This episode is hosted by Boundaryless Conversation Podcast host Simone Cicero with co-host Stina Heikkila.

The following is a semi-automatically generated transcript that has not been thoroughly revised by the podcast host or by the guest. Please check with us before using any quotations from this transcript. Thank you.

Simone Cicero:
Hello, everyone. Simone Cicero here, as always, your co-host of the Boundaryless Conversations Podcast. And today like almost always, here with me, there is Stina Heikkila, my usual co-host.

Stina Heikkila:
Hi, everyone, very happy to be here.

Simone Cicero:
And with us today, we have I mean, again, I’m not exaggerating this time, but we have a real — a legend of strategy with us today, Rita McGrath.

Rita McGrath:
It’s a pleasure to be here.

Simone Cicero:
Thanks for joining us, Rita. We really look forward to getting your insights to our community. And we have this fairly productive preparation call with you. And we, basically with Stina, in preparation of this conversation, we were referring to two little pieces of all of your work or insights that we used in the recent white paper that we released in November 20th last year. And these two elements that we feel are a good starting point for this conversation are essentially two main aspects that we identified in the research so far. And on one hand, it’s this idea that the economy is evolving into a digital context, where as you said, recently, when you can transact more readily, you can start to see market-based transactions where you used to have only firm based transactions selection.

So, this is one key point that, of course, we are researching since ages. This is our bread and butter, I would say, marketplaces, ecosystems, platforms, that are overcoming the traditional firm. And on the other hand, you also captured and this is something that you captured, of course, increasingly, in the last few years in your work, this idea of inflection points. And more specifically, this idea that even the pandemic has been, to some extent, a very tangible and to some extent, a very big inflection point that brings us to reconcile, I would say, this idea of technological development, with an idea of having to rethink also the social compact around work, the role of organization. So, having said that, what is, in your words, the new strategy playbook that organizations need to develop and institutions for this new world?

Rita McGrath:
Well, I think the first observation I would make is that a lot of the tools and ideas that we use as the foundational frameworks of strategy really came from a very different time and place. When you think about a lot of the original strategy work, things like Five Forces Analysis, and BCG matrix and those kinds of tools, they were really emerged in the 70s, mostly, sometimes the 60s, mostly in an American context. And if you think about what’s changed in the world, since then, back then there were very strong barriers to entry for many industries. The industry was considered to be the focal point of analysis. Your fate was really finding an attractive position in and attracted industry and then minding your entry barriers and maintaining your business. And what’s happened since then, is clearly the world has globalized. You know, it’s possible now to economically manufacture things 10s of 1000s of miles away from where they’re actually going to be consumed. That was new in history. And it was really facilitated by the invention of the container shipping vehicle in the late 50s.

Of course, you have the internet, which has introduced all kinds of connections and dropped the price of communications radically. And you have new forms of competition. So, new competitors, and so forth. And so what I’ve argued is that this has the effect of making it much more difficult to sustain a competitive advantage once you’ve achieved one. Not everywhere, but in many, many parts of the economy. And so what you’ve got is the necessity to create new advantages, certainly to exploit them, but then to be astute as to when they have eroded in their ability to deliver success to you, so that you need to get better at several things, among them disengagement.

So, the elements of the new playbook are we need to be thinking about being in motion rather than stability being the normal thing. You can think of that as being agile. We need to get much better at disengaging from things in a healthy way. So, good strategists decide what they’re not going to do as much as what they are going to do. Then we need to get much more smart about resource allocation. And in fact, I was just talking to a CEO yesterday who was saying she’s very concerned that her firm is very good at the core business. But when it comes to investing resources in the possible future business, she’s very concerned that they’re just not doing a good job of that. And I think that’s a really core element of the new strategy playbook.

Fourth, we need innovation as a proficiency. And a lot of people think it’s getting great ideas, that’s usually not the problem. If you really want to build innovation as a proficiency, you need to get good ideas, but you also need to be able to incubate them, and you need to be able to accelerate them so that they get into the market in a healthy way. And unless you’ve got proficiency at all three of those activities, you’re really relying on your last competitive advantage, you’re not creating new ones. This, of course, has enormous implications for leadership, because increasingly, leadership needs to be what I call discovery-driven. And I elaborate on that in the new work, which is the leader that says, don’t bring me a problem without having a solution. Or I don’t want to hear bad news or makes it clear, they don’t want to hear uncomfortable news. That leader is going to be left out of vital flows of information that they need.

