The developed world is in the process of committing collective national suicide. Its citizens are not producing enough babies to reproduce, and the cause is quite clear. Its younger population is no longer in a position to bear the increasing burden of a growing passive class. They can only offset that increasing burden by reducing at the other end of the dependency spectrum, which means having fewer or no children.
Of course, birth rates may rise again, although there is not the slightest sign of a new birth boom in any developed nation so far. But even if birth rates rise overnight it would take 25 years before those new babies will become fully educated and productive adults. In other words, for the next 25 years the underpopulation of developed nations is a fait accompli and therefore has implications for their societies and economies.
There will be no dominant world economic power, because no developed nation has the base population to sustain that role. There can be no long-term competitive advantage for any nation, industry or company, because no money or technology can compensate, over a long period, for the growing imbalances in labor resources. The training methodologies developed during the two world wars - mainly in the United States - now make it possible to raise the productivity of unskilled pre-industrial labor to sky-high levels in a very short time, as Korea demonstrated 30 years ago and now Thailand. The technology - the new brand technology - is generally available very cheaply on the open market.The only comparative advantage of developed nations is the supply of educated workers. This is not a qualitative advantage, educated people in emerging countries are exactly as capable as their counterparts in the developed world. But quantitatively, developed nations have great supremacy. Turning this quantitative advantage into qualitative supremacy is one way - and perhaps the only way - for developed nations to maintain their competitive position in the world economy.
THE THEORY OF BUSINESS
In a long time - perhaps since the late 1940s or early 1950s - there have not been as many important new management techniques as there are today: corporate downsizing, the source of external provision, total quality management, analysis of economic value, differentiation (benchmarking), restructuring (reengineering). Each one constitutes a powerful tool. But with the exceptions of external provision and restructuring, these tools are intended to do what you are already doing in a different way. They are operational tools on "how to do" something.
However, "what to do" is becoming an increasingly important challenge facing managers, especially managers of large companies that have enjoyed long-term success. The story is well known: A company that was a superstar just yesterday finds itself stagnant and frustrated, struggling and often in an apparently uncontrollable crisis.
The root cause of almost all these crises is not that things are done poorly. Actually, in most cases, the right things are done - but unproductively. What explains this apparent paradox? The assumptions on which the organization has been developed and managed no longer agree with reality. These are the assumptions that determine the behavior of any organization, dictate its decisions about what to do and what not to do, and define what the organization considers significant results. These assumptions concern the markets, the identification of clients and competitors , their values and their conduct. They concern technology and its dynamics, the advantages and disadvantages of a company.
Every time a large organization struggles - and especially if it has been successful for many years - people blame indolence, complacency, arrogance, and gigantic bureaucracies. Is it a possible explanation? Yes. But rarely is it important or correct.
But for every one of these apparent miracle workers, there are a host of capable CEOs whose organizations succumb. We cannot depend on miracle workers to rejuvenate an outdated business theory any more than we can depend on them to cure other types of serious illnesses. They start with diagnosis and analysis. They recognize that achieving goals and growing quickly require a deep reconsideration of business theory. They do not rule out unexpected failure as the result of a subordinate's incompetence or as an accident, but rather treat it as a symptom of "systems failure." They do not take credit for unexpected success, but treat it as a challenge to their assumptions.
They accept that the obsolescence of a theory is a degenerative disease that endangers subsistence. And they know and accept the old principle of the surgeon - demonstrating over time - regarding making an effective decision: a degenerative disease cannot be cured with delay. It requires firm action.
THE GREAT POWER OF SMALL IDEAS
Is long-range planning just for the big company?
Does long-range planning mean predicting that the future will determine and adapt the company's actions to anticipated trends?
Judging by their actions, many executives would answer yes to these questions. But they are wrong. The correct answer to both is a resounding no!
The future cannot be known . The only thing certain about him is that he will be different, more than an unborn, amorphous, indeterminate yet. It can be planned through premeditated action. And the only thing that can effectively motivate such action is an idea - an idea of a different economy, a different technology, or a different market operated by a different company.
But ideas always start small. That is why long-range planning is not just for the big company. It is also the reason why small business can really have an advantage in trying to plan for the future in the present.
The new, the different, when estimated in dollars, always seems so small and insignificant that it is usually dwarfed by the total volume of existing business in the large company. The few million dollars in sales that a new idea could produce in the coming years, even if it is emphatically successful, seem so insignificant compared to the hundreds of millions produced by existing business in a large company that those dollars are sometimes spent for high.
And yet new businesses require a great deal of effort. So much so that the small business is often much more willing to undertake the task. So this is a good reason for the large company to organize a special long-term planning effort; otherwise you may never find an opportunity for something other than the current task.
But, of course, the small business that does a good job of planning the future in the present will not remain "small" for long. Every great company successful today was once - and often very recently, as in the case of IBM or Xerox - a small company based on an idea of what the future should be.
