Defining the Big Shift

About one month after the release of our Shift Index report, one question that keeps coming up is whether we can offer a succinctly define what the Big Shift is that our Shift Index seeks to measure.

Given the magnitude, depth and far-reaching impact of the Big Shift, succinctness is a challenge.  At the highest level, we would characterize the Big Shift as moving from a world of push to a world of pull.  In other words, given the growing uncertainty in the world around us, we must master a new set of techniques required to access, attract and accumulate resources to unleash peer based learning in far more flexible ways than conventional push programs permit.

But perhaps this is too high level.  It may help to develop this perspective just a bit more in the context of “from-to” contrasts. 

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

From knowledge transfer to knowledge creation.  Most companies today will acknowledge the importance of knowledge flows, but they tend to focus on transferring knowledge more efficiently, especially within corporate boundaries.  While useful, this is ultimately a diminishing returns game on multiple levels.  The greatest economic value will come from finding ways to connecting relevant yet diverse people, both within the firm and outside it, to create new knowledge. They do this best by addressing challenging performance requirements that motivate them to get out of their comfort zone and come up with creative new approaches that generate more value with fewer resources.

From explicit knowledge to tacit knowledge.  Here’s a paradox.  Just at the time when more and more information is becoming available about more things, the driver of value creation is shifting from explicit knowledge – that which can be expressed abstractly and statistically – to implicit knowledge – that which drives our day to day practices but which we generally have a very difficult time expressing, much less quantifying.  Why is this the case?  Because knowledge tends to evolve over time.  In its earliest stages, knowledge tends to have a much more significant tacit component.  Over time, we are more successful in articulating larger portions of our knowledge by abstracting and quantifying it, even though a significant tacit component inevitably remains. But the most valuable knowledge is the knowledge that is in the early stages of emergence is generally the most difficult to express. And, once again, it is not just within the firm but distributed broadly outside the firm.

From transactions to relationships.  Western corporations have increasingly focused on short-lived transactions as the way to generate profit – buy low, sell high and wherever possible squeeze partners in transactions to extract as much profit as possible.  If one group can’t meet our short-term requirements, let’s move on to find another group that can.   But here’s the problem – that transactional mindset undermines the ability to build long-term, trust based relationships.  And in the absence of those relationships it becomes almost impossible to effectively participate in the knowledge flows that matter the most.  It is very difficult to get diverse people to come together and constructively engage around challenging performance issues by sharing their tacit knowledge unless long-term trust-based relationships already exist.  Once again, since the most valuable knowledge flows are distributed well beyond the boundaries of the firm, these trust based relationships must also extend into broad, scalable networks that literally span the globe.

From zero sum to positive sum mindsets.  If we approach interactions with the zero sum mindset – that there is a fixed quantity of resources that must be distributed and your gain will inevitably be my loss – we virtually ensure that we will end up with short-term transactions and undermine any efforts to build longer-term relationships.  In contrast, if we adopt a positive sum mindset – that through our collaboration we can generate a growing pool of resources – we are likely to be much more successful in building long-term trust based relationships. In turn, this means we will be more effective in participating in the knowledge flows that have the potential to generate the most economic value, thereby creating a virtuous cycle that builds upon itself and generates powerful network effects.

From push programs to pull platforms.  In a world driven by efficient exploitation of relatively fixed knowledge stocks, scalable push programs became the best way to extract value from these stocks.  Accurately forecast demand and make sure the right resources are in the right place at the right time to produce and deliver against the demand.  If new knowledge creation through effective participation in a growing range of knowledge flows is the goal, push programs become an obstacle by enforcing routines and predictability.  Scalable pull platforms become essential to ensure that participants distributed across a broad and diverse range of institutions can effectively access and attract resources when relevant to support their performance improvement initiatives.

From institutions driven by scalable efficiency to institutions driven by scalable peer learning. We emphatically do not believe that the Big Shift will lead to the disintegration of large institutions.  Today’s large institutions are more often than not barriers to effective participation in scalable knowledge flows so it is no wonder that passionate and creative talent is increasingly fleeing established institutional homes to set up shop as independent contractors and entrepreneurs. On the other hand, institutions can provide unique opportunities to scale pull platforms and build ever growing networks of long-term trust based relationships on top of these platforms.  If institutions viewed their primary rationale as fostering scalable peer learning, they could create learningscapes that would help individuals develop their talent much more rapidly than these individuals ever could on their own. Of course, there is a huge transition required to get from here to there, but growing competitive and economic  pressures will ensure that institutions either make this journey or fall by the wayside as a new generation of institutions emerges to take their place.

From stable environments to dynamic environments. One final point – the Big Shift label can be misleading.  It suggests that we envision a movement from stable Point A to a new stable Point B.  That is far from the case.  If the logic of the Big Shift holds true, we are moving from a relatively stable business environment to one characterized by rapid rates of change with ever more disruptions generating increasing uncertainty and unpredictability.  The economic imperatives and the management practices and institutional arrangements required to address those imperatives will lead to more instability rather than less.  What we need are management practices and institutional arrangements that can turn that instability from a threat to an opportunity. 

OK, so this is not very succinct.  It is certainly not a sound bite ready to be broadcast and consumed in our national media. But it does capture some of the key logic behind the overarching, and perhaps more succinct, point that the Big Shift involves a movement from the world of push to a world of pull. And perhaps it will help those who rightly point out that we have not yet systematically and explicitly defined the Big Shift.

Comments

[tcruise]

There seems to be some conflict here with your language. We can't stand people who use the term "extract value" because this is the mindset of Wall Street and was the mindset of Enron (the Enron people would always say "extract value". Literally, they mean suck all of the wealth out of CUSTOMERS and the Market using your resources to your advantage. Thisis worse than zero sum. It's "I'll suck all the wealth from you for myself, even if that means the rest of the country suffers. And I will get richer and more powerful from this."

So I suggest modifying your Big Shift to the include the following:
1. Delivering value to your customers by using your knowledge to obtain a competitive advantage.

2. Helping customers to prosper (and society) by delivering value to them so you can prosper, thereby creating a virtuous cycle.

Please eliminate "extract value" from the business school language. It shows that you haven't worked with customers at delivering value.

Nuff said.

[David Phipps]

Great article underscoring many emerging trends in academia as well as business. I am confident the same is true for not for profits but don't have any evidence. Our worlds of technology commercialization and knowledge mobilization are moving from push to pull and focusing on trust based relationships.

[ray]

a nice read. probably the most lucid account of about the future of business that i've read. thank you

[roy wiliams]

Great article.

You might add Knorr-Cetina's 'micro-global structures (http://ejournals.ebsco.com/Article.asp?ContributionID=7788525) which argues for a fundamental shift from Weberian organisational structures to 'networked' structures, and cites global finance and global terrorism as two key case studies.

[TropicalGringo]

Lot's of interest in this research (shift index) in Latin America. Here's an article I wrote on the topic in one of Colombia's most important magazine portals (Dinero.com) http://ow.ly/janQ

[Tom Foremski]

This is hardly succinct :)

This is the crux:

"If the logic of the Big Shift holds true, we are moving from a relatively stable business environment to one characterized by rapid rates of change with ever more disruptions generating increasing uncertainty and unpredictability. The economic imperatives and the management practices and institutional arrangements required to address those imperatives will lead to more instability rather than less."

Things will continue to be unstable despite the tools, imho.

[Dimitri Limberopulos]

Excellent article! I've been scanning the web (blogs, news, etc) and this is the first time that I see a clear article about what's happening in our world.

Congratulations John.