The Great Fragmentation E-Book

Steve Sammartino

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 409

Veröffentlichungsjahr: 2014

Beschreibung

Doing business in the digital age The Great Fragmentation: And Why the Future of All Business is Small is a business survival manifesto for the technology revolution. As the world moves from the industrial era to the digital age, power is shifting and fragmenting. Power is no longer about might and ownership; power in a digital world is about access. Existing businesses need to understand this shift and position themselves to survive and thrive in an environment where entrepreneurs and start-ups enabled by access to technology are genuine threats. Author Steve Sammartino is widely regarded as a thought leader on the subject of technology and business, and helps companies transition from industrial-era thinking to the mindset and processes required to compete in today's digital marketplace. The Great Fragmentation shows how technological changes such as Big Data, gamification, crowdfunding, Bitcoin, 3D printing, social media, mashup culture and artisanal production will forever change business and the way we live our lives. * Examine how the digital era has altered where we work, how we work, where we live and what we do * Discover how the digital era has impacted social and economic structures, including educational systems, financial systems and government policy * Understand that the social media and collecting 'friends' is just the tip of the iceberg in a digital business environment Weaving together insights from business, technology and anthropology, The Great Fragmentation provides both corporations and entrepreneurs with a playbook for the future of work, life and business in the digital era.

Leseprobe

THE GREAT FRAGMENTATION and why the future of business is small

STEVE SAMMARTINO

First published in 2014 by John Wiley & Sons Australia, Ltd 42 McDougall St, Milton Qld 4064

Office also in Melbourne

© Steve Sammartino 2014

The moral rights of the author have been asserted

National Library of Australia Cataloguing-in-Publication data:

Author:

Sammartino, Steve, author.

Title:

The Great Fragmentation : why the future of business is small / Steve Sammartino.

ISBN:

9780730312680 (pbk)

9780730312703 (ebook)

Notes:

Includes index.

Subjects:

Business enterprises.

Information technology.

Information society.

Dewey Number:

658.4062

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.

Cover design by Wiley

Cover image © iStock.com/ pavlen

Disclaimer

The material in this publication is of the nature of general comment only, and neither purports nor intends to be advice. Readers should not act on the basis of any matter in this publication without considering (and if appropriate, taking) professional advice with due regard to their own particular circumstances. The author and publisher expressly disclaim all and any liability to any person, whether a purchaser of this publication or not, in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance, whether whole or partial, upon the whole or any part of the contents of this publication.

List of Tables

Chapter 6

Table 6.1:

Chapter 19

Table 19.1:

List of Illustrations

Chapter 4

Figure 4.1 life in boxes

Figure 4.2 a remote control

Chapter 6

Figure 6.1 the behaviour of cities has evolved as people are self-organising themselves into groups around passions

Chapter 8

Figure 8.1 photo of Vasilii Racovitsa

Chapter 14

Figure 14.1 expectation and utility curve: a personal variation on Gartner’s hype cycle*

Chapter 17

Figure 17.1 anyone can get into space

Figure 17.2 the pitch tweet

Figure 17.3 the hourglass launch strategy

Guide

Cover

Table of Contents

Preface

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PREFACE

Over the past 10 years I've been a keen observer of the business landscape. I had an inkling something was going on when I left corporate life for the first time in 2005. It was a time when the web 2.0 era was gathering a head of steam. A real sense of empowerment was sweeping the entrepreneurial community. Many of the tools of business were all of a sudden becoming accessible and easier to use. You didn't need anyone's help to find out how to do something because information was entering the ‘on-demand' realm. While most of us still had VCRs in our houses with the time blinking on 12 am, some savvy tech geeks decided to refocus their efforts externally. They decided to not just build something for themselves, but to build something for all of us — something end users could play with, improve upon and even use to build something else. The insight of creating for further creation and humanising and socialising business was inspired.