However, this "idea" must be a business idea - with the potential and ability to produce wealth - expressed in a dynamic, operational and productive business, and concretized through actions and business conduct. Implicit in the entrepreneurial idea is always the question: “What major change in the economy, market, or knowledge would allow us to lead the company the way we would really prefer to lead the company the way we would really get the best economic results?".
The fundamental question should not be: "What will the society of the future be like?" . This is the question of a social reformer, revolutionary or philosopher - not the entrepreneur.
Because this criterion seems so limited, so selfish, historians have often overlooked it. They have neglected the impact that the innovative entrepreneur has had. Of course, the great philosophical idea has had much more profound effects. Although, on the other hand, very few philosophical ideas have had any effect. And while each business idea is much more limited, most of them have been effective. As a result, innovative entrepreneurs, as a group, have had far more impact on society than historians believe.
The very fact that their ideas are not "big concepts" - ideas that cover all of society or all of knowledge, but "little ideas" that only affect a narrow area - makes them much more viable. People who have these ideas may be wrong about everything else in the economy or society of the future. But how important as long as they are approximately successful in their own narrow business objective? All they need to be successful is just a small specific development. It is true that some - very few - great philosophical ideas become footnotes in history books; But many small business ideas get to be listed on the stock exchange.
Let's look in history for some small ideas that have led to great results. But first we will cite some ideas from which entire industries developed. (Later we will consider some ideas from which large corporations emerged)
The commercial bank
The business innovation that has had the greatest impact was the one that in the last century converted the theoretical proposal of the French social philosopher. Claude Henry Saint - Simon, on a bench. Saint - Simon started from the concept of the entrepreneur, as his compatriot, the economist JB Say, had previously conceived, to develop a philosophical system around the creative role of capital.
Saint-Simon's idea came to fruition through a commercial bank: the famous Crédit Mobilier that his disciples, the Pereire brothers, founded in Paris in the mid-19th century. Credit Mobilier was to be the conscientious promoter of the industry through the administration of the community's circulating resources. It became the prototype of the entire banking system of the then "underdeveloped" European continent in the Pereire era - beginning with France, the Netherlands and Belgium. Later, the Pereire imitators founded commercial banks in Germany, Switzerland, Austria, Scandinavia and Italy, which became the main agents for the industrial development of those nations.
The chemical industry
Without a doubt, the modern chemical industry arose in England. In the mid-19th century, this nation, with its highly developed textile industry, was the main market for chemical products. It was also the country of origin of the great scientists of the time: Michael Faraday and Charles Darwin.
Actually the modern chemical industry started with an English discovery: Perkins 'discovery of aniline dye in 1856. However, 20 years later the leadership by Perkins' discovery in the new industry (roughly 1875) had clearly passed To Germany. German entrepreneurs contributed to the entrepreneurial idea that was absent in England: the result of scientific research, organic chemistry in this case, could be directly transformed into commercial applications.
Modern marketing
The most powerful private companies in history were probably run by the Japanese house of the Mitsui, which was estimated to employ one million people worldwide before its dissolution after World War II, according to estimates by the North American occupation authorities.
The entrepreneurial idea implicit in this business was that of the merchant as a principal of economic activity, not as a mere intermediary. This meant fixed prices for the consumer. And also that the Mitsui no longer acted as agents in the negotiation with the craftsmen and manufacturers. They purchased on their own and ordered standardized merchandise to be manufactured to their specifications.
Mass distribution
It doesn't take a lot of imagination to make a business idea successful. All that may be necessary is systematic work that will make something that has already happened effective in the future. For example, new developments in the economy and market will generally occur long before distribution. However, organizing distribution can make change more effective - and thereby generate real business growth.
For example, Canadian Willard Garfield Weston observed that when English housewives began to order sliced bread at the end of World War II, there was no adequate distribution system to satisfy them with what they wanted to buy and where they wanted to buy it.. Due to this little idea, in a few years one of the largest food marketing companies in Britain emerged.
The chains that sell at a discount
Frequently, the ideas from which large corporations have emerged have been small. Here are some examples.
IBM
Thomas J. Watson, the entrepreneur who founded and developed IBM, did not see the incipient development of commercial technology. But he had the idea to process information as a unifying concept on which to develop a company. IBM had long been a very small company and limited to such an earthly task as keeping accounting ledgers and accountability. But he was ready to make the leap - from a totally disjointed wartime task - when the technology came that made data processing possible by electronic computers.
Sears, Roebuck & Co.
The men who built Sears, Roebuck & Co. - Richard Sears, Julius Rosenwald, Albert Loeb, and finally Robert E. Wood - had active social interests and a lively social imagination. But none of them thought about remaking the economy. I even doubt that the idea of a mass market - as opposed to the traditional quality market - came to mind until well after 1930. From the beginning, the founders of Sears & Roebuck had the idea that money could be made from The poor man had the same purchasing power as the rich man.
