Liberated Companies

Chapter 1: The Trajectory of Technology

So, you tell me that you are taking your company digital?

I want to hear your idea of technology, not that you introduced this or that app.

- Paraphrased from Friedrich Nietzsche, Thus Spoke Zarathustra (1891)5

To devise an organizational design that works well in a world increasingly dominated by technology, one has to understand two things. First, we must grasp the essence of technological progress, the direction in which it is leading us-in short, we must understand the "wants" of technology. Second, as technology and humans become ever more closely intertwined, we must ask: how do humans and technology flourish together? Let's save the first question for later and answer the second question first.

The three ways of understanding technology

Old truth: technology is just a tool

A hammer, a coffee machine, or a smartphone app is a tool, a technology that we are using. Humans use these tools to manipulate the world around them, to get results. Natural problem-solvers that we are, we look around for the best tool to assist our efforts. If the tool is available, we simply need the skill to use it, and our lives will be easier. The basic thinking of many people in business is similar: tools help to solve problems. All we need to do is to make a tool available to workers and train them how to use it.

But is this really true? Of course not. For as long as technology has existed, the relationship between tools and people has never been a one-way street. Humans invented and used tools, and their use shaped human culture. No technology was ever inconsequential to human mindsets, values, social systems, even the rise and fall of empires. Anthropologists even divide cultures according to their tools: Stone Age, Bronze Age, Iron Age, Age of the Sail, and Information Age, to name a few. The impact of tools doesn't have to be as dramatic as gunpowder or printing; even the inconspicuous coffee machine intervenes in the way we structure our day, determines where and when we gather, takes up a prominent place in our homes, changes our biological mode of operation by drugging us slightly, and sends many of us into fits of rage when dysfunctional.

Tools have shaped us into what we are today. There is every reason to believe that with ever more technology available, the more and more we are shaped by it. As Marshall McLuhan is often attributed to have said, "We shape our tools and thereafter tools shape us."

Even more true: technology as a maker of decisions

People in companies have already lost control over many things they used to do. In the information age, companies have delegated many tasks to complex systems, be it in production, distribution, accounting, or sales. These systems are so complex that no single person knows what the systems are really doing. Even teams of experts often struggle to make sense of the sheer complexity of modern systems-a fact that is clearly visible in the high failure rates of modern software projects. Humans have set up these systems, but are they fully in control? Are they making the decisions? Our control is limited by design because we want the machines to take over our work, to automate much of what is happening. The algorithms humans have set up mesh with other algorithms to produce the outcomes that we want, and we tend to understand less and less of their inner workings and true complexity. Still, we choose to rely on them out of necessity.

How much will we be in control tomorrow? Certainly less, as artificial intelligence becomes more pervasive in the workplace. The more we utilize technology, the more that technology will make decisions for us: today, just simple deterministic decisions, those that can be easily automated; tomorrow, more complex decisions, those requiring judgment. Without experts to act as translators between business and technology-be they engineers or highly specialized functional experts in logistics and accounting, for instance-modern businesses could not exist today. Yet even experts are limited in their ability to control, as it takes five things to be in control of complex systems.6

1. The correct information.
2. A group of knowledgeable people (a single individual's cognitive abilities are usually too narrow and biased).
3. The right group process to analyze and weigh hard (measurable) and soft (intuitive) data.
4. The discipline to keep to a proven process of synthesis every single time, avoiding shortcuts.
5. The discipline to evolve the process itself.

This is a five-point recipe for making solid decisions about complex matters. The better an organization is able to apply this recipe, the more it will prosper. The trouble is that hierarchical companies find it hard to apply this recipe effectively, for the following reasons:

1. "Correct" information is hard to get. If the workplace is not a safe place to speak up, people will suppress some information. People subjected to powerful bosses will react in a politically correct manner so as not to upset anyone with power over them.
2. The people making decisions are the ones furthest removed from the problem: the managers.
3. The process for analyzing data in hierarchies is often skewed towards everything that can be measured. It is further limited by the fact that it is usually quite unsafe for people to speak up about their intuition or express divergent views.
4. The discipline to keep to a process can easily be undermined by an arbitrary personal decision of the highest-paid person in the room (HIPPO). It takes tremendous listening skills for superiors to refrain from dominating decision processes.
5. The discipline to evolve the process itself is likewise undermined. Evolution and betterment might not be the target of a hierarchy at all. A hierarchy inherently favors stability, not change.

Major power differentials between people are systematically detrimental to making sense of complex systems, and this defect has grave consequences. As technology becomes increasingly complex and important for the survival of companies, conventional hierarchical companies will be less and less able to benefit from technology.

New truth: technology as a co-worker

As Kevin Kelly mentions in his book, What Technology Wants, "technology is an independent force in itself. Nobody is in control now and humanity will be less in control tomorrow. The technium is already whispering to itself."7

Today, most companies are already so complex that decisions are made by a mixture of humans and machines. In companies like Amazon, Google, Netflix, and Facebook, most day-to-day business decisions are made by algorithms in real-time. Have you ever tried to talk to their "customer service people"? Overwhelmingly, the product itself, in the form of some specialized algorithm, is in charge of customer interactions-and those algorithms are doing their job extremely well. Much better than the customer service peoples of cable or telecom companies usually do.

People inside technologically advanced companies tend to work more on maintaining and experimenting with algorithms. The algorithm becomes a co-worker-one that is extremely skilled in specific functions. Humans specialize in those things that they are more adept at, such as the holistic perception of contexts and setting purposeful directions. AI researchers have concluded that humans in the digital age will be an asset to any company, as they supply a certain form of specialized intelligence.8 Supplemented by all the multiple forms of intelligence that AI has to offer, the human-algorithm team can achieve much more than either can alone. Take chess, for example. There is no human on earth today who is able to beat modern chess programs. However, in tournaments where humans are allowed to play assisted by AI, the combination of human and machine tends to beat AI that is not supported by humans. There may, of course, come a point in the future when human interference in chess AI will no longer increase but may actually impair performance, but business is much more complex than chess-its rules are much more fluid, and its streams of information are much more ambiguous. In the context of businesses, human intelligence and machine intelligence are likely to have a productive relationship for a longer period. If humans and machines are more and more equal co-workers, the companies that benefit will be those that manage to create a work environment that fosters this cooperation.

Today, we work and live with companies that are a reaction to the challenges of the industrial age, and the work-environment design that best suited industrial technologies was bureaucracy. Bureaucracy replaced charismatic domination with legal domination, replaced haphazard arrangements with standardized processes and a clear hierarchical way of making decisions that was focused on analytics, efficiency, consistent outputs, and reduction of waste.9 At the time of its invention, bureaucracy was considered an antidote to bad management. Max Weber, a German sociologist credited with "inventing" bureaucracy, wrote in 1922 that "organizations are shaped by the relentless march of technological and managerial reality."10

Today we face the relentless march of the algorithm. There is so much benefit inherent in algorithms that we adapt our...