One of the high points of my visit to the Aspen Ideas Festival was spending time with two of my favorite thinkers, John Hagel and John Seely Brown who are partners in the Deloitte Center for the Edge and co-authors of The Shift Index and the recently published book, The Power of Pull with Lang Davison.

The authors describe the power of pull as follows:

Pull helps us to find and access people and resources when we need them-think of search engines as an example .But in a world characterized by unpredictable change, a second level of pull becomes increasingly valuable: the ability to attract people and resources to you that you were not even aware existed, but once you encounter them, you realize that they in fact are extremely relevant and valuable … Finally, we need to cultivate a third level of pull-the ability to pull from within ourselves the insight and performance required to more effectively achieve our potential.

The world of pull motivated is a world where flows of knowledge become much more important than stocks, as they explain in the Harvard Business Review.

We believe there’s good reason to think that value is shifting from knowledge stocks to knowledge flows. Put more simply, we believe that flows trump stocks.

Why might this be true? As the world speeds up, stocks of knowledge depreciate at a faster rate. As one simple example, look at the rapid compression in product life cycles across many industries on a global scale. Even the most successful products fall by the wayside more quickly as new generations come through the pipeline faster and faster.

In more stable times, we could sit back and relax once we had learned something valuable, secure that we could generate value from that knowledge for an indefinite period. Not anymore. To succeed now, we have to continually refresh our stocks of knowledge by participating in relevant flows of new knowledge. And once we see that it’s flows that matter, we are confronted with the reality of an increasingly uneven, concentrated and spiky world.

There’s one easy way to see the growing value of flows of knowledge.
Look at the movement of people and firms around the world. Many observers have declared that the world is flat, that location no longer matters in an era when technology provides connectivity on a global scale. If that is true, how do we explain the accelerating growth of “spikes” – geographic concentrations of talent in such diverse areas as Silicon Valley, Shenzhen, Bangalore, and Saint Petersburg? People and firms gather in these spikes to better participate in tacit knowledge flows. Face to face encounters and collaboration trump the far more sterile flows of information that tend to dominate the fiber pipes of our flat world. In Silicon Valley, where we work, there is an expression
- “to be in the flow” – and you can’t really be in the flow if you are not in Silicon Valley, or some similar spiky place.

The key is understanding not only where the spikes are, but where emergent spikes may be growing and how to leverage as individuals and organizations the flows of knowledge and capabilities across numerous spikes.  That indeed is one of the core questions of economic development, business strategy, and public policy for our time.

Here’s an excerpt of the book and a video interview with Hagel and Seely Brown. The Power of Pull is an important and timely book – I highly recommend it.

Two of my favorite management thinkers, John Hagel and John Seely Brown, have just released an important new study, The Big Shift. I’ve read the research, which expands on some of my own constructs, and had a chance to talk with Hagel about it at length last week. One of the most important findings is that return on assets for American companies has been declining for decades. Here’s a short-form version that appeared over at Harvard Business Review online.

The 2009 Shift Index reveals a disquieting performance paradox in the US corporate sector. On the one hand, labor productivity has nearly doubled since 1965. During those same years, however, US companies’ Return on Assets (ROA) progressively dropped 75 percent from their 1965 level.

How can firms be getting lower returns even as they’re becoming more efficient? The answer resides in the heightened competition among firms. Competitive intensity nearly doubled between 1965 and 2008, forcing firms to compete away the benefits of productivity gains, which were instead captured by creative talent in the form of higher compensation and numbers of consumers through increasing performance/price ratios and wider choice.

It’s little surprise to find also that the highest-performing companies are struggling to maintain their ROA rates and are increasingly losing market leadership positions. Taken as a whole, the findings portray a U.S. corporate sector in which long-term forces of change are undercutting normal sources of economic value. “Normal” may in fact be a thing of the past: even after the economy resumes growing, companies’ returns will remain under pressure.

To respond to this performance challenge, U.S. companies will need to let go of industrial- era organizational structures (and the reporting relationships, incentive systems, and managerial processes that go with them) and operational practices in favor of the new institutional architectures and business practices needed to create and capture economic value in the era of the Big Shift.

Companies must move beyond their fixation on getting bigger and more cost-effective to make the institutional innovations necessary to accelerate performance improvement as they add participants to their ecosystems, expanding learning and innovation in collaboration curves and creation spaces. Companies must move, in other words, from scalable efficiency to scalable learning and performance. Only then will they make the most of our new era’s fast-moving digital infrastructure.

The full report is here. The section on creative cities begins on p. 60. It shows strong relationships between cities with high scores on the Creativity Index and economic output (measured as GDP), returns to talent and economic freedom, as well as a large performance gap between high and low scoring cities on that index.