This was a bit unexpected because after the dotcom crash a lot of us (me included) had doubts about the technology utopia the internet promised to provide. But, while it was delayed, it has arrived. What's arrived has turned out to be far more widespread and structural than most people predicted. It turns out that information that's freed up and accessible by all has an equal and opposite impact on the physical world. Information becomes objects. Information changes the shape of the physical world. Information changes the social and physical world and inevitably the economic structure.

In many ways, it's the opposite of what business had been about up until this point. Business was a zero sum game of producers and consumers: an ‘us' and ‘them'; a server-and-receiver structure. But most of all, it was a definitive power structure where the people who already had wealth and access had much of the economic power. And I know what you're about to say: ‘But what about the 1 per cent, the ever-increasing wealth of the wealthiest few?' The truth is that we're just at the start of a bigger revolution where everything important in life and business is becoming cheaper and more available to everyone. It's a time when our standards of living will increase exponentially via the dissemination of powerful technology; a time when the power flips back to the populous as tools of all sorts are democratised. It will be an entire revision of the factors of production, the way business is done and the power structures around our economy.

As this book is written at the intersection of technology and business, there will be concepts that may not be from the business world you live in. The good news is that the definition of much of the new terminology is provided in the book and the rest is a mere web search away from a quick definition. Let your curiosity take you away from the book and on a non-linear journey — something that matches life. It's also worth remembering that what matters is not so much how any of this technology works, but how it reconfigures commerce. It's the patterns that matter. As business people, we only need to concern ourselves with what technology can do, not how it does it.

The main economic pattern is the increasing fragmentation of industries. Everything in business is breaking down into much smaller pieces. More access is resulting in more players and in more options being available for everything we do and make; in other words, a more decentralised economy. The delineation between makers and buyers is evaporating. We're moving into a phase of highly distributed crowd-powered business systems. The parts that make up our economy are shifting and while the final structure is not knowable, the trajectory is. We're entering a phase in business where things are moving so quickly that we need to avoid the pretence of claiming to know the outcome. Instead, what's needed is an open-source strategy that matches the technology and the newly empowered populous: a world where there are very few trade secrets.

Business is facing its own climate change, but it seems to me that much of the thought and analysis to this point has been about keeping the water out of the front door, or building a better boat to keep a business afloat. As business leaders and entrepreneurs we have to go wider. In times of significant change, what's really needed is a thorough analysis of the landscape and a topographical assessment of the new world. Even the big players — the new ‘big' — became big by creating highly distributed networks of small pieces that are more loosely tied together with many more fragmented products and services. The new digital dominators all live deep inside the long tail.

* * *

There's no shortage of books available with tactical tips on how to use the latest tech tool. If that's what you're looking for, this isn't the book for you. If you're lucky enough to be reading this preface in a bookstore prior to purchasing the book and you want a tactical ‘how-to' summary, please buy another book. This one will only disappoint you. What you can find in this book is deep understanding of the technological landscape that's about to infiltrate our world, both from a business and social perspective. Let's be honest: the two can't be separated anyway. And why should they be? All business books that are strategic in nature have to cover the breadth of life. They have to cover anthropology, technology, commerce and culture.

By the time you've finished reading this book, you'll have a philosophical base about the direction in which the world is moving. This will serve you more than a bunch of disposable digital tactics would, especially given the pace of change. The disrupters are already being disrupted by the next-generation startups. Tactics are short term. Philosophy is enduring. I hope you'll develop your own philosophy on the future as we examine the marketing mix and how it's shifting and fragmenting around us.

Steve Sammartino

ABOUT THE AUTHOR

Steve Sammartino had his first startup before the age of 10, running an organic egg farm in the early 1980's before the words organic or startup had been invented. The first phase of his ‘adult' career was in marketing, working his way into senior executive roles in global consumer goods companies and advertising agencies. He escaped his cubicle for the first time in 2005 and went on to found rentoid.com — a peer-to-peer renting portal that became a leader in the collaborative consumption movement. After a successful exit he embarked on a number of crazy side projects including putting a Lego space shuttle into actual orbit, building a jet-powered bicycle, and crowdfunding the build of a full-size Lego car that runs on air and uses an engine made of Lego — all to prove what's possible in a connected world with low cost technology.

