Scalable Learning and Innovative Architectures

The ability to learn faster than your competitors may be the only sustainable competitive advantage. Arie de Geus

One of Deloitte’s internal research facilities (Centre for the Edge) recently published an interesting report on the changing nature of institutional innovation. The report begins by documenting the historical emergence (from the 1600s onwards) of ‘scalable efficiency’, the paradigm that has represented the mainstay of business practices for the last 400 years. This paradigm, which was first recognisable in the form of Dutch East India Company in 1602, used changing technologies and infrastructure to ‘mobilise financial resources from a large number of investors and create ventures at a scale that had previously only been possible for monarchs.’ Throughout the 1800s, the paradigm mutated through additional innovative infrastructures such as the ‘railroad, the steamship, electricity, the telegraph’, providing the potential for greater efficiencies of scale through the creation of the global marketplace we bear witness to today. By concentrating ‘economic transactions in a single enterprise, large companies gained efficiencies that trumped the earlier advantages (local knowledge and presence) of smaller, fragmented institutions’. The modern organisation, as we currently know it, was built on this winning formula; ‘self-contained entities that perform all critical economic activities within their own four walls’. However, as the paradigm begins to mutate once more (through new digital infrastructures), what was once certain and assured, appears under changeable conditions, to be less so; the winning formula of scalable efficiency appears to be nearing its end.

As the 21st Century begins to mature, the rate of infrastructural change experienced by many organisations increases without recourse to known history (witness the disruption to traditional publishing industries). What was once stable and predictable in terms of knowledge and understanding, now appears to be more uncertain and less predictable. With each acceleration, the value once afforded to what was already known has begun to depreciate at an alarming rate. As the authors of the report rightly anticipate, competitive advantage is no longer based on ‘stocks of knowledge, but having access to flows of knowledge to enable up-to-date information that enables adaptability.’ However, moving from centralised systems that function on the basis of predictability, to systems that respond to unprecedented events and situations will require us to puncture the threshold that defines success, not by scale, but by the ‘ability to learn (and unlearn) more rapidly.’

Unfortunately, this conundrum is built into the very principle of scalable efficiency, with the aim of reducing costs and increasing their buying power, large organisations systematically shrink the volume of partners in their ‘ecosystem’ in the process of achieving scaled efficiencies. This process then takes the effect of continually limiting the diversity of learning potential and ‘deep specialisation’ embedded within their ecosystem, leaving them integrally vulnerable to unprecedented events and reinforcing inwardly looking behaviour. To counter this effect, the authors of the report situate the practice of ‘scalable learning’ as a possible alternative, although, as they state, this would require us to examine each element of the working environment in the process of reconfiguring ‘traditional institutional boundaries’ to support a more ‘rapidly evolving architecture of relationships.’

But what would a practice of scalable learning look like? What changes would need to be made to our institutional architectures for the dynamics of co-evolution to succeed?

As any evolutionary biologist will tell you, the key or fuel to any successful evolutionary process is diversity, diversity coupled with volume, the more of each there is, the greater the chance of survival. This is the key to scalable learning, the reassessment of our institutional architectures must take the form of extending ‘relationships that span beyond their institutional boundaries’. Increasing the variability of transactions within these relationships to uncover and exploit the broad seams of tacit knowledge that exist at the interfaces and junctions between organisations and their outside. Developing practices for identifying, accessing and synthesising tacit knowledge with multiple experience bases, whilst extending out ‘to diverse participants’ and creating platforms for ‘short-term transactions (largely in the form of posing questions and getting answers) that help to accelerate learning’.

Increasing and leveraging variable transactions and relationships in this way will quickly expose the breadth of possibilities that exist for creating new organisational forms and the longer term opportunity to evolve innovative ‘institutional designs that explicitly seek to accelerate and amplify learning among a growing number of participants’. As we stated earlier, the rate of infrastructural change is increasing and the potential for more unprecedented events looms large on the horizon. If evolutionary history has taught us anything, it is that, in the words of Charles Darwin, ‘In the long history of humankind (and animal kind too), those who learned to collaborate and improvise most effectively, have prevailed’.