The cooperative movement in Europe had thrived primarily on the basis of that idea. However, Sears & Roebuck was the first company in the United States to build on it. It started with the question: "What would make the farmer a customer of a retail company?" The answer was simple: "You need to be sure of getting goods of the same reliable quality as people in the city but at a lower price."
Coat
The basic business idea may simply be an imitation of something that works in another nation or in another industry. For example, when Thomas Bata, the Slovak shoemaker, returned to Europe from the United States after World War I, he came up with the idea that the entire population in Czechoslovakia and the Balkans could wear shoes as everyone did in the United States. "The peasant is barefoot," he is said to have said, "not because he is too poor, but because there are no shoes." What was necessary to make this vision of a footwear peasant come true was someone to supply him with a cheap, standardized, but well-designed and durable shoe, as had been done in the United States.
Based on this analogy with the United States, Bata started out capitalless in a rented workshop, and within a few years built the largest footwear company in pre-Nazi Europe and one of the most successful companies on the Old Continent.
Making the future happen requires effort rather than "talent." Surely, the individual with a creative imagination will have more imaginative ideas. But it is not so likely that the most imaginative ideas turn out to be truly successful.
Creativity, which is so important in discussions of innovation, is not the real problem. Generally, there are more ideas in any organization, including companies, than can be applied. Ask this question in any company - even the seemingly dying ones: What aspect of our company, our society, or our level of knowledge would give our company its best chance if we could only make that happen? ” Dozens of responses will emerge from management. Usually we are not short of ideas - not even good and useful ideas. What is missing, more than products or processes, is a willingness of management to welcome ideas, to ask for them. After all,products and processes are only the vehicles through which ideas become effective. The specific products and processes of the future are often not even imaginable.
Finally, the idea must pass the test of personal commitment. Do we really believe in the idea? Do we really want to be that kind of person, do that kind of work, run that kind of company?
Building the future requires courage. It requires effort. But it also requires faith. Committing to advantage is simply not practical. It will not pass the successive tests. Since no such idea is infallible - it shouldn't be either.
The only idea about the future that must fail is the apparently safe idea, the risk-free idea, which is considered incapable of failure. The ideas on which the company of tomorrow is built must be uncertain; no one can really predict what they will be or when they will become reality. They must be risky; of course, they must have a probability of success, but also a probability of failure. If they are not uncertain or risky they are simply not practical ideas for the future.
conclusion
It is not absolutely necessary that all companies look for the idea that will determine the future and start working on its realization. In reality, many business managements have not even realized their present - and yet their companies somehow survive for a time. Large companies, in particular, seem capable of subsisting for a long time on the courage, effort, and vision of their top executives before weakening and declining.
But the future always comes, sooner or later. And it is always different. Even the most powerful company will have difficulties if it does not work towards the future. You will lose importance and leadership. All that will be left will be the overhead of a great company. There will be neither control nor understanding of what is happening.
By not daring to take the risk of making the future happen, default management takes the greater risk of being surprised by what will happen. This is a risk that even the largest and richest company cannot afford. And it's a risk that not even the smallest company needs to take.
THE DISCIPLINE OF INNOVATION
Innovation is the specific function of entrepreneurship, whether in an existing company, a public service institution or in a new company started by a single individual in the family environment. It is the means by which the entrepreneur creates new wealth-generating resources or increases existing resources with improved potential to produce wealth.
Today there is great confusion about the proper definition of entrepreneurship. Some observers use the term to refer to all small businesses; others to all new companies. However, in practice a large number of well-established companies engage in highly successful entrepreneurship. The term, therefore, does not refer to the size or age of a company, but to a certain type of activity. At the core of that activity is innovation: the effort to create deliberate change, focused on a company's economic or social potential.
Sources of innovation
Of course, there are innovations that stem from a trait of ingenuity. However, most innovations, especially successful ones, result from a deliberate and conscious search for innovation opportunities, found only in a few situations.
There are four areas of opportunity within a company or industry:
Unexpected events
Inconsistencies
Process needs
Changes in the industry and the market
There are also three additional sources of opportunity outside of a company, in its social and intellectual environment:
Demographic changes
Changes in perception
New knowledge
Actually, these fonts overlap. While they may be different in the nature of their risk, difficulty, complexity, and potential for innovation can be found in more than one area at a time. But combined they account for the vast majority of all innovation opportunities.
Unexpected events
Fifteen years later, when everyone believed that computers were designed for advanced scientific work, companies unexpectedly showed interest in a machine that could do payroll. Univac, which had the most advanced machine, disdained business applications. But IBM immediately realized that it was facing possible unexpected success, redesigned what was basically the Univac machine to be applied to payrolls, and at five years became a leader in the computer industry, a position that it has held until date.
