programs; orchestrating group strategy; and adjudicating disputes. Guilds routinely splinter over petty squabbles and other basic failures of management; the master must resolve them without losing valuable members, who can easily quit and join a rival guild. Never mind the virtual surroundings; these conditions provide real-world training a manager can apply directly in the workplace.

Unfortunately, this focus on leadership skills, while insightful and important, diminishes the real significance of MMOGs.  JSB and Thomas hint at the real significance in the following passage:

The fact that [the game players] don't think of gameplay as training is crucial. Once the experience is explicitly educational, it becomes about developing compartmentalized skills and loses its power to permeate the player's behavior patterns and worldview.

The working paper by JSB and Douglas at USC, entitled “The Play of Imagination: Extending the Literary Mind”, explores the real significance of MMOGs much more deeply, although in a much denser, academic style that many business people may have trouble accessing. That’s a shame because the business implications are profound.

A key theme of the paper is learning across boundaries, as JSB and Douglas lay out early on:

While a traditional “game” remains at the core of MMOGs, the rich social fabric that the game produces blurs many of the boundaries that we tend to expect such as the distinction between the physical and the virtual, the difference between player and avatar, and the distinction between work and play. Further, we argue throughout the essay that the learning that happens in MMOGs is tied to practices, but those practices are not solely the practices of game play or even skills such as resource management. They are, instead, the skills of learning how to use one’s imagination to read across boundaries and be able to find points of convergence and divergence between different worlds to understand their relationships to one another.

JSB and Douglas set out to offer “a set of analytic categories designed to help us understand what virtual worlds do that is different from the typical learning environment.” In part, the paper builds on the notion of disposition in JSB and Paul Duguid's essay on “Stolen Knowledge” when they suggested that learning “is not simply a matter of acquiring information; it requires developing the disposition, demeanor and outlook of the practitioners.”

JSB and Douglas argue that gaming develops a disposition of play – “a way of thinking about more than what we know” – but that the player’s dispositions are continually shaped by the social network of the game itself.

As a result, players are forced to continually adjust and readjust their dispositional stances not only to the game world, but also to other players within the world. In doing so, players develop a correspondingly flexible attitude toward dispositions which is, as Sherry Turkle has described it, protean in nature.

At another point, JSB and Douglas discuss the way MMOGs promote a “vivid situational awareness that provides the opportunity for the player to live in a space of possibilities, which we see as a powerful training for innovative thinking.”

At the highest level of abstraction, the disposition of a gamer is one that recognizes the importance of situational awareness and develops practices to heighten and refine that disposition. What the gamer learns and what is transferred is not any particular skill set . . . , but the recognition that situational awareness itself is important. The game can tell you very little about how to be situationally aware in different contexts (such as work or home), but it can dispose one to behave with awareness regardless of the context or environment. While different contexts may require awareness of different things, they each require the same kind of imaginative thinking.

JSB and Douglas make a key distinction between the learning that occurs in MMOGs and in simulation-based training:

The learning that occurs in MMOGs is a kind of learning by metaphor, by which two radically different spaces (the virtual and the physical worlds) offer up a single points of experiential convergence (a trigger) which invite (or require) reflection and imagination to translate. Learning by analogy, the kind of learning that happens in simulations or simulation based games, focuses on creating spaces which are measured based on their convergence between the real and virtual worlds, and attempt to minimize divergence. The purpose is to remove imagination and reflection as requirements for learning, and provide a system of instruction and direct transfer of skills and knowledge from the virtual to the physical.

This leads them to emphasize the capability of “conceptual blending”, a concept introduced by Mark Turner in his book The Literary Mind.  JSB and Douglas elaborate:

At its most basic level, conceptual blending is a system of projection, where we take a source image and project it upon a target image. Conceptual blending occurs when the two image schemas are able to align and not conflict. Turner’s example of such blending is the blend of the “talking animal” familiar to us from fables, stories, tall tales and the like. The blend occurs when we project speech onto an object such as a donkey. . . .

While a blended space must show some “conformity to its own logic,” it remains “free of the constraints that restrict its input spaces”. Blended spaces get all the richness of their input spaces, but only some of their constraints. . .

The ability to negotiate, manage, and make sense of this continual sense of blending, which is to say the agency a player develops within that world, are what we see as the tools for innovation for the 21st century.

In their conclusion, JSB and Douglas explore the implications of MMOGs for re-thinking the very meaning of education itself:

The model that virtual worlds provide offers a glimpse into the possibilities of what our classrooms might become: spaces where work and play, convergence and divergence, and reality and imagination intertwine in a dance where students grow to understand the importance of communities of practice and learn how to be the things they imagine.

But the implications are far broader than that.  Educational institutions are becoming progressively marginalized as it becomes apparent that learning is a life-long undertaking and that the success of all of our institutions hinges on the ability to support learning activity.  As the working paper makes clear, the most valuable learning is certainly not at the level of compartmentalized skills; it is much more about developing and evolving appropriate dispositions and the ability to integrate in new ways, as suggested by the notion of conceptual blending.

The irony, and the tragedy, is that MMOGs may promote this kind of learning far better than our educational institutions.  These institutions may be so broken that it may be much more productive to design and deploy new institutional frameworks and practices to foster this different form of learning rather than trying to implant it into existing institutions.

Fostering these new forms of learning will be a key challenge, and opportunity, for firms if, as JSB and I have maintained, the rationale for the firm increasingly becomes the ability to accelerate talent development. In a world of proliferating and rapidly evolving niches, the ability to build and sustain economic scale will depend on integrative and adaptive dispositions, at least as much as individual skills.

As JSB and Douglas conclude their Wired article:

The day may not be far off when companies receive resumes that include a line reading “level 60 tauren shaman in World of Warcraft."  The savviest employers will get the message.