And finally, I think all of this has huge implications for talent, to the point where Chris Yeh and Reid Hoffman of LinkedIn wrote a wonderful book called The Alliance. And they talk about the tour of duty career, where instead of signing on with the company, and having a lifelong association with that company, you might sign on for a tour of duty, you might exploit that for three, four, or five years. But then when it comes to an end, you may decide that it’s better for you to part ways and go into a different mode, and that’s okay. But it has big implications for HR and talent and how you manage people and how you think about assembling your talent for a given strategic initiative. It’s becoming much more like making a movie or you know, the Hollywood model than the traditional industrial model. So, I think those are all some very specific things that are different today.

Simone Cicero:
Well, this resonates a lot with also our recent work, and if I can think about our work on the entrepreneurial, ecosystem-enabling organization. Or this idea that a modern organization is made of small nodes, or small micro-entrepreneurial units that resonate with one of the points that you made, you know, this idea of becoming better at resource allocation, and generally becoming more able to invest and disinvest on projects, for example. And we see a lot of resonance with this idea of an organization, when there is no proper budgeting, everything is pretty much customer-driven, and you pay your own — you create your own profit and loss. So, that’s that kind of an extreme way to address from a strategic point of view, they need to make organizations, as you said, discovery-driven. And totally echo on your point on this being extremely challenging for leadership. So, in practical terms, in terms of, for example, organizational shape, what do you think is going to be? Or what are the trends that you think organizations can embrace to actualize some of the points that you mentioned?

Rita McGrath:
Well, some of the theory, right, is that you want to be pushing decision-making rights, as close to the stimulus from outside the organization as you can, while using processes to make sure the whole thing doesn’t fly apart. So, you know, if I have a challenge from a customer or a competitor, just something interesting, I don’t want to have to wait for the information about that to travel 10s of people away before I get a decision, and then things come back to me and now I can take action. You really want to empower people as much as you can, to make decisions at as low a level as you can. Now, that has really important implications, because it implies a lack of formal controls. It implies you’re gonna have to give up on some of the limits and practices that many organizations use to control people’s behavior and try to get a consistent outcome.

But what we find is, if you can use process and context controls, then you have much less need to worry about imposing a specific, let’s say your authorization limit is a 1,000 euro or something. That’s an example of a control that just is very narrow, and may not suit a particular situation. So, let’s say that you’re an incumbent trying to compete with something that a startup is doing. Well if you’ve got to wait around for procurement to make their decision on whether you can spend 5,000 euro rather than 1,000, it’s just gonna slow you down. And it’s an example of the kind of things that bog you down. So, among the big challenges are how do we keep control in a sensible way without hamstringing the operations of the company?

I think a second design principle — So, the first design principle is really pushing rights to decision as close to the stimulus required by the organization as possible. I think a second design principle is that you want to align your incentives as much as possible around what’s actually a good outcome for the organization. And in many organizations, that doesn’t happen. And it doesn’t happen for a lot of reasons. You know, organizations develop silos, which have their own territories and their own perceived interests. And so when that starts to become a big factor in what makes people behave, that creates a real problem, because now what they’re doing is optimizing their political fortunes rather than doing what’s really best for their constituencies in the organization. So, that’s something to really watch against, especially as an organization gets larger.

Simone Cicero:
Right. And that seems to be an interesting friction, I would say, between — besides the last point that you mentioned, which is totally resonant with this idea of avoiding what is possible to accumulate this organizational debt. And so to actually avoid for people to have the possibility to hide behind some kind of power structure or something like that. But on the other hand, I think the most interesting part is, it’s your hint towards this, a little bit of friction between control and coherence. So, coherence seems to be something that we can, we should look for. On the other hand, control is something that we should let go. So, for example, it’s interesting when you say, you know, don’t wanting to wait, for example, for certain information to reach decision-makers implicates that you give up on control. And it is, let me think about what companies like Amazon have been doing. So, for example, by enforcing these Black Box interfaces between elements in the organization, between units in the organizations. And these automatically, basically tells you, you don’t need to mind that business of the other unit. And at the end of the day, if you do this, it’s easy to change an existing unit with a third party or another element from your ecosystem. So, to some extent, if you try to be coherent and non-controlling, you automatically evolve into a more systemic organization. What do you think?