Unexpected failure can also be an important source of innovation. Everyone knows of the biggest failure in automotive history: the Edsel model from the Ford Motor Company. But what few people seem to know is that the Edsel's failure was the foundation for much of the company's subsequent success. Ford planned the Edsel, the most carefully designed car in American automotive history, to provide the company with a complete line of products with which to compete with GM. When the model failed, despite all the planning, market research, and design included in it, Ford realized that something was going on in the car market that went against the basic assumptions that GM and everyone else was on. they had designed and sold the cars.The market was no longer mainly divided into segments by income groups; suddenly the new beginning of segmentation was what we now call "lifestyles." Ford's immediate responses were the Mustang and Thunderbird - the cars that gave the company a different personality and restored it as an industry leader.
The inconsistencies
Alcon Industries was one of the great successes of the 1960s because Bill Connor, the company's founder, took advantage of an inconsistency in medical technology. Cataract surgery is the third or fourth most frequent surgical procedure in the world. For the past 300 years, physicians systematized to the point that the only "old-fashioned" step that remained was cutting a ligament. The eye surgeons had learned to cut the ligament with complete success, but it was so different from the rest of the operation and so incompatible with it that they often feared it. It was inconsistent.
Doctors had known for 50 years an enzyme that could dissolve the ligament without having to cut it. All Connor did was add a preservative substance to this enzyme that would ensure him some months of life in vitro. Surgeons immediately accepted the new compound, and Alcon found himself with a worldwide monopoly. Fifteen years later, Nestlé acquired the company for an excessive price.
Such an inconsistency within the logic or rhythm of a process is only one possibility from which opportunities for innovation may arise. Another source is the inconsistency between economic realities. For example, whenever an industry has an expanding market but declining profit margins - as was the case with the steel industries of developed nations between 1950 and 1970 - there is an inconsistency. An innovative answer: minimills.
The needs of the process
Anyone who has driven in Japan knows that this country does not have a modern highway system. Its routes still follow the paths laid out for - or by - bullock carts in the 10th century. What makes the system work for cars and trucks is an adaptation of the reflector used on American highways since the early 1930s. This reflector shows each driver the other vehicles that are approaching from any of the six directions. This minor invention, which allows traffic to flow smoothly and with a minimum of accidents, exploited a need for the process.
Changes in the industry and the market
Managers may believe that the structures of the industry have been dictated by the Good Lord, but they can - and often do - change overnight. This change creates a great opportunity for innovation.
One of the great business successes of the United States in recent decades has been the commissioning firm of Donaldson, Lufkin & Jenrette (DL&J), recently acquired by the Equitable Life Assurance Society. DL&J was founded in 1961 by three young men, all graduates of the Harvard Business School, who understood that the structure of the financial industry was changing as institutional investors became predominant. These young people had virtually no capital or connections. Still, within a few months, his company had become a leader in the transition to negotiated commissions and a star player on Wall Street. It was the first to be incorporated and listed on the stock exchange.
Demographic changes
Among external sources of innovation, demographic sources are the most reliable. Demographic contingencies have maturation periods; for example, every person who joins the North American workforce by the year 2000 has already been born. However, because political planners often overlook demographics, those who take advantage of them can reap huge profits.
The Japanese are ahead in robotics because they pay attention to demographic statistics. Around 1970, all inhabitants of developed nations knew that both birth control and the educational explosion would continue; half or more of the young people were finishing their secondary studies. Consequently, the number of people available for traditional manual labor in industry was destined to decline and be inadequate by 1990. Everyone knew this, but only the Japanese acted with foresight and now have a ten-year lead in robotics.
Changes in perception
"The glass is half full" and "The glass is half empty" are descriptions of the same phenomenon but have significantly different connotations. Changing a manager's perception from a half-full glass to a half-empty glass offers great opportunities for innovation.
For example, all the evidence based on facts indicates that in recent years Americans' health has improved at an unprecedented rate - whether estimated by newborn death rates, the survival rates of newborns. the elderly, the incidence of cancers (in addition to lung cancer), the percentage of cancer cure, or other factors. Still, hypochondria affects all Americans. Never before has there been so much concern for health or so much fear about health. Suddenly everything seems to cause cancer or heart conditions or premature memory loss. Obviously, the glass is half empty.
Instead of rejoicing at the great improvements in health, Americans seem to emphasize how far they are still from immortality. This vision of things has created many opportunities for innovations: markets for health care magazines, for all types of healthy food, and for exercise classes and jogging teams. The fastest growing new business in 1983 was a company that makes home exercise equipment.
The new knowledge
Among the innovations that have made history stand out those based on new knowledge - be it scientific, technical or social. They are the superstars of entrepreneurship; they get the publicity and the money. They are what people generally cite when talking about innovation, although not all knowledge-based innovations are important. Some are insignificant.
Knowledge-based innovations differ from all others in the time it takes, in their failure rates, and in their prediction, as well as in the challenges they pose to entrepreneurs. Like most "superstars," they can be temperamental, whimsical, and difficult to handle. For example, they have the longest gestation period of all innovations. There is a long interval between the emergence of new knowledge and its assimilation into applicable technology. Then there is another long period before this new technology appears in the market processes, services or products. In general, the interval between the beginning of the process and its results is almost 50 years, a figure that has not decreased appreciably throughout history.