He does some serious stuff too.

Steve also travels the world helping companies transition from industrial-era thinking into the digital age, writes on business and technology issues and blogs to over 30 000 readers a month.

His latest startup project is Tomcar Australia — a seven-person car company which makes and sells all-terrain vehicles. It is Australia's first car startup in over 30 years and a company that practises what Steve preaches.

Connect with Steve, check out his latest projects or read his blog via www.stevesammartino.com.

Or maybe just say hi to @sammartino on Twitter.

CHAPTER 1The industrial deal: the shift from industry to technology

The industrial revolution was a pretty good deal. Here’s what we got: stable jobs with better pay, paid annual leave and union-improved working conditions; improved housing with automated heating and cooling; homes filled with labour-saving devices and disposable widgets; free entertainment projected directly into our living rooms; personal motorised transportation and a national transport infrastructure; a garage filled with toys; air-conditioned supermarkets selling packaged goods with long shelf lives; big box retailing; government sponsored education, medical innovation and public hospitals; jet aircraft that could fly us through the clouds; and a life expectancy beyond the age of 35.

It’s no surprise that people living in industrialising countries clamoured to gain the benefits of a longer and wealthier life. The only rational choice was to sign up for it. The benefit of an improved life expectancy on its own was quite compelling. But when we added the layers of conspicuous consumption and free entertainment on tap it was a real human high ground.

So we handed in our craftsman and artisanal skills to help build the one-size-fits-all economy and the consumables that fill it up. It was the only way all of us would be able to own everything. It meant we had to trade in the very personal touch of a craftsman and become part of the machine itself. By becoming part of the machine we were able to have more. We were handed everything earlier generations could only dream about, a standard of living beyond that of gentries and kings when we take into account the upgraded living standards we all acquired. But there was a price to pay: we had a job to do. Our job was to help churn out the items that built the industrial world and to buy the items we churned out. We had to become consumers.

Terms and conditions

The industrial revolution didn’t come with a set of terms and conditions; however, there were some unspoken rules that weren’t covered in the text book. The textbook was so focused on how to make widgets and money, it forgot about why any of that mattered.

We abided by these terms for the best part of 200 years. The two most important terms were:

We’ll enable a more materialistic lifestyle

but

You’ll need to follow the rules set by the owners of the capital.

This was a simple way of saying that our individual creativity can’t compete with the industrialists’ aggregated efficiency. It’s something that goes against the basic human spirit — our need for collaboration, creativity and nuance, which is imbedded deeply into our past and, thankfully, our future.

Consumers and creators were two different classes in the industrial world. The industrialists owned the factors of production. The ability to create independently was taken away from workers and re-engineered so it belonged only to the capital class. Without saying it, the deal was: ‘You let us design, make, distribute and advertise and in exchange we’ll give you a higher standard of living.’ They left out the bit about keeping all the profits for themselves.

This economic model worked well until we reached the point where we owned everything we needed. But now the deal has entered its final phases and the gig is up. The industrial revolution is putting itself out of business. I wonder if they had a planned-obsolescence in mind.

Unlearning

The methods used by corporations became so effective at generating more for less that they’re making their own era an obsolete business method. Companies that want to thrive during the technology era need to seriously revise their economic playbook. The efficiencies these corporations generated have made high-end technology disposable, or at the very least, low cost. It’s difficult to make a profit when products have to improve each year and cost less than they did last year.

This means that in the new economy we’re all required to do some unlearning to stay profitable and relevant.

It means the only way of achieving revenue upside is to sell more units, but there are only so many mobile phones and televisions a person can own. This means that in the new economy we’re all required to do some unlearning to stay profitable and relevant.