Rita McGrath:
Yeah. So, Jeff Bezos very famously says one of the things we confuse in organizations is the distinction between type one and type two decisions. And he says type one decisions are very consequential, they’re irreversible. Once we’ve made the decision, we can’t easily undo it, they can have big implications. And those decisions need to be taken with considerable care and thoughtfulness and as much rigor as we can put into them. And then there are type two decisions, which are basically reversible, where even if the consequences are negative, it’s not life-shattering, it’s not devastating. And most importantly, they’re reversible, they’re sort of like options. And he makes the point that what most organizations do, is they’re far too eager to put everything in the type one box. So, everything gets treated as though it’s this massive choice that the company has to make. Whereas if you allow people to say, hey, here are the characteristics of a type two decision, you can make those kinds of decisions. And it just frees people up to get on with it. And then ideally, what they’re doing is they’re learning as they go, and they can then share those learnings with others in the organization.

Stina Heikkila:
Actually, I wanted to in this context go also back to the idea that maybe one of the reasons that we want to have this kind of flexibility inside of organizations, to be able to — for people to make fast decisions, to be able to have a little bit more of a space of maneuver in their roles is also driven by external factors. And as you have written so extensively about this topic of inflection points, we’d love to hear more about how those things relate. So, the external environment influences how organizations operate. But also within that broader context, what is changing in the relationship between the organization and society, in your point of view?

Rita McGrath:
Certainly. So, an inflection point, drawing on Andy Grove’s original definition of the concept, is some force that changes by 10X and something you have previously taken for granted about your business. And those could take your business to new heights or they can cause your business to spiral into disaster. But they can’t be ignored. And the reason an inflection point so often takes organizations by surprise is that any organization grows up in a particular moment in time, even if it’s born at a particular moment in time. And certain things are possible and certain things are not. And it could be because of technology, it could be because of natural circumstances, it could be because of regulation. And what an inflection point does is it changes the nature of those constraints. So, it either imposes new constraints, or it removes old constraints.

Now, if you’re in a working functioning successful entity, it has developed over the years a recipe for how to operate successfully. So, that feeds into its key performance indicators. It feeds into organizational processes like budgeting, it feeds into what causes people to get promoted and rewarded, and so forth. And what an inflection point does is it throws all those things into question. So, yesterday, in the before days, hopping on an airplane to go visit someone because that was the way you did things was perfectly normal. It was unremarkable. Today, that decision involves a lot more calculations about is this worth it, should we do it, and so forth. So, just a simple decision like that, all of a sudden, is a very different kind of decision than it was even a year ago. So, I think what an inflection point does is it causes a whole accelerating group of those kinds of decisions, to all start to implode upon each other at the same time.

Now, it can lead to great opportunities. So, we’ve certainly seen companies such as Amazon, that have benefited tremendously from the pandemic, because it’s suddenly taken a whole group of consumers and users who previously maybe weren’t that interested in things like grocery deliveries or remote logistics, it’s brought them onto its platform. And of course, it’s had a devastating effect on other kinds of industries. Anybody that relies on strangers being comfortable in close quarters together, is certainly seeing ricocheting negative effects on their business. So, that’s an inflection point. And I think part of the challenge for leaders is how do I develop a broad enough perspective on what’s going on outside the narrow purview of my organization, that I can see where these things are starting to bubble up. Because the other thing I would observe about inflection points is, when they come upon us, they feel as though they’ve emerged instantly out of the blue, “Oh, my God this is just so sudden. And yet, if you really look at them, even the pandemic, there were plenty of bits of information that there’s this was something that was definitely a possibility.

And so one of the problems we have as human beings is we have two big limitations when it comes to apprehending inflection points. The first is, we’re terrible at exponential phenomena, something that doesn’t have a linear progression, but has an exponential progression, what we fail to realize, it’s a bit like the old story of the chessboard, right. There’s one grain of rice on the first square, and then two grains of rice on the second square, and then four grains of rice on the third square, and so on. And by the time you get to the second half of the chessboard all the rice in the kingdom would need to be consumed to create that on an ongoing basis. And human beings are bad about that. We’re also very bad about leading indicators. So, information that gives us clues as to what might be happening, but we often don’t see their significance or we gloss them over, or we’re just not paying attention.

Simone Cicero:
So, with regards to this idea of inflection point to still, the question that I have for you is, to what extent these inflection points we are so important to question the very idea of strategy. Now, because we started to discuss this idea of the strategy playbook that needs to be updated for this new age. But the question that I would like to ask is that something that goes deeper than just changing the playbook? So, I mean, for example, that may be the priority for organizations may soon become resilient and antifragility versus maybe just plain good old market success. And in that case, it’s antifragility for what? because we are seeing an economy or a political system like it happened a couple of weeks, well, one week ago in the US with the capital incident, and so on. We are seeing these systems now really flickering a bit. So, that’s my question, in your impression, are we actually about to go deeper in questioning the strategy playbook into something different?