The principles of innovation
Since innovation is conceptual and noticeable, innovators should also go out and observe, inquire and listen. Successful innovators use both hemispheres of their brains. They take into account the figures. They take people into account. They analytically determine what innovation must be like to satisfy an opportunity. They consider potential users to study their expectations, their values and their needs.
To be effective, an innovation has to be simple and focused. It should accomplish only one thing; otherwise, it confuses people. Actually, the biggest compliment an innovation can receive is for people to say, “This is obvious! Why hadn't we thought about that? It's so simple! " Even the innovation that creates new users and new markets should be aimed at a specific, clear and carefully planned application.
In reality, no one can predict whether a given innovation will end up being a great company or a modest achievement. But even when the results are modest, successful innovation from the beginning aspires to set the standards, the direction of a new technology or a new industry, to create the company that is - and will continue to be - at the forefront of the rest. If an innovation does not target leadership from the start, it is unlikely to be sufficiently innovative.
Above all, innovation is effort rather than genius. This requires knowledge and often inventiveness. And it also requires concentration. Obviously, there are people who are more talented than others as innovators, but their talents reside in well-defined areas. Innovators rarely actually work in more than one area. With all of his systematic innovative achievements, Edison worked only in the field of electricity. An innovator in financial areas, such as Citibank, is unlikely to embark on innovations in healthcare services.
In innovation as in any other effort, there is talent, there is ingenuity and there is knowledge. But when all is said and done, what innovation requires is deliberate and concentrated effort. If dedication, perseverance and commitment are absent, talent, ingenuity and knowledge have no effect.
Of course, there are many other things to undertake besides systematic innovation: for example, different business strategies and business management principles, which are equally necessary in the established company, in the public service organization and in the new venture.. But the true foundation of business entrepreneurship - as a practice and as a discipline - is the exercise of systematic innovation.
THE INFORMATION EXECUTIVES REALLY NEED
However, even though we have overestimated and dismissed the new tools, we have failed to understand that the tasks to be undertaken will drastically change. History has repeatedly taught us that concepts and tools are mutually interdependent and interactive. They modify each other. This is what is happening now with the concept that we call a company and with the tools that we call information. New tools allow us - actually, can force us to - see our companies differently:
- as generators of resources, that is, as organizations that can convert business costs into benefits;
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- as links in an economic chain, which managers need to consider in their entirety in order to control their costs, as organs of our society for the creation of wealth; and as creations and creators of a material environment: the area outside the organization in which the opportunities and results are found, but where threats to the success and survival of the company also originate.
Information for wealth creation
Companies earn to generate wealth, not to control costs. But this obvious fact is not reflected in traditional estimates. First-year students of the accounting career learn that the balance sheet reflects the liquidation value of the company and provides creditors with the worst-case information. But companies are not normally managed to be liquidated. They have to be managed as running businesses, that is, for wealth creation. To accomplish this, executives need information that enables them to make informed decisions. Four sets of diagnostic tools are required: basic information, productivity information, competition information, and information on the allocation of scarce resources. Together,These tools constitute the instrument to manage the current company.
Basic information
The oldest and most widely used diagnostic management tools are cash flow, liquidity projections, and standard estimates, such as the relationship between merchant inventories and new unit sales; income coverage for the payment of interest on a mortgage; and the relationships between accounts pending more than six months, total assets and sales. They can be compared to the estimates a doctor makes in a routine physical exam: weight, pulse, temperature, blood pressure, and urinalysis. If these readings are normal, they don't tell us much. But if they are abnormal, they indicate a problem that must be identified and treated. These estimates could be called basic information.
Productivity information
The second set of business diagnostic tools concerns the productivity of key resources. The oldest of these - typical of World War II - estimates the productivity of labor. We are now slowly developing estimates, albeit still very primitive, for knowledge-based task productivity and service. However, simply estimating the productivity of workers, whether they are office workers or factory workers, no longer provides us with adequate information on productivity. We need data on the productivity of the total factor.
Competition information
A third set of tools concerns competencies. From CK Parlad and Gary Hamel's foreboding article, "The Company's Key Competency," we have known that leadership lies in being able to do something that others cannot do in any way and find it difficult to do even poorly. It is based on the key competences that combine the value of the market or the consumer with a special ability of the producer or supplier.
It is the detailed report of the innovations in all the specialty during a certain period. Which innovations were truly successful? How many of them were ours and is our performance in proportion to our goals - and market orientation? Or with our position in the market - and with our investment in research? Are our successful innovations in the areas of greatest growth and opportunity? How many of the truly important opportunities for innovation have we missed? Why? Why didn't we see them? Or because we saw them but discarded them? Or because we made a blunder? And how do we turn an innovation into a commercial product? A good initiative for that, let's admit it, is evaluation rather than estimation. Ask questions rather than answer them,but it asks the right questions.
