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From division of labour to interactive value creation

Teemu Arina drew my attention to Esko Kilpi's blog and I picked out extensive quotes (emphasis mine) - full post certainly worth reading:

"Division of labour reduces organizational effort and cost of work. Division of labour also increases the quality of efforts through specialization. For this reason all societies and all enterprises are heading at least somewhat towards specialism. The assumption has been that the further the division is carried, the greater are the savings and the better the quality of contributions. This has led managers to focus on the efficiency of activities separated from other activities and organizational design and management seen as planning and execution of a collection of independent activities forming the organizational system.

The function of the line manager was accordingly to be the representative of his box, his domain of action and resources. The manager enjoyed a high degree of autonomy and was accountable only for that domain. The grounding principle in practice was: “don’t tread on my grass, and I won’t tread on yours”.

From action to interaction

As the demands for higher value and creativity are the norm today and the complexity of offerings has grown, we have begun to see that division of labour has reached its points of diminishing returns. What managers have learnt is that division of labour always implies a scheme of interaction by which the different divided activities are made to work together. The lines between the boxes are starting to matter more than the boxes! Complex value creation is impossible without interaction. This is because any higher value activity involves complementary, often parallel, contributions from more than one person or one team. In fact the more complex the offering is and the more specialized the resources needed, the more demands there are for the amount, quality and efficiency of communication because of the inherent interdependence of the activities.

The one-dimensional approaches to interaction have been top down command and control- or sequential work-flow based communications, where the action of one part is meant to set off the action of another. Interaction has thus been seen as one way signals, a system of senders and receivers (Shannon and Weaver 1948). These approaches seemed to work in simple, low value environments, but are not creating the desired results any more. What managers have lately found out is that in pursuit of higher value and when facing the growing demands of complex offerings the value of actions is limited by the value of interaction. The two are mutually dependent.

Activities and interaction are mutually dependent

A system of partial activities that go into the completion of the total offering implies always a scheme of interaction among the persons concerned. If the scheme of activities changes, even somewhat, the scheme of interaction should change too. As the two are mutually dependent, it means accordingly, that if there are changes in interaction, so will the activities change.


We need to understand how the present ways of dividing labour have been historically based on a very different communications environment than we are living in at present.


Managing the scheme of interaction – creating a social media/communication strategy

The activity systems and units of activity cannot any more be seen as a collection of independent activities and independent high performing specialists. There are however many challenges ahead if we adopt the thinking of seeing interaction as the governing factor in organizations. One of the challenges is our language. That is the way we speak about work following the system of subjects and predicates. Our language of work is geared towards handling one independent factor and one dependent factor at a time: “someone is doing something to somebody”. Linear cause and effect rather than thinking in terms of mutual interdependence and non-linearity is built into our management speech. Yet, a situation that can be described accurately in terms of linear, rational cause and effect is least common in social contexts. An organization consisting of people is always a social network following a different logic – complex causality. Organizations as social activity processes are about interdependent people working in complex interaction.

If we take this view, it means that people and actions are simultaneously forming and being formed by each other at the same time, all the time, in interaction. Instead of thinking in terms of spatial metaphors, of organizational levels, boxes and lines, this explanation focuses attention on how the actions of people are creating patterns in time following a very different approach to communication than the sender receiver model.

Organizations seen as patterns of interaction

Organizations can be described as patterns of communicative interaction between interdependent individuals. All interacting imposes constraints on those relating, while at the same time enabling those people to do what they could not otherwise do. Supportive, inspirational, energizing and enabling patterns of interaction are the most important raison d´être of working and being together. If we see interaction as the governing factor and see organizations and organizing as relations between interdependent people, our methods of sense making need to change. Social interaction is not following linear causality, seen as a system of senders and receivers, but is fundamentally non-linear, responsive and complex. Following this logic, organizations today and information based value creation in general, can only be understood if seen as complex, communicative patterns of mainly digital interaction.

Back from interaction to action

Resource allocation has always been one of the main tasks of management: planning what is to be done by whom and by when? In integrated systems and with homogeneous resources, this allocation can easily be done top-down and in-advance. Planning can take place separate from action. When knowledge resources are the decisive factors of value creation and when work takes place in digital, global, decentralized environments, this top down process is increasingly inefficient. A manager cannot know who knows best or where the most valuable contributions could come from? The solution has been so far to try to “know what we know”, and even more importantly try to “know who knows”. Neither of these approaches has quite fulfilled expectations. The knowledge databases have not met the situational needs of users. Accordingly, people have not been able to explain to others or even to themselves in a meaningful way what they know.

Because of the aforementioned growing needs in daily organizational life a new, different approach has to be adopted. One could even claim that a new mode of knowledge based production is now emerging in, and because of, the digital networked environments. The most important platforms for the new production systems are social media platforms.

This new production method refers to a new economic phenomenon: People from the whole network contribute pieces of their time and expertise to tasks, emergently, based on their interest, availability and experience, working in a transparent, open environment. This method has systemic advantages over traditional production hierarchies when the work in progress is mainly immaterial in nature and the involved capital investment can be distributed. For most knowledge based products and services, this kind of production is the most efficient method of creating value from a resource allocation point of view.

The system is as much developed bottom-up as top-down. In a top-down system everything is created and provided by the organization to the user. The user has none or very little control over what services, information and people are available for him. Instead of forcing people into predetermined groups like groupware does, social media facilitates the natural formation of groups based on spontaneous, contextual needs for interaction. In social media, people affiliate through personal choice and need. Understanding this difference in community formation is crucial for building self-sustaining, dynamic communities.


The primary goals are increasing the value and quality of information and the value and quality of interaction and at the same time lowering the transaction costs associated with information and interaction. Even more importantly, open interaction platforms like Wikis are a medium for sharing what we would like to know next, where we would like to go, what we would like to explore?


Interactive, iterative work

... Content should be seen as the by-product of conversation. Perhaps in the future of digital work IT does not mean Information Technologies, but Interaction Technologies.

..... An organization should today be understood as complex, self-organizing, iterative patterns of interaction, through which both continuity and novelty emerge as patterns in time."

As said really worth reading - especially these days when too often everyone is writing and nobody is reading in organizations with old-fashioned command structures. Too many still believe that pressing send means that all will read the message and if doing so will have the time or incentive to change behavior...


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Bo Harald

Bo Harald

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This post is from a series of posts in the group:

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

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