Rita McGrath:
So, I’m hearing two questions. One has to do with the role of strategy as you move forward, and then the other has to do with the systems implications of some of the individual decisions that we make. So, let me take those in turn. I believe the role of strategy is more important than ever. You know, if you think about it, what does strategy exists to do? It really just exists to help you make better decisions under conditions of competition and limited resources. So, if you buy the idea that you can’t do everything, well you’ve got to make some choices. And a good strategy is simply there to suggest what those choices should be. And whether you’re in a very uncertain changing environment, or whether you’re in something that’s more stable, a good strategy should serve you well in either context. So, that’s strategy. Now, let’s come to the question of resilience and antifragility. Roger Martin has done some wonderful work on this. And what he’s pointing out to us is that we have allowed local optimization and local efficiencies to create a condition in which the system as a whole is very fragile. And this is something I’m quite passionate about. If you look at the post World War Two prosperity certainly in the United States, one could also make the argument in Europe and then subsequently, in much of Asia, the focus for business in many cases was not so much on maximizing profit as it was on maximizing jobs.

And the idea was you have these people who’ve been heavily involved in global armed conflict, they’re all coming home. Nobody wants to go through that again. And so let’s think of what it would take to create the undergirding to a prosperous society. And it was things like business leaders being held to account for the quality and the number of jobs that they created, where they would actually hire more people than they strictly speaking needed. But it created a system with more buffers, right? It involved corporations reinvesting rather than extracting money and giving it to shareholders. It involved many, many, many dozens of individualistic decisions, which said we are going to sacrifice some short term optimization for the greater good of the system as a whole. And that was a philosophy that was very dominant postwar through the 60s, I would say, right up into the 70s.

And what started to happen then was some real things and some, what I would call ideological things. The real things that did happen was you did start to see the first effects of globalization. You did start to see the first ability to export routine jobs, you did start to see automation kicking in, taking over jobs that were sort of low-level routine kind of things. But you also had an ideology that shifted and the ideology said, “Look, rather than running organizations for the benefit of the whole society, we’re going to run organizations with a particular focus on profits, and particularly a focus on shareholder profits.” And it was a philosophy that became very popular. And it was used to justify all kinds of rollbacks of worker protections, labor protections, social contract kind of arguments, and, and, and, and. And I think where we are, and what the pandemic has really brought home is that we’re now in a situation where we’ve got dramatic inequality, which is a direct result of these profit-seeking shareholder sensitive policies.

And what we know about inequality and this has been well studied, is the societies that have massive inequality tend to be much more violent, much more fragile, much less resilient, you tend to see the kinds of political divisions that were all too readily on display last week. And you’ve also got competition among the, what — there’s a scholar called Peter Turchin who studies this stuff. And he said, “What you got is too many elites looking for the same jobs.” There’s still only one president, there’s still, at least in the United States, there’s still only 435 members of Congress. And yet, you’ve got so many more of these elites, because the income and wealth that’s flowed upward in the society is just produced many, many more of them relative to everybody else. And so what that basically leads to is a situation of conflict, when people who feel justifiably in many cases that the society has not been designed to help them, participate in its prosperity latch on to these disaffected leaders. And that’s where you can create these enormous amounts of divisiveness.

Stina Heikkila:
When listening to you, Rita talking, it just came to mind this idea when you were talking about this shift in the sense of purpose or “raison d’être” for companies. And we’ve had previous organizations about also the role of exponential sort of technologies within that. So, as the more you managed to speed up transactions, the harder it gets to be close to your constituents in a way. Whereas maybe in that post-war period, at least initially, the organizations were much more entangled in the local communities in which they were engaged and operating. So, what are your thoughts on that in the digital transformation? Can we still have that model? And do you have ideas on how to reconstruct that link between the company and the community in which it’s embedded?