Information about resource allocation
The last area in which diagnostic information is needed to manage the current company in order to generate wealth is the allocation of scarce resources: capital and productive personnel. These two resources turn into action all the information that management has about your company. They determine whether the company is operating effectively or ineffectively.
In contrast, in the company, promotion with specific expectations - as to what the designee should achieve - and systematic evaluation of the result are practically unknown. In the effort to create wealth, managers need to allocate human resources as pertinently and thoughtfully as they allocate capital. And the results of those decisions should be carefully reported and studied.
Where are the results
These four types of information only illustrate us about the current company. They inform and direct the tactics. But for strategy, we need organized information about the situation. The strategy must be based on information about the markets, consumers and non-consumers; on the technology in the own industry and others; on finances worldwide; and about the changing world economy. Since that's where the results are.
A serious cause of business failure is the frequent assumption that conditions - taxes, social legislation, market preferences, distribution channels, intellectual property rights, and many others - must be what we think they are or at least what we think they should be. An adequate information system must include information that allows executives to question that assumption. It should induce them to ask the appropriate questions, not just communicate the information they expect. That means executives know what information they need. Also, they need to get that information on a regular basis. Lastly, they need to systematically integrate the information into their decision-making process.
Another reason why there is a need for outside help is that the information has to be organized in a way that questions and challenges a company's strategy. Providing information is not enough. Information has to be integrated with strategy, both have to test the company's assumptions and challenge its current perspective.
THE ADVENT OF THE NEW ORGANIZATION
Information is a set of data that has importance and a purpose. So converting data into information requires knowledge. And knowledge by definition is specialized. (Actually, truly knowledgeable people tend to over-specialize, whatever their discipline, precisely because there is always so much more to learn.
The organization based on information requires many more specialists altogether than the companies based on the command - control to which we are accustomed. Also, specialists can be found in operations, not in corporate headquarters. Instead, the operational organization tends to become an organization of specialists of all kinds.
Information-based organizations need to centralize operational tasks such as legal advice, public relations and, of course, labor relations. But the need for personnel in the services - that is, for personnel without operational responsibilities that only advise, advise or coordinate - decreases dramatically. In your central management, the information-based organization needs few, if any, specialists.
Due to its flatter structure, the large information-based organization will be much more like the companies of the last century than it is to today's large companies.
However, previously, all knowledge as it was resided with senior staff. The rest were assistants or helpers, who for the most part did the same job and did it as directed. In information-based organization, knowledge will be primarily at the grassroots, in the minds of specialists who will do different tasks and direct themselves. So the current typical organization in which knowledge is often concentrated in administrative staffs, located rather insecurely between senior management and operational staff, will likely be considered a phase, an attempt to instill knowledge from the top rather than to obtain information from below.
Finally, in information-based organization a large proportion of the work will have to be done differently. Traditional departments will act as standards keepers, as training centers and appointment of specialists; they will not be where the task is carried out. The latter will happen mainly in teams focused on the task.
It remains to be seen how task forces will develop to address other business problems and opportunities. However, I suppose that the need for a task force, its powers, composition and leadership will have to be decided on a case-by-case basis. So the organization to be developed will go beyond the model and can be very different from it. One thing is clear, though: That will require greater self-discipline and a greater emphasis on individual responsibility in relationships and communications.
Saying that information technology is transforming business enterprises is simple. But what this transformation will require from companies and senior management is much more difficult to decipher. So I find it helpful to look for clues in other types of information-based organizations, such as the hospital, the symphony orchestra, and the former British administration in India.
But the best example of a large, successful information-based organization, without middle management, has been the British civil administration in India.
The British administered the Indian subcontinent for 200 years, from the mid-18th century to World War II, without introducing fundamental changes in organizational structure or administrative policy. The public administration in India never had more than 1,000 members to administer the vast and densely populated subcontinent - a tiny proportion (less than 1 percent) of the legions of mandarins and palatial eunuchs employed to administer no less populous China. Most of the British were quite young; a 30-year-old man was a survivor, especially in the early years. Most lived alone in isolated border posts with the compatriot closest to a day or two of travel, and for the first hundred years there was no telegraph or railroad.
The organization structure was completely flat. Each district official responded directly to "Coo," the provincial political secretary. And since there were nine provinces, each political secretary had at least 100 people reporting directly to him, often allowing for the doctrine of the British period of control. Despite that, the system worked remarkably well, in large part because it was meant to ensure that each of its members had the information they needed to do their homework.
Each month the district official spent an entire day writing a full report for the political secretary of the provincial capital. He analyzed each of his main tasks - there were only four, each clearly defined. He described in detail what he had expected to happen regarding each of them, what actually happened, and why, if there was any discrepancy, the two differed. He then wrote down what he expected to happen in the next month with each of the key tasks and what he was going to do about it, asked questions about the policy, and discussed long-term threats, needs and opportunities. For his part, the political secretary "wrote a record" of each of these reports - that is, he responded with a written comment.
