An Epoch Change: The New Rules for How the World Works


by Rod Collins, Director of Innovation at Optimity Advisors

We live in a new world with a radically different set of rules. This is not hyperbole. It's a reality, albeit a reality that very few of the leadership elite want to recognize. That's because this new reality is unpalatable to those who hang onto the traditional reigns of power, even as they find themselves increasingly powerless to hold back the acceleration of a technological Cambrian-style event that is rapidly rendering old ways obsolete.

Whether we're ready to accept it or not, the way the world works today--and more importantly, the way the world will continue to work tomorrow--is radically different from the way the world worked just a few decades ago. A number of insightful thought leaders have recognized that we are in the midst of a major social and economic transformation. John Hagel calls it the "Big Shift." Stephen Denning likens what's happening today to the Copernican revolution. Don Tapscott writes about the Wikinomics and Blockchain revolutions, describing how each of these manifestations of the unprecedented capacity for mass collaboration "changes everything." And Ken Auletta has chronicled in great detail how Google, which has topped Fortune's 100 "Best Companies To Work For" in seven of the last ten years, portends "the end of the world as we know it." If this seems to be a little overstated, think about this question: Are the companies of tomorrow more likely to resemble General Motors or Google?

An Unprecedented Challenge

Change is happening at a pace that the vast majority of us find difficult to absorb. A few decades ago, none of us envisioned that driverless cars would be possible in the second decade of the twenty-first century. Not even the fiction screenwriters of Back to the Future, who presciently anticipated the Chicago Cubs in the World Series, saw that one coming. When the world is changing more rapidly than we can take it in, it's not surprising that so many of us feel overwhelmed, especially the leaders of traditional organizations.

Today's managers are confronted with an extraordinarily difficult challenge because the amplitude of change that we are experiencing today is truly unprecedented. This challenge is both validated and compounded by the unpleasant and sudden reality that strategies, methods, and practices that managers have relied upon for decades to deliver predictable results don't work anymore. This has been a hard lesson for some managers, who in failing to recognize that the rules for business have been radically transformed, doubled down on the old ways when faced with the forces of turbulent change only to severely damage their businesses. Examples include Kodak, Blockbuster, and Borders, each of whom were at the top of their industries and suffered dramatic falls because they could not adapt to rapidly changing markets.

The Pace of Change Continues to Accelerate

Perhaps what is most troubling and overwhelming to managers is that our fast-forward world shows no signs of letting up. In fact, with the forthcoming emergence of the Internet of Things and Blockchain technology, the one certainty in an increasingly uncertain world is that the pace of change is only going to get faster.
As hard as it may be to accept, there will probably be more change in the next decade than we have seen in the last twenty-five years.

If managers are to have any chance of thriving in an even more rapidly changing world, a good place to start is by coming to terms with the essential complexion of current events because what's happening now really is changing everything and ending the world as we have known it. For the first time in the history of human civilization, we find ourselves in the midst of a transition from one epoch to another. That's why all the rules for how the world works are changing. If business leaders want to master the challenges of a new epoch, they will only be able to do so if they play by its new rules. And those business leaders who fully grasp these new rules will create for themselves and their organizations a progression of extraordinary opportunities.

The Waning Epoch

Until recently, the entirety of human civilization has evolved within the context of a single epoch, which can best be described as the Hierarchical Epoch. This first epoch was comprised of three ages: the Hunter Gatherer Age, the Agrarian Age, and the Industrial Age. As Frederic Laloux has chronicled in his survey of human organizations, Reinventing Organizations, our social structures have evolved with each age as we have morphed from tribes to bureaucracies. While tribal chiefs gave way to kings and queens, who in turn were supplanted by public and private sector chief executives, the one common characteristic that persevered across the ages was the unquestioned assumption that the foundation for human organization was the hierarchical structure. Whether you were a tribal chief, a monarch, or a CEO, power belonged to those who were in charge and who had the wherewithal, either through force, law, or position, to exert their will over those in their charge.

Another basic characteristic of hierarchies is that control is the ultimate mechanism for the execution of power. These control mechanisms have matured over time as fear of consequences at the hands of an absolute authority was displaced by the regulatory structures of sophisticated bureaucracies. Nevertheless, the essential goal remained constant: compliance. Throughout the entirety of the Hierarchical Epoch, the underlying dynamic of human organizations was some form of the basic rubric of top-down structures: command and control.

The Emerging Epoch

What makes our times unique is that the digital revolution has not only ushered in the new Digital Age, it has, more significantly, catapulted us into a new epoch: the Network Epoch. Digital technology has provided the pervasive and practical means for people to self-organize within the context of hyper-connected networks in ways that were never possible before. For example, who would have thought a mere 30 years ago that the world's largest reference work would be a self-organized effort of volunteers working without assignments and without pay? None of us three decades ago could have conceived of a bossless enterprise such as Wikipedia. After all, how would anything get done if no one was in charge?

Perhaps the most important thing to understand about networks is that the way power works is radically transformed. In networks, power belongs to those who are connected, not to those who think they are in charge. And when a network takes firm hold in the market place, it tends to operate far smarter, far faster, and far more efficiently than hierarchical counterparts, which explains why--without any intention to do so--Wikipedia's meteoric rise ended the reign of the 244-year-old market leader within a decade. This network effect has also played out between Craigslist and newspaper advertising, iTunes and the recording industry, Netflix and Blockbuster, and Amazon and Borders. The transition from hierarchies to networks results in a radical paradigm shift in the way that power works. It's no wonder that the leadership elite find the new rules of our new networked world so unpalatable.

Another paradigm shift resulting from the metamorphosis from hierarchies to networks is that control mechanisms become liabilities rather than assets because, in a hyper-connected world, thousands--perhaps millions--of bad agents can now single-handedly take control and wreak havoc on systems built using traditional IT structures, as we recently learned when several social media sites were shut down for a few hours by a few pranksters who did so just because they could. It is probably not an exaggeration to say that there isn't a traditionally built IT system today that is safe from a single determined hacker. Fortunately, a new architecture for building systems in a hyper-connected world is emerging in the form of Blockchain technology. The great innovation of Blockchain is that no single individual can effect an action because the game-changing architecture--consistent with the fundamental rules of networks--uses collective intelligence dynamics rather than control mechanisms to make sure things are done right. As the world becomes more networked, it will become essential that the basic architecture of all our systems employ collective intelligence dynamics to preserve their security.

Digital Transformation

However, it not just our information systems that need to be reengineered to adapt the new rules of a new epoch. Our human organizations will need to be transformed if they want to avoid joining the list of stalwart companies that have rapidly declined from market leadership to oblivion because they could not adapt to a new epoch. As unsavory as it may be, business leaders need to understand that digital transformation has as much to do with the overhaul of the human technology we use to organize ourselves as it does with the proliferation of gadgets that continue to wow us. In this new epoch, power will increasingly accrue to the connected, and collective intelligence platforms will propel both human intelligence and human capability. Take a close look at the new breed of leaders who are changing the world as we have known it, and you will notice that they are fully competent in understanding the rules for how to build and lead networks.

Rod Collins (@collinsrod) is the Director of Innovation at Optimity Advisors and the author of Wiki Management: A Revolutionary New Model for a Rapidly Changing and Collaborative World (AMACOM Books). He writes for this column on the first Thursday of each month.