Rita McGrath:
Yeah. And I think digital is a neutral tool in that. I think digital can accelerate it or digital can decelerate it. It depends on how you use the tool as in any tool. When it comes to organizations being embedded in their communities, so here’s a perspective, if your underlying society is ultimately going to fall victim to armed conflict, undemocratic institutions, the rule of dictators, I’m sorry, you as a profit-making business are going to have a lot of problems. You’d probably much rather exist in a society that didn’t have those characteristics. So, at a very macro level, the interests of business organizations and the interests of community organizations are very well aligned. What you want is a functioning society where there’s rule of law, and there’s property rights, and people abide by certain rules. And there’s an infrastructure to make sure that you can conduct business without unduly worrying about corruption or other things. So, at a high level, it makes sense that organizations would be very concerned about the health of their communities.

At a more macro level, you know, most organizations are still in some kind of physical place. Unless you’re producing a purely digital offering, which some do. But even then you’ve got a physical place, you’ve got to have your data centers, you’ve got to have — you are physically in the world somewhere. And so to the extent that those places are healthy places with a clean environment, with your workers interested in willing to live there, with a decent education systems with decent health care systems, you know, all of these things work together. And I think where we get into trouble is when we create a set of incentives where certain organizations feel that they can socialize their costs, and capture the profits for themselves and benefit that way.

So, there’s a great example that Jeffrey Pfeffer uses of the city of San Francisco, which basically got fed up with so many companies there basically not providing their employees with adequate health care. And so they said, “Look, we’re starting a thing that we think was called Healthy San Francisco. And either you will pay tax on your earnings. And we will set up these health care systems to take care of your people or you will provide your people with adequate health care, or there was one other option. But in any case, they basically said that companies should have to pay for the health of their employees, they should not be allowed to externalize that cost. But if you’re going to hire a person, you need to keep that person healthy, was their basic position. And of course, business screamed and carried on and waved and ranted and…

And so two or three years go by, what happened? Did business stop setting up in San Francisco? No, it’s one of the most desirable places in the world to have a business. Did companies go bankrupt? No. Yes, they made maybe a little bit less profit that would have gone into the healthcare pocket. But the flip side was that people were getting seen now, people who’ve never had access to health care in their lives were now getting treated much earlier, the burden to the whole system had lessened. And most importantly, the emergency infrastructure for San Francisco’s hospitals wasn’t under the same kind of strain. Because what happened was people without access would wait until they were desperately, desperately ill. And then they show up at the emergency room, and you’ve got multiple, very expensive things to now deal with. And so it’s an example to me of how you need to think about where are the costs being born? And what is a fair way for a business to be able to live in society with a business model that can support their expenses?

I mean, another very interesting example that’s playing out now, is this whole thing about gig economy workers and Uber would be an example. And being said, “No, no, no, they’re not employees.” Well, I can by that. I mean, I can see where some of our older regulations around employment. I mean, I know myself, I’ve had employees and it’s a pain in the neck. Not because I don’t want to spend the money, but it’s such an administrative and horrible, which is awful to have to do it. The bureaucracy and paperwork is terrible. On the other hand, that doesn’t dissolve the principle of saying if you’re going to hire a human being to work for you, you have certain responsibilities to the society in which that human being lives, but you can’t just foist it off on society to deal with, you have to take some responsibility. And however, we work that principle out in whatever the new employment contract becomes, I think it’s really, really important to do that. Because ultimately, if businesses don’t do that, what they’re essentially doing is shifting costs and responsibilities that feed their business model to the communities around them.

Simone Cicero:
I mean, that’s a very interesting place to have this discussion, to be honest, because I think you are really getting there to some of the key questions of organizing in the 21st century. Because when you, for example, in some of your recent pieces, you have been hinting into the role of policymakers. If I’m not wrong, it was when you were talking, again about these gig economy work and platforms in general, and you were talking about this idea to enforce multi-homing for the consumer. And also, you know, I would say, some policy moves that can to some extent generate specific outcomes into how platforms behave and implement their services in society.

So, to some extent, there is a hint into our future that is made of more interaction with brands and policymakers, which is also what Ben Evans has been talking about, in the last year, speaking about the age of regulation, or the next technological age being actually an age of regulation, because internet gets everywhere. So, my question would be, is there a possibility that actually politics — and I must say, very specific in local politics — so I would say maybe a state in the US or a particular state in the European Union can enforce certain requirements on to businesses, is it really a regionalization, even of businesses and their impacts a potential outcome of these new evolutions that we’re seeing in society and the world of business.