A new business infrastructure

The entire economic, political and social infrastructure is going through a 200-year shift from the industrial era to the technology era. All of the elements that make up our economic infrastructure are experiencing a technological disruption. These changes are not the comfortable, incremental ones we’re accustomed to, but step changes that — for the unprepared — hurt careers and kill businesses. Products and services, distribution systems, pricing methods, advertising and promotion are all following a transition away from clustering and aggregated power structures. They’re moving from a one-size-fits-all model to small, distributed, specific, customised platforms that deliver to a one-size-fits-one model. Previously stable economic systems are now fragmenting rapidly.

The 4Ps

In order to understand the changes in our economic system, we need to investigate the changes in parts. The simplest way is by looking at the parts that make up what’s known as the ‘marketing mix’. This is called ‘the 4Ps’: Product, Price, Place and Promotion. While modern marketing mavericks will try to displace these simplest of production-related business factors, there’s nothing in business that can exist outside of these four parameters. We’re limited to using the 4Ps when it comes to configuring what we hope to sell. User experience, community, interface, responsiveness — take your pick — they all sit inside and are part of the marketing mix and they go back to the foundation of economics, the Ws: What, Where, Who, How much and for Whom. The 4Ps are the only levers we can use for building anything in business for a profit: they’re the factors of production in their simplest form. All four parts are changing rapidly and forever. A simple explanation of each of the 4Ps will help create a context for the journey in this book.

Product.

This is what we sell, whether it’s a widget, a service, an event or an idea. It’s what we use to generate revenue from.

Price.

This is the price we sell a product for, even if that price is attention or privacy. Price also includes the impact of demand and supply, finance, currency considerations and payment systems — anything that must be considered when money changes hands or there’s a transaction.

Place.

This tells us where we can get the product and how it’s delivered to us, both physically and virtually. It includes all considerations for distribution systems in exchanging goods and services between people and organisations.

Promotion.

This is anything to do with communication about what’s available and why people may want it; for example, the tools of information exchange and media among people, brands, organisations and governments.

The 4Ps form the interdependent system, or ‘mix’, from which we do business. In fact, it’s the same marketing mix that people employ when they earn their living, but most people don’t have the presence of mind to see it in such simple terms. While certain brands and companies often focus heavily on a particular part of the mix to create a point of difference, it’s getting them to work in concert that leads to a profit advantage. And when all of them are changing rapidly we need to pay attention and reset our mode of operation. What it comes down to today is that a business is either disrupting these factors of production or it’s being disrupted by a new competitor trying to put the incumbent out of business. When the factors of production change, the world we live in changes too. Where we work changes, so where we live also changes. It impacts the support systems around the economy as well: the financial system, the education system and even government policy.

The greatest innovation we’ve seen since the commercial internet was born in the early 1990s has been the rebuilding of infrastructure. That’s why everything is up for grabs. Until now, many industrial legacy organisations have remained unaffected by the change. It was a temporary situation for them. But all of the 4Ps are — and will continue to be — disrupted.

The first example of disruption affected the fourth P, promotion. This was to be expected, given the world wide web (the web) is all about interacting in a new way; it’s a form of media in itself. It was the easiest of the 4Ps to disrupt, thanks to our new internet technology.

legacy media: the traditional media outlets that were common before the internet, including television, radio, newspapers and magazines

The biggest and first P to be hit hard by the technology revolution was legacy media. But open communication does more than just disrupt the media: it’s the bellwether for rapid innovation. Knowledge exchange affects everything and redesigns the systems and infrastructure around us. The corporate infrastructure that used to provide a layer of protection now forms a legacy of financial burden in the form of assets that can rapidly become redundant and costly to carry. Probably for the first time since the commencement of the industrial revolution in the late 1700s, it’s better to be small than big in business. So the question any company should be asking is:

Would I build this same infrastructure today given the choice of a clean slate?

The simple reality of the technology revolution that we’re living through is that it requires ‘clean-slate’ business strategies. Piecemeal legacy adaptation is the fast track to irrelevance and financial disaster.