In other words, information-based organizations require common, clear and simple objectives that translate into particular actions. However, as the examples cited indicate, information-based organizations also need to be focused on one goal, or at most a few.
The other requirement of an information-based organization is that everyone take responsibility for the information. The bassoonist in the orchestra does it every time he plays a note. Doctors and medical assistants work with an elaborated reporting system and with an information center, the infirmary in the hospitalization area. The district official in India assumed this responsibility each time he wrote a report.
The key to this system is for everyone to ask themselves: What is up to me in this organization and what should I report? And on whom, in turn, do I depend? Each person's list will always include superiors and subordinates. But the most important names on that list will be those of colleagues, the people with whom the fundamental relationship that one maintains is coordination. The relationship of the internist, surgeon and anesthesiologist is one example. But the relationship of a biochemist and pharmacologist, the medical director in charge of clinical trials, and the marketing specialist of a pharmaceutical company is no different.
It also requires each party to take responsibility for the most complete information.
The responsibility of others for information is increasingly understood, especially in medium-sized companies. But self responsibility is still overlooked. That is, everyone in an organization should constantly think about what information they need to complete the task and make a contribution.
This may be the most radical change in the way companies are still managed, even the most highly computerized ones. In them, the staff assumes that the more data there is, the more information one has - which was a perfectly valid assumption in the past when information was scarce, but led to data overload and information blackout, which are now copious. Or you think information specialists know what data executives and professionals need to get information.
But information specialists are toolmakers. Can you tell us which tool to use to hammer upholstery tacks into a chair. And we need to say if we should upholster a chair.
Most large companies have little in common with the examples we've been considering. However, to remain competitive
- perhaps even to survive - they will have to become information-based organizations, and fairly quickly. They will have to change old habits and acquire new ones. And the more successful a company has been, the more difficult and painful this process will be. It will jeopardize the positions, status, and opportunities of a large number of staff in the organization, especially middle-aged people with a long career in middle management who tend to be the least versatile and most secure in their jobs. work, in their jobs, in their relationships and in their behavior.
The information-based organization will also pose its own management problems. I consider as particularly critical:
- The development of awards, recognition and professional opportunities for specialists.
- Creating a unified vision in a specialist organization Planning a management structure for a task force organization Ensuring the attendance, training and review of senior management personnel
We are now entering a third period of change: the transition from organization of command and control, organization in departments and divisions, to organization based on information, organization of knowledge specialists. We can already perceive, even if only interchangeably, what the organization of the future will be. We can identify some of its main characteristics and requirements. We can indicate the fundamental problems of values, structure and behavior. But the real task of developing the information-based organization still lies ahead - the managerial challenge of the future.
THE NEW SOCIETY OF ORGANIZATIONS
In this society, knowledge is the main resource for individuals and for the economy as a whole. Land, labor and capital - the economist's traditional factors of production - do not disappear, but they become secondary. They can be obtained, and are easily obtained, provided there is specialized knowledge. However, specialized knowledge by itself produces nothing. You only become productive when you are integrated into a task. And so a knowledge society is also a society of organizations: the purpose and function of all organizations, both commercial and non-commercial, is the integration of specialized knowledge into a common task.
In particular, we already know the fundamental tensions and problems facing the society of organizations: the tension created by the need for community stability and the need for community stability and the need to destabilize the organization; the relationship between the individual and the organization and the responsibilities of one with the other; the tension that arises from the need for autonomy of the organization and the interest of society in the Common Good; the growing demand for socially responsible organizations; the tension between specialists with specialized knowledge and performance as a team. All of these will be fundamental problems in the years to come, especially in the developed world. They will not be resolved through a proclamation, philosophy or legislation. They will be resolved where they arise:in each organization and in the manager's office.
As for managers, the dynamics of knowledge imposes a clear condition: each organization has to develop change management within its own structure.
On the one hand, this means that each organization has to prepare for the abandonment of everything it does. Managers have to learn to periodically question every process, every product, every procedure, every policy: "If we weren't doing this anymore, would we start doing it knowing what we now know?" If the answer is no, the organization should ask itself "So what do we do now?" And you have to do something, and not say, "Let's do another test." In reality, more and more organizations will have to plan abandonment instead of trying to extend the life of a successful product, policy or practice, something that only a few large Japanese companies have now faced.
On the other hand, every organization must be dedicated to creating something new. Specifically, each organization has to rely on three systematic practices. The first is the sustained improvement of everything the organization does, the process the Japanese call kaizen. All artists throughout history have practiced kaizen, or constant and organized self-improvement. But to date only the Japanese - perhaps due to their Zen tradition - have incorporated it into the daily life and activity of their business organizations (although not in their universities particularly resistant to change). The goal of kaizen is to improve a product or service so that it becomes something truly different within two or three years.