Rita McGrath:
I mean, certainly. Capitalism left to its own devices is an amoral way of organizing an economy. It doesn’t have first principles baked into it. It basically says you’ve got a buyer and a seller, and if they can come to terms about a transaction, we’ll have the transaction happen. And those that use those transactions to mediate between labor, and the ownership of the means of production, and the owners of capital can sort of figure it out. But capitalism can produce terrible outcomes. You know, what people constantly and this is where, you know, people take the position that markets can solve everything. I’m sorry, markets can’t solve everything.

So, some very specific places where capitalism fails are when a benefit is highly concentrated, but a harm is broadly distributed markets fail. So, if I’m a polluter, and I make you a mountain of money by imposing harm on the environment, you and I and our 15 friends in our immediate family suffer a little bit of harm. Well, gee, it’s not so nice out today, as it was the other day, but there’s no specific thing that it ruins our lives. And yet the person that is doing the polluting experiences a great deal of profit from that, right? So, that’s one case. Another case is where the harm is very heavily concentrated, but upon people who are fundamentally powerless. And the benefit is sort of broadly accrued to the greater good and that’s a case where you’ve got a few people suffering very badly. And most of us sort of moderately benefiting. So, there’s no real hue and cry, because the people that are suffering are powerless.

So, an example there would be back in the 60s, the way that the government basically tore up a lot of poor neighborhoods to put highways through for the benefit of automobiles and trucking interests. And there was no real human cry because the people being negatively affected were very concentrated and very powerless. So, those are just two examples of where capitalism fails. So, when you think about the state’s making interventions, there are many interventions currently being made in the United States, certainly. And one of the cool things about the US well, there’s a lot that’s wrong with it.

But one of the cool things about it is we’re like a petri dish for hundreds and hundreds of social experiments all over the place. So, there are states that have already imposed a minimum wage raise, so to $15 an hour, which is still by historical standards very low. I mean, if minimum wages have kept pace with inflation since the post-war period, they’d be in the $40 range, not the $15 range. So, that’s one. Another one that I think is fascinating that’s playing out right now is many states have now said, we’re going to go for what’s called approval voting. So, ranked preference voting, in which you can’t have, say two dominant party candidates and a third-party candidate comes along who’s a spoiler, and it’s a winner take all vote situation.

In rank choice voting, what happens is everybody votes, but they vote for their top choice. And then their other choices that they can kind of live with. And if a particular candidate doesn’t achieve a majority on the first go-round, what ends up happening is the lower candidates, the one that gets the least both gets knocked up. And those votes get redistributed to that candidate’s second-tier preferences, right. So, it’s a little bit more complicated, but the collective effectiveness is to create conditions in which candidates, instead of trying to splinter voters and appealing to increasingly polarized basis, now what they’re doing is they’re saying wait a minute. I better appeal to the moderate voter because my opponent’s voters could become my voters depending on how the situation plays out.

So, it’s an electoral system that mitigates against polarization. And I was very encouraged that in Alaska, they’ve just voted this in. And one of Alaska senators, Lisa Murkowski has just said, “Look if my party isn’t willing to be a lot more clear-headed and sensible about the kinds of policies they’re going to support, I perhaps don’t need to be part of that party.” But I think part of what makes that possible is she can now appeal to the voters directly without it being a winner take all situation. And so let’s say she might not be any one particular candidate’s number one, or she might not be the majority’s number one candidate, but if she’s everybody’s number two preference, she’s got a much better chance of winning than in other situations. So, I think there are structural things that you can do that create the conditions under which more just economic choices get made.

Simone Cicero:
So, before maybe touching the last point that we wanted to touch with regards to how actually organizations can get closer to where these phenomena are. But I would like to ask you a reflection around the idea that, and the interplay, that these evolutions in organizations and companies has with the conversation on politics and social media and dissent and consensus forming on social media, which, for example, things such as Qanon or that kind of discussion on the politics. So, the question that I would like to ask is, if really, the space of policymaking becomes so important, then probably it’s not something we can vote to. It’s something that we can — we really need to implement in terms of not just policies, but also entrepreneurial activities, and businesses. So, the question is, do you see these, I would say, porous conversations between the new politics and the new discussion that is happening on social media, for example, and the world of business in terms of creating this collaboration also wuth local institutions?

Rita McGrath:
Yeah. So, a couple of things that I think are worth recognizing, one of the effects of digital has been to create the conditions under which large amounts of data that used to be safely locked away in manual files, we cannot connect to them. And so with very little effort, we can now connect your cell phone records, with your medical records, with your real estate records, with other records that were previously, you know, set. I mean, we could do it before, but it was, it was hard, it was effortful, there was friction. So, one of the things that these new communications technologies have done is that they’ve reduced a lot of these frictions. And what that creates is systemic interdependency, because now instead of oh, well the housing — the mortgage record went into a big file in the county courthouse. And if I wanted to find it, I could, but I had to go to the county courthouse, call for that file, get it up.

