This is the second installment of my three annual ‘top 10 ideas’ lists. The list for Blogs and the Internet is here; the one for Politics & Society will be out later this month. Here are my nominations for the 10 Most Important Ideas of 2004: Business & the Economy:
- The Wisdom of Crowds: The idea: The best answers to business problems are found by canvassing groups (the larger the better) of reasonably informed, unbiased, engaged people; the group’s answer is almost invariably much better than any individual expert’s answer, better than the answer of the experts as the group, even better than consultants’ or management’s experienced judgement. The evidence is in James Surowiecki’s book of the same name. I’ve written about this a lot in the last year.
- Personal Productivity Improvement: The idea: The best way to improve business productivity today is bottom-up, by analyzing one-on-one your front-line employees’ technology, information, learning and workflow management impediments to productivity, and coaching them to overcome them. Almost everyone wants to work more effectively, but top-down training, centralized databases and complicated, unintuitive tools aren’t working. Personalized help with managing information overload, solving the “I can’t find it” problems, and organizing and prioritizing workload to Get Things Done, is what is needed. Four years ago Peter Drucker said this would be the greatest business challenge of the century, and we’re only just starting to realize he was right.
- The Recognition of Corporatism’s Excesses: The idea: The corporation is the very foundation of our modern economy, and the overwhelmingly preferred form of business, but there is a growing public backlash against the corporation’s amorality and single-minded pursuit of short-term profit at any cost. Books like The Corporation, The People’s Business and People Before Profit prescribe solutions that would dramatically affect the behaviour of corporate managers, boards and shareholders, but these solutions may be essential to save the reputation of business as a whole and restore the integrity of our increasingly entangled and dysfunctional economic and political systems.
- The Importance of Courage: The idea: We live in a time of risk-aversion, brought on by the consequences of spectacular corporate failures and embarrassing scandals and swindles, and this mentality will continue to paralyze innovation and progress until business leaders and individual workers start to exhibit some much-needed courage. Fear of failure, of inefficiency, has brought about a kind of corporate anorexia that manifests itself in outsourcing and offshoring, in massive serial layoffs, in making decisions that are long-term dysfunctional out of cowardice to tell investors to be patient. Courage is not about making decisions that are foolhardy, it’s about taking calculated risks, about daring to experiment, and about learning quickly and inexpensively from failure as well as success. Without such courage a business is lame, inflexible, vulnerable.
- The Search for Elegant Simplicity: The idea: Technology has given us the ability to build enormous functionality into almost everything we build, but the very best designs are simple, do one thing very well, and are almost austere. Like nature’s finest creations, the products of Apple and Google search pages conceal their astonishing complexity where the user can’t see it, and the result are things of great beauty and utility. By contrast, today’s cellphones now have user manuals twice the size and weight of their products — monsters of over-engineering. In a world of too much unnecessary complexity, consumers and employees are beginning to make it clear in many ways that less is more, smaller is better, and as Einstein said of scientific theories, business products “should be as simple as possible, but no simpler.”
- An Economy Dependent on Living Beyond Our Means: The idea: Consumption by the end-consumer underlies the entire now-ubiquitous capitalist economic system, but increasingly consumption, by individuals, corporations and governments is fueled by spiraling and unsustainable levels of debt, and the taking from the Earth of vastly more than it can replenish. The result is a deficit economy that is staggeringly fragile, dependent on everyone’s willingness to incur more and more debt, to fund others’ ever-shakier debt loads, and to demand very modest interest rates in return. It’s a Ponzi scheme, and eventually those of us who are wise will get out before the crash, and leave the naive and foolish holding the bag, and bankrupt. It’s an extremely unhealthy way to try to make an unsustainable economy carry on, quarter by quarter, devoid of fundamental support, with everyone wondering who’s going to blink first.
- Role Models Instead of Leaders: The idea: In an age when almost everyone’s job is unique, and each of us uniquely know what needs to be done in our job and how to do it, we don’t need or want business leaders who tell us what to do, or tell us what our values should be, but rather leaders who show us how to get things done — models of productivity, of courage, of responsibility. Leaders are role models whether they want to be or not, and their success depends increasingly on what they show, not what they say. Drucker’s eight recommended principles for role model leadership are shown in the chart above.
- The Co-opting of the Counter-Culture: The idea: Not only are counter-cultural movements, from rap music to eating organic and botanic foods not disruptive or effective at ‘sticking it to the man’, much of the modern economy depends on business’ substantial competence at co-opting such counter-cultural movements, which obsolesce old products and create huge demand for ‘what’s cool’ far more effectively than old ‘planned obsolescence’ schemes ever did. For marketers, this means that viral marketing (one of the top ten ideas on my list last year) can do much of their job for them. For those that want to undermine the old economy with a counter-cultural one, better think again.
- Marketing: Two Kinds of Free Stuff: The ideas: (a) More and more businesses are finding the most successful model for new market penetration is to give a basic product or service away free, and to charge for extras that ‘improve the user experience’; (b) Useful, insightful small ideas that solve a problem that’s peripheral to what your product is all about can dramatically differentiate, add value to, and get people talking about your product, and generate additional revenues with almost no incremental cost to the company. Two-tier pricing isn’t new, but when the lower tier price is zero (which is what file-sharing has led to) it can be alarming to the owner of the property. The answer isn’t to sue the customers, or otherwise try to get blood out of a stone, but rather to use the free first-tier products to generate buzz for the second-tier products, so that not only do they cover the losses from the first tier, they attract a huge price margin. But you can’t cheat: ‘Limited time’ freebies and those that don’t even do the basic job will rightfully be seen as coercive and devious, and can backfire. The second kind of ‘free’ stuff is free to the producer, not the consumer. Seth Godin’s new book Free Prize Inside explains how to do it, and he’s even developed a tool, Edgecraft, to exploit it.
- The End of Oil: The idea: Yes, I know we’ve all heard it before, but we’re running out of oil. Deny it all you want, call it scare-mongering, the facts are that at current rates of consumption there will be no oil left to extract, even at an absurd price, by the latter part of the century. Many experts in economics and in new energy technologies agree that the huge existing oil-dependent infrastructure simply cannot migrate to new energy sources fast enough, and those new energy sources cannot be made commercial even for the very rich, in time avoid a catastrophic ‘adjustment’ (depression). Think about what a sudden quadrupling of the cost of all the materials used to make your product, and of the cost of living of all your employees, would do to your business. And consider that the only thing between today’s $45/barrel oil and $160/barrel oil is a tenuous agreement between OPEC not to charge much more for its increasingly scarce resource, and the world’s only superpower not to invade the rest of the OPEC countries as long as they keep the price low.
I would have liked to have put Natural Capitalism, Natural Enterprise, and The End of Work on the list, but it would be wishful thinking to believe these ideas have yet begun to permeate the business and economic world. Maybe next year.