Second, every organization will have to learn to leverage its knowledge - that is, to develop the next generation of applications from its own successes. Once again, Japanese companies have so far done their best in this endeavor, as evidenced by the success of electronics manufacturers in developing one new product after another, stemming from the same North American invention, to the tape recorder. But the successful exploitation of their successes is also one of the advantages of rapidly growing American pastoral churches.
Ultimately, every organization will have to learn to innovate - and innovation can and should be organized now - as a systematic process. And then, of course, it will return to abandonment, and the process will begin again. Unless this is done, the knowledge-based organization will soon become obsolete, lose its performance capacity, and with it the ability to attract and retain knowledgeable and trained personnel on which its productivity depends.
The need to organize for change also requires a high degree of decentralization. This is so because the organization must be prepared to make quick decisions. And those decisions must be based on knowledge - of performance, of the market, of technology and of the multiple changes in society, the environment, demographics and knowledge that provide opportunities for innovation if they are warned and used.
However, all this means that the organizations of post-capitalist society must constantly change, disorganize and destabilize the community.
In addition, each organization has a value system that is determined by its task. In all hospitals in the world, healthcare is considered the fundamental mission. In every school in the world, learning is considered the fundamental mission. In all companies in the world, production and distribution of goods or services is considered the fundamental mission. For the organization to perform at a high level, its members must believe that what they are doing is ultimately the individual contribution to the community and society on which all others depend.
Therefore, in their culture, the organization will always transcend the community. If the culture and values of an organization conflict with those of the community, the organization must prevail - or it will not make its social contribution. "Knowledge knows no borders" says an old saying. There has always been a conflict between "community and togas" since the first university was established more than 750 years ago. But it is a conflict - between the autonomy the organization needs to achieve its highest performance and the demands of the community, between the values of the organization and those of the community, between the decisions of the organization and the interests of the community - it is inherent in the society of organizations.
Now all organizations often say, "People are our most important asset." But few practice what they preach, much less believe what they say. Most still believe, though perhaps not consciously, what 19th-century employers believed: Staff need us more than we need them. But in reality, organizations have to compete for staff as much as they compete for products and services - and perhaps more. They have to attract, retain, recognize and reward staff, motivate staff, serve and satisfy them.
Since the modern organization consists of educated specialists, it has to be an organization of equals, of colleagues and associates. No knowledge should be classified in a higher rank than the others; each must be esteemed for his contribution to the common task rather than for an inherent superiority or inferiority. Therefore, the modern organization cannot be an organization of a boss and his subordinates. It must be organized as a team.
THE NEW CHALLENGE OF PRODUCTIVITY
Knowledge and service workers span a wide range from research scientists and cardiac surgeons to female designers, store managers, and 16-year-olds who dispatch hamburgers at fast-food restaurants on Saturday lunchtime. Their category also includes people whose job makes them "machine operators": dishwashers, janitors, data processing operators. But in terms of their diversity in knowledge, skill, responsibility, social status and salary, service and knowledge workers are remarkably similar in two crucial respects: what does not contribute to increasing their productivity and what does.
The first thing we have learned - and we found it difficult to understand - is what has no effect. Capital cannot be substituted for labor. Nor does the new technology by itself generate higher productivity. In the manufacture and distribution of goods, capital and technology are factors of production, to use the term of the economists. In the task of services and knowledge, they are production tools. The difference is that a factor can replace labor, while a tool can or cannot replace it. Whether tools contribute to or hinder productivity depends on what people do with them; for example, the purpose for which they are intended or the ability of the user. For example,Thirty years ago we were confident that the efficiency of the computer would lead to massive reductions in office and administrative staffing. The promise of increased productivity led to massive investments in data processing equipment that now rival raw material processing technology (i.e., conventional machinery). But clerical and office staff have grown at a much faster rate, since the introduction of information technology. And there has been practically no increase in the productivity of services.The promise of increased productivity led to massive investments in data processing equipment that now rival raw material processing technology (i.e., conventional machinery). But clerical and office staff have grown at a much faster rate, since the introduction of information technology. And there has been practically no increase in the productivity of services.The promise of increased productivity led to massive investments in data processing equipment that now rival raw material processing technology (i.e., conventional machinery). But clerical and office staff have grown at a much faster rate, since the introduction of information technology. And there has been practically no increase in the productivity of services.
Today we know that productivity is the true source of competitive advantage. But what we must understand is that it is also the key to social stability. For this reason, comparable to those already achieved in factory productivity, it must be a priority for managers throughout the developed world.
The task is known and achievable. But the urgency is great. To raise the productivity of services, we cannot fully depend on government or policy. This is a task for managers and executives of companies and non-profit organizations . In reality, it is the first social responsibility in the knowledge society.
Bibliography
»The great power of small ideas»
Peter Drucker.
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