Now, it can be connected with the flick of a switch. And so what that produces is complexity. And the difference between complicated and complex is a Boeing 747 is a very complicated thing. It’s about 4 million moving parts. But you know, what those parts are going to do. With a complex system, you don’t know. So, I think the first Uber observation I would make is that we have allowed complexity to occur without really comprehending what the consequences could be. So, if I take that specifically to social media, and I’ve been very public about this, which is, we have sleepwalked our way into allowing these companies to monetize and in many cases weaponize personal data, for the benefit of a business model that, to me, is socially a very dubious thing. Is the benefit that I get advertised a pair of rubber boots when it’s raining outside, is that such a social good that we would give up just enormous amounts of expectations of privacy, safety other real public good?

So, I’ve said for a long time, I thought this business model was going to be in big trouble. I mean, I said that in the beginning of my book, in 2019, that, you know, people don’t understand. And just as evidence of this, all Apple did when they introduced their latest iPhone was they said, “Well, we want people to actually acknowledge that they’re willing to give up their data.” And Facebook totally freaked out, because they said, “Well, people aren’t going to do that.” And my position on that is, “Look, if your users don’t approve of your business model, and you’re pursuing that business model, anyway. I mean, doesn’t that sort of tell you there’s something wrong here, that, you know, people should have a choice.” So, like, that’s one big, big thing.

Second thing that I think is a corollary, it’s not necessarily an irrevocable outcome. But we now are in a situation where facts are not respected as such to an extent, I’ve certainly never seen in my life that we’ve had a series of people saying that fake news and the facts aren’t the facts. And it’s — I mean, and that’s always been there in the — There’s always some human judgment, and what’s the fact, what’s truth, what’s not. But as a society, if we’re going to move forward science is science. Scientists look at facts and try to make up their minds from that. There are other things that are or they’re not. You know, the rule of law depends on a common recognition of reality. And so one of the things I think we’ll likely see is, as we have really stared into the abyss of what a fact-free polity looks like that people are going to get a lot more alarmed about people — lots of human beings living in their individual thought bubbles with their own belief systems that have absolutely nothing to do with what reality is. And I think that’s very worrying.

Stina Heikkila:
As we move on, sort of towards the last part of this conversation wanted to see: so it seems like, to some extent, we’re not doing a great job at the moment. We’ve kind of been taken by surprise, maybe about how this complexity is creating feedback loops that are now coming back at us. So, if we can go back to how do we get closer to this phenomenon of exponentiality and get better at dealing with the signals that the earlier signals may be for inflection points and how can we organize within this now growing complexity that we are facing?

Simone Cicero:
Yeah. So, I think the first thing to realize and Roger Martin again, points this out. He says efficiency is not always better, that there are times when we acknowledge there’s a benefit to inefficiency, where having gatekeepers, having grit in the system, having some things that require a breaker makes sense. And so examples there would be in many of these super hyper rapid markets, you’ve got breaks when it passes a certain threshold, for example, stock trading, right? There’s a breaker to automatic trading when certain thresholds are passed. Same thing with electrical grids, right? When there’s a certain kind of demand, the grid will automatically shut off parts of itself to protect the others. So, I think we’re going to take that concept of breakers and think about where else might that be necessary? You know, a little example of this is when Twitter and Facebook basically said, we’re going to deplatform some of these calls to violence, because there’s just too many of them, and we can control them. So, we’re just going to take them off our platform. That’s, to me an example of a breaker. Right? And so I think we’re going to have to think, very hard about where do we put in these frictions? Where do we put in these breakers? Because left to their own devices, these things get ahead of us, and we can’t really control them. So, I think that’s one category of things that I think would be very, very interesting.

Secondly, is we really need to look at systems as a whole, right and understand, and this is something I’m playing around with, possibly for my next book, which is our human ability to perceive the way a whole system fits together is pretty limited. And yet, if you apply some of the disciplines of what sometimes called social systems thinking or systems dynamics, you can start to really see how all the pieces fit together. It’s just we don’t often take the time to do that. What we do is we focus on, I’ll call them local optima, you know, we’ll focus on a local thing that we react to. We don’t really see the whole system as it throws out unforeseen sort of unexpected results.

