Duncan Ville

The new economy is creating a tyranny of conflicting drivers causing every company to rethink its mission. Virtual aliens and a hundred other factors are pressuring the cost structure of large companies. Time to reach market is critical when products have a competitive life span of one year, one month, one week, or one afternoon, as in the case of some products in financial services. Innovation, rather than access to resources, plant, and capital, is what counts most. (Remember when eyeglasses took two weeks?) Customers have changed, expecting that companies must provide best quality, green products, fast, at lowest price, with best service, and ensuring social responsibility—to name a few.
Five years ago, competitors to Xerox were Kodak, Canon, and Ricoh. Today, the rivals are Hewlett-Packard, Microsoft, and IBM. Five years from now, it may be Sega-Genesis, Andersen Consulting, AT&T, and the banks. The most famous last words that could possibly be uttered inside any firm these days are: “We don’t have any real competition.” No one is secure, not even the Fortune 500 companies. Of the companies on that prestigious list in 1955, 70% are now out of business. Of the companies on the 1979 list, fully 40% no longer exist as corporate entities. By 1993, the combined market value of Intel and Microsoft was larger than that of IBM; the suppliers had become more valuable than the customer.4
The Queen of England’s bank—Barings–—was put under by a 28-year- old employee. American banks have faced different pressures. Fifteen years ago all the top money-center banks were based in the United States. Now, none are. In fact, of the world’s twenty-five biggest banks, measured by assets, fifteen are Japanese—and now many of them are in trouble.
In the digital economy, competition doesn’t come from competitors only—it comes from everywhere. When information becomes digital and networked, walls fall and no business is safe. There is nowhere to hide. Take the case of Microsoft’s ill-fated attempt to acquire the personal financial software company Intuit. The proposed deal was dropped by Microsoft in light of potential Justice Department opposition, which was in turn stimulated by the banks. The financial industry was worried that Microsoft would become a bank! Consumers would pay bills electronically using Microsoft software, generating almost instant annual revenues of hundreds of millions of dollars. Microsoft could then demand a share of the clearinghouse revenue of the banks. Overtime, brand identities of the banks would fade as consumers would appear to use Microsoft products for banking. Microsoft could also enable investors to surf the stock market and- execute trades themselves, “disintermediating” the investment banks. As Fortune’s Terence P. Pare put it: “Microsoft would become, in effect, a nationwide consumer bank,”5 Banks would become commodity suppliers competing only on price. And although Microsoft backed off from the Intuit deal, it is clearly not backing off from being a player in the world of electronic banking. -
In the l98Os, American business believed the answers would come from MBA graduates. Management also grabbed any passing guru with a catchy phrase covering customer satisfaction, high-octane productivity, and competitive culture. “Adopting ‘new’ ideas became a way for companies to signal to the world that they were progressive, that they had come to grips with their misguided pasts, and that they were committed to change. After all, the worst thing one could do was stick with the status quo,” say Nitin Nohria and James D. Berkeley of Harvard Business School. In the l990s, there is no status quo. The velocity of change in information technology has seen to that, Products are becoming digital. Markets are becoming electronic. Industries are in upheaval. Organizations are having to go far beyond reengineering to fundamentally rethink everything about themselves and their future. As Tony Comper, president of the Bank of Montreal, says: “It’s kind of like the early days of the universe after the Big Bang, when gases are congealing and galaxies are forming. No one is really sure how it will all sort out and it’s not yet clear where Earth is.”
Even the tried-ancj-twe familiar clichés of business are no longer accurate. Take the old adage that executives used in the past to halt fresh thinking, “If it ain’t broke, don’t fix it.” At Philadelphia-based Bell Atlantic, they’ve not only updated that phrase, they’ve stood it on its head, saying:
“If it ain’t broke, keep looking.” Home Depot, with more than 300 stores the largest home-improvement center in the United States, puts the same case differently: “Unless you keep fixing it, someday it will be broke.” For many companies with products having short life cycles, the message should In), “If it ain’t broke, break it before your competitors do.” What that lileans for the future of business is this: Only those organizations that understand the pace of change and can develop successful strategies and tie wiliing to ride that wild surf can succeed. As Bette Davis said in All About Eve, “Fasten your seatbelts. It’s going to be a bumpy night.” What a business person to do’? For starters, create a company. Many of the brightest and most energetic people of the new economy would rather create a new small business than change an old big one. “Big” was what made companies successful in the old economy. Today, being big is often a liability, whereas innovation, agility, and organizational learning are the key variables for snccess. Besides, by growing your own, you get to share in the value you create.
Or maybe you’ve chosen to “reinvent” your current company. Just about everyone agrees that a shift from the traditional bureaucratic hierarchy is needed. The new organization has many names. Peter Drucker calls it the “networked organization.”7 Peter Senge has coined the “learning organization.”8 Davidow and Malone call it the “virtual corporation. “ For Peter Keen, it’s the “relational For Tom Peters, it’s the “crazy organization.” For D. Quinn Mills, it’s the “cluster organization.”’2 Charles Savage calls it “human networking.”3 Russell Ackoff describes the “democratic corporation.”4 For James Brian Quinn, it’s the “intelligent enterprise.” For Michael Hammer and James Champy, it is the “reengineered corporation.”6 For Gary Hamel and C.K. Prahalad, the challenge is not just a new organizational paradigm but a new strategy paradigm.’ 7Call it what you like, fundamental change is necessary.
The new enterprise is a network of distributed teams that act as clients and servers for each other. Teams received a big push back in the 1980s when John Welch, GE’s CEO, launched the workout program, which was centered on the creation of cross-functional teams. Now teams reach out to customers, suppliers, and others, thereby changing the relationships between organizations.
Easy? No, but it surely can’t be as hard as Charles Dc Gaulle found running France to he. “How can you govern a country,” the soldier-statesman once lamented, “with 246 varieties of cheese?”
Moreover, the answer lies not in new organizational structures. As Petronius Arbiter, an officer in the Roman Imperial Army, said in 60 AL “I was to learn later in life that we tend to meet any new situation by r organizing, and a wonderful method it can be for creating the illusion progress, while producing confusion, inefficiency and demoralization.”
Companies need fundamentally new strategies for the new economy. Networking is enabling new structures and new strategies. But even
it is enabling strong personal trusting relationships among people—r tionships that are very different from those of the old hierarchy. Ha trouble building a learning organization? Individual learning req intelligence and consciousness. Such learning has been going on for milennia. But both can now be networked to create conscious organizations. Organizational consciousness is a prerequisite for organizational learning. The new networks are opening the bandwidth of human communication. But how?