Company of Yesterday or Company of Tomorrow, Today

Our world has been going through an ever accelerating storm of change to the fundamental underpinnings of society and the economy for the better part of 2 decades and in my humble opinion, it has gone past the tipping point from yesterday to tomorrow. In other words, it is no longer maybe changing into a new paradigm; it has changed and the gestation of the new paradigm is basically just ‘wrapping up’.

This is a really critical phase for anyone who is creating or developing a new business, not to mention those in established institutions. I suggest that the most important question for CEO’s of growing companies is this: are you creating a company of yesterday or are you creating a company of tomorrow, today. Because we went past the tipping point of global change, there is no in between. In the next few years, you are either going to become a great company or you’re going to become irrelevant and the difference between the two is likely to depend on whether you are building something from the past or something aligned with a new paradigm.

In my mind, I trace the beginning of the change juggernaut to 1989, the year of the fall of the Berlin wall. This was also the period of the local area network, the move to client-server technology, the time when Microsoft became great and PC’s turned into a commodity. Not too long after, the Netscape browser emerged and the Internet became the centre of our world. In the 2 decades that followed, the ‘information highway’ of fibre optic cables spread its tentacles throughout the world, enabling an ever more complex array of transactions to be performed through the Internet. Google came along and then Wikipedia, MySpace, Facebook and YouTube. The iPod revolution was followed by the iPhone revolution and the Post PC era of tablets and the cloud. As the world of communications was changing, Science was changing as well. The center of the economic universe has been changing from the 20th century world of making big things to a world of innovation at a sub-molecular world. Whereas the 20th century was the century of machines, the new millennium is a time when Man invents things that can’t be seen through software engineering, nanotechnology, bioengineering, genetics and quantum mechanics. And then, concurrent with these structural changes, there came the change that causes everything to come together: the emergence of the new generations that grew with the Internet as their social medium: Gen Y and Gen Z. And thus we were pushed inexorably over the tipping point.

The world has changed in the most fundamental pillars of any economy: science and technology, demographics and human communications. This has happened before: it happened in the Renaissance of the 16th century; certainly in the time around the turn of the 19th to the 20th century; and again now.

As the past decade unfolded, we’ve been seeing the emergence of a new breed of company, that which I call the Company of Tomorrow, Today. These are the companies that are emulating the new paradigm, who are showing us how to be competitive in the new world. They give us a glimpse of the economy of the future and they tell us, by contrast, that if you are still stuck in the precepts of the 20th century, you are already dead.

As someone once said, here’s the good news: sometimes extinction is a matter of choice. You can choose to be sceptical and believe that the business models of yesterday are “the right ones” – in which case you will perish; or you can choose to learn new ways of thinking, to leverage the new generations and their new habits, to embrace the adventure of the new world – in which case you just might be relevant in the future.

With a view to help the CEO’s of developing companies, I put together an outline of the main characteristics of the companies of tomorrow. I doubt that successful companies of tomorrow will all fit into one model or even a few models. and, if that were the case, I don’t believe that any of us could, at this point, anticipate what that will be. But what we can do is recognize a few emerging  characteristics of new companies and contrast them with the beliefs and habits of the 20th century, as a way to guide us in the right path, even if without the certainty of the destination.

Capacity to Change

Innovation has always been part of the success story of most companies but the new companies of tomorrow, today, take the role of innovation in business strategy to a whole new level. These companies don’t innovate “as part of” what they do, they exist essentially to innovate. Take these examples: Apple, Google, Facebook and Amazon. What is common to these supremely successful companies of the past decade? They are masters of disruptive innovation. They either disrupt whole industries (e.g., Apple to music and telephone; Amazon to retail; Google to advertising) or they create new industries (Facebook or Google) or both. Here’s how a company of tomorrow contrasts with yesterday’s companies in terms of attitude to change:

• Yesterday’s companies are based on principles that evolved in the mid 20th century – in pre-Depression times and then in post-WWII times. People in these organizations follow an established way of doing things, a well defined business model and, if you look carefully, they are doing things that have been done before – and for quite some time. 
• Tomorrow’s companies, because they not only emerge from a period of ferocious change, they emulate that period, are fundamentally places where new things are done, things that have never been tried. People in these places question the status quo as a matter of habit, they are fearless about new ideas and they innovate obsessively. And they don’t stand still, they are constantly changing, constantly looking for something new (notice how Facebook is perpetually in a beta-testing-like state).