Simone Cicero:
Rita, if we think about the future of organizing, what is the space that we really need to look into to see the first signs? I would say where is — When should we focus, at least from your point of view as a last point to identify how the future of organizing is going to unfold?

Rita McGrath:
Well, I think part of it is, is understanding where value is moving, that, as you have illustrated with your work, that increasingly value is moving from product, features, ownership to interactions, transactions, community, and experiences. And so I think once we figure out where value is traveling, that will give us some insight into how we want to organize to produce that value. And I also think we’re all — everyone on the planet has a mutual interest in making sure that the place where we live is going to be here when our children grow up, you know. And so I think there’s a lot of external pressures, which are also going to be put on mechanisms for organizing. And I’m an optimist. You know, I believe that every wave of new technology, and I put social media as one of those waves, they all have things that they do that are great. And they have things they do that are not so great. And as we learn about them, and it takes a long time.

And if you look at any new communication or connection technology, it takes a long time before we really understand what it means. So, if you go all the way back to the Telegraph, the fact that you could get a message across the world, a very crude message, a very rough message, but that you can get a message across the world dramatically brought the world closer, when you look at the movies, right, movie recording. When the movies were first invented, people didn’t know what they were. So, they filmed the stage plays, and they thought the real value of a movie was to be able to watch a stage play later on without the live actors being there. And it took about 40 years before all the techniques we associate with modern filmmaking came to be. And I think we’re going to find the same kinds of things with modern communication technologies that these platforms and to some extent to a lesser extent, things like Slack, and Yammer and the other communications platforms. It’ll take a while before we figure out how best to harness them and how best to use them.

And I think with social media, we’re still in a very early stage. I mean, I remember when Facebook was still, you know, you had to have an edu email address to join Facebook. And I did because I was a professor and my kids were horrified. They were like, “Mom, this is for teenagers. What are you doing on Facebook?” And of course, now, the name Facebook platform, their main signups are from people who are in their 60s. So, you know as that platform matures, and ages, we’re starting to learn about where are we comfortable with, how its evolved, and where are we not comfortable? And that may precipitate changes, just as the changes around Microsoft’s platform took place in the 90s. We’re starting now to realize and it takes, as I said, it takes institutions a long time to catch up with what’s technologically possible.

So, when you think about what organizing is going to look like, I think we need to look at where value is flowing, how we’re going to change the rules of the game, so that more socially desirable outcomes are produced and fewer socially undesirable ones are produced. And then what did the new technologies allow us to do that we could never do before? You know, one of the more interesting things I think is collaboration, as we’re doing now virtually. It’s so much more possible than it ever was before. You know, I mean, I’ve been very encouraged by that. People all over the world can now really work together in a way that couldn’t be if you all had to get on airplanes, and go somewhere. So, there’s some really bright, interesting ideas coming out of this as well.

Simone Cicero:
Well, the conversation was so so great, I think in doing one thing in pointing out how hard it is to crack this code of the vision of organizing. So, I think we need to also acknowledge that in the great conversation that we had the range so far. And also, I think it’s testifying the depth of this rabbit hole of the future of organizing. So, I mean, from my point of view, that was, again, an amazing conversation. So, one thing that I would like to ask you is just to share with us, where we should look for your most recent work. And if you have anything to suggest to our listeners, in terms of your recent work, where can they find it?

Rita McGrath:
Sure. So, the best place to start is probably my website, which is RitaMcGrath.com. It’s very simple. And on there, you’ll find links to a lot of what I do. Since the pandemic, I’ve been doing regular Friday fireside chats with people who I think are interesting or provocative, or have a useful point of view. And those are free, and you can just logon on my website and register for them. And then they’re there live, and then we record them afterwards. And so they’re on my YouTube channel and, you know, terrific guests. I mean, really interesting people, people who run companies, people who are academics, people who are well-known business personalities. So, that’s been a fun thing that the pandemic has made possible. And then people can definitely follow me on Twitter. I’m on Twitter, I’m on LinkedIn. I’ve got a Medium column that I write. So, the best place to start is really the website, and then all these others should spring up from there.

Simone Cicero:
Well, thank you very much again. Stina, do you want to add something more?

Stina Heikkila:
No, I echo you. Thank you very much, was a very interesting conversation.

Rita McGrath:
Great.

Simone Cicero:
Thank you again. And to our listeners, catch up soon.