New Economic Spaces

The new technological environment of business is marked by conflicting constraints and value-creating relationships that change rapidly and constantly. It is a complex environment. In complex environments, the way to vitality and resilience is a continuous recombination of successful elements to create new versions, some of which may thrive.

As a result, the operating system of work is starting to change in a radical way. Success is based on continuous redefinition of the organization itself. It is about recombining options and contributions in a competitive and cooperative network environment.

The concept of economic space represents a new logic of organizing based on neither the traditional market nor a process. Whereas processes involve relations based on dependence and markets involve relations based on independence, the new economic spaces involve relations of dynamic interdependence.

Work is always solving other people’s problems and what defines those problems is that to understand them and to solve them, a person has to think not only about what she believes the right answer is, but also about what other people have seen and learned. What they think the right answers could be. Work, then, is exploration both what comes to defining the problems and finding the solutions. The network is the key resource. Every valuable piece of learning can be put to use by someone else, or somewhere else. At best, then, work is remixing and recombining successful elements to create new versions.

Interaction creates capability beyond individuals. Cooperative performance can be more than what could ever be predicted just by looking at the performance of the parties involved

Minimal hierarchy together with organizational diversity and responsiveness characterize these spaces. They are a necessary response to the increasing fuzziness of strategic horizons and shorter half-life of designs. Strategy used to be about rational choice between a set of known options and variables. The variables of creative work and complex environments have increased beyond systems thinking and process design. Under circumstances of rapid technological change, the management challenge is not better planning and control, but creation of protocols that make possible openness to possibilities. By creating and integrating more relationships, the networked business broadens its opportunity space dramatically. The only common goal the nodes of the network have is the growth of the network.

Firms are social and legal constructs. They are what we think firms are. It is time to renew our old construct of the firm as a newer version, a creativity- and network effects-based view of the firm, utilizing tokens and smart contracts. The democratization of technology that is taking place at the moment does not guarantee social change, but it does create opportunities for totally new social/financial practices.

Network theory suggests that what a system becomes emerges from the complex, responsive relationships of its members, continuously developing in communication. Post-blockchain smart contracts make possible risk-sharing and risk-taking in a loosely coupled network. As a result, any node in the network is able to communicate and cooperate with any other node on the basis of contextual interdependence and creative, participative engagement. The thin labor markets we have become a thing of the past.

The architecture of the Internet is based on the very same principle of loose couplings and modularity. Modularity is the only design principle that intentionally makes nodes of the network able to be highly responsive. The logic of modularity and ubiquitous communication make it possible for the first time to create truly network-based organizations, new economic spaces.

We need symmetric relations

The original Internet was designed as a peer-to-peer system. Up until around 1993, the Internet had only one model of connectivity. Computers were assumed to be always on and always connected. The goal of the original Arpanet after 1969 was to share computing resources through integrating networks and allowing every host to be an equal player. Any two computers on the Internet could send packets to each other. Firewalls were unknown and communication patterns were by default symmetric.

Reach together with symmetry and equality were the things that made the Internet such a radical social innovation.

The explosion of the Internet in 1993–1994 was largely the result of the web browser and a different logic: the client-server protocol. The client initiates a connection to a known server, asks a question, downloads the answer and disconnects. The device running the client doesn’t need to have a permanent address. It does not even need to be always on. This is the reason why broadband providers gave us asymmetric bandwidth. More bandwidth is offered when getting data from the Internet than when sending data to it. The assumption was that the majority of users want to download and consume, not upload and produce.

It was not about symmetry and equality any more.

In a centralized, hierarchical system, coordination between peers is controlled and mediated by a central server, one host, one manager. A modern version of a hierarchical system transfers some coordination responsibility down from the center to a tree-like architecture of coordinators. In this model, peers are organized into groups, where a local manager/host mediates communication between peers in the same group, but communication between peers in different groups is passed upwards to a higher-level manager. This is essentially the way almost all corporations operate today.

The future architecture of work is not the structure of a corporation, but the structure of the network. The organization is not a given system or a given process, but an ongoing process of organizing. The Internet-based economic spaces see work and cognitive capability as networked communication.

The most important model for work is a learning protocol where the value of all interactions is raised by all interactions; where every interaction and every worker benefits from the total number of interactions and workers.

Order, design and local proximity have been the leading principles of work during the industrial era, but what if in the future easier and more valuable work were in effect based on dynamic connections and interaction with people in the larger network? Exploration, finding these people and connecting with their learning is now possible with the help of new protocols and programmable contracts. The small-world geometry of social science offers a way to see order and design in these apparently disordered networks. Purpose-driven proximity complements local proximity in the world of work.

But the way we work needs to change. As people do their own thing, they also need to act as links for others. That is the new role and new algorithm in all work. The network is then the market and commons for exploration, coordination and value creation without any central (platform) authority.

Businesses used to be built on assets. Tomorrow they are built on network effects

The Internet is no longer about linked pages but connected purposes. We want to do something — with the help of AI (enabling protocols) and other people we can.


Credits Akseli Virtanen and the ECSA-team