Organization model

• The classical model of most established corporations began sometime in the 1920’s with Alfred P. Sloan of General Motors – big, central head offices with branches or subsidiaries dispersed geographically. The boundaries around each of these units are well established, as are the boundaries between one Enterprise and other Enterprises. Business processes and activities only happen inside an Enterprise. Enterprises request services from other Enterprises but usually in a Client/Supplier relationship, through Purchase Orders. Organizations are hierarchical structures that can be represented in standard org charts with multiple levels of management and departments. When issues require the involvement of multiple Departments and/or multiple branches, Divisions, offices, etc., people resort to meetings booked through calendars.

• Classical organizations tend to follow a Mass Production model, one way or another. Enterprises tend to be specialized or focused on a particular product or service domain (e.g., you either make products or you distribute them or you are a retailer – but never both; you produce medication but you don’t administer hospitals or clinics; you are a farmer but you are not a grocery store; etc.)

• In the Company of Tomorrow, Today, the Hierarchy is replaced by the Social Network; and uni-dimensional Departments are replaced by subject communities. Networking defines the way people work within an Enterprise but also how Enterprises work amongst themselves. Enterprise boundaries are not well defined and the way services are delivered to customers or consumers is by enterprises forming clusters around customers.

• Whereas in the classical organization work and decisions are driven top down in a military-like command and control model, in tomorrow’s company work is performed by clusters of individuals of multiple skills who combine their capabilities through spontaneous association in response to real problems, without significant management involvement. Multiple initiatives to develop innovative solutions coexist side by side so as to cause ‘contamination’ of ideas and the generation of further innovation.

• In yesterday’s world, privacy and confidentiality dominate business relationships and employer-employee relationships. This compartmentalization of information and knowledge is consistent with the hierarchical structure and the formal client-supplier model. In tomorrow’s world, today, open collaboration dominates the work environment and business relationships. Privacy will become an obsolete principle and confidentiality will be redefined and far more limited than today. While roles and skills will remain clear – if not clearer – and rules of practice, quality and conformity will continue to dominate the workplace, the ‘lines in the sand’ delineating spaces of authority and responsibility as well as the boundaries amongst corporations will all blur and, at the very least, become dynamic and accidental. The culture of “this is my stuff and that is your stuff” will be replaced by a culture where everybody is permeable and when individuality will be replaced by team work in a community environment.

Business Model

• Think of the words “Supply Chain” and then put the word “slow” in front of them and what you get is yesterday’s business model. Demand from the market flows upstream in a slow process of filters and purchase orders; and then supply flow downstream through a sequence of corporations working in isolation from one another, the majority of them oblivious to the concern of the end customer.

• Companies of tomorrow work in ways that are closer to how the Motorcycle Industry operates in China and to how Social Entrepreneurs organize their Enterprises. There may still be companies with specialized or at least limited roles but the way their assets and capabilities are mobilized to respond to a social need or a market opportunity will be through dynamic clusters that are spontaneously created in response to those needs and opportunities. Instead of Supply Chains we will have Supply Circles where all the players see the needs of the end customer at the same time and therefore the combination of skills and capabilities will not occur through a stop-and-go series of decisions followed by formal purchase orders. Instead, the response to a need will be simultaneous in a collaborative environment where what everybody does is everybody’s business and thus decided and planned jointly.

• Collaborative Supply Circles or clusters are infinitely faster and more adaptable than the rigid Supply Chains of the 20th century, no matter whether we are talking about the industrial sector or the service sector. As is the case with the dynamic relationships of the Motorcycle Industry in China, Supply Circles don’t have to be formal or rigid, they can come together spontaneously in loose associations that are pertinent for a period of time. Because privacy, confidentiality and IP will be reinvented to fit a more open and collaborative world, these constructs involving multiple organizations don’t need to be rigid or exclusive but rather the result of opportunity and circumstances that are always temporary.

The ideas I have expressed in this article (as well as similar points made in other postings in this blog) may sound like science fiction to many. But I am no Jules Verne. I am simply summarizing and extrapolating from experiences that are already happening and have been happening for at least a decade. If your company is doing things that have already been done before and for a long time, you are in all likelihood condemned to perish. If you feel excited or at least intrigued by some of these ideas, then perhaps you have a chance to model your business by looking forward instead of sitting comfortably upon the principles that have prevailed for a century. The latter is certainly easier and somewhat reassuring… until you realize that you may be in the path towards a dinosaur graveyard.