Clean-slate business strategies are not only needed because everything around us is changing. They’re needed because, unlike other revolutions, this one will be a global revolution. The change is so rapid and global this time that developing nations will skip right past their industrial era and straight into technology-driven economies.

What is fragmenting

The power base of industrial companies is breaking up. It’s flipping from the ‘few’ to the ‘many’.

What it means for business

The industrial business playbook is being rewritten. Industrial legacy infrastructure is no longer a business advantage.

CHAPTER 2A global revolution: industrial leapfrog

The global revolution is underway and it’s far more significant than the industrial revolution.

Beyond the fortunate few

The benefits of this revolution will not be confined to a number of wealthy, Westernised countries with existing infrastructures and stable governments (which, to provide a level of quantum, excluded more than 80 per cent of the population). The entire globe will participate in the technology revolution, not just the billion or so fortunate people who live in western Europe, Nordic regions, North America, Australia and certain parts of Asia. And this will happen because the cost of entry and adaptation is so low.

The entire globe will participate in the technology revolution.

This revolution is about accessibility, and it’s driven by the low cost — disposability, even — of technology, costs low enough for people within developing nations to access mobile technologies, often before the true industrialisation of the nation even occurs. The most cited example of this phenomenon is that there are more mobile phone subscriptions (approximately 4.6 billion) around the world than there are toothbrushes1 in use (approximately 4.2 billion). While this point is debatable, what matters is that this revolution has the potential to create a leap-frog effect and that the path to economic development will no longer be linear. Countries could circumvent certain industrial technologies altogether. For example, industrialised, government-funded schooling could leap directly to cloud-based, open-source learning. This is something large conglomerates in the packaged goods, power generation and other industrial stalwart categories should take note of. A corporate strategy that relies on growth from selling to developing nations as they industrialise is fraught with short-sighted danger. The speed of development of certain technologies means that industrial methods of production may never eventuate in tomorrow’s non–BRIC countries’ developing economies.

BRIC: Brazil, Russia, India and China

3D printing (discussed in detail in chapter 10) has the potential to circumvent manufacturing altogether. Exponential advances in solar, wind and other power-generating technologies may mean that houses will become self-sufficient with regard to their energy needs. As we saw for media and communications, the ability to create products that enable us to own the tools is where the economy is headed.

It’s what technology wants. It fragments down to the micro level and becomes personal. The job of the corporate hero of tomorrow is to provide a platform for customer independence.

The multi-generational shift

The reason why it’s hard for companies to cope with this shift to micro businesses, is that it’s a multi-generational shift. Given that the dawn of the industrial revolution was in the late 1700s, and if we use 30 as an average age for a new parent (it used to be much lower), we’re living through a nine-times generational shift in lifestyle and economic understanding. This is a significant amount of indoctrination handed down from parents and employers of how things should be done and what works in this world. It’s pretty hard to unlearn all of this, especially when most of it has been proven empirically.

We can thank Fredrick W. Taylor and his scientific management techniques2 for the overly rational and logical approach to business. Taylor believed that workers could be regarded as cogs in the overriding industrial machine and that the tasks undertaken by workers could be analysed down to a minute level of movement and time and then designed, iterated and improved for the ultimate in efficiency. For physical tasks this can be a valid approach. What’s unfortunate is that the ‘humans-as-machine-cogs’-based management ethic leaked its way into knowledge work over the past 100 years, while creativity and human judgement took a back seat to the idea of spreadsheet-based or quantitative decision making — an ironically irrational approach to managing many creative decisions. An example from my working life is the involvement of a procurement department in the choice of advertising agency. And I’m not talking about the negotiation or contract element at the end of the process, but full involvement from the start.

Changing habits

This rationality, while being potentially useful for gaining efficiencies in systems, has inappropriately become the preferred approach in all business arenas and even in career paths and corporate strategy. It probably had a greater negative impact on our schooling and education process than we give it credit for.

Employers want to see linear, rational progressions in all their inputs, even their staff. They want your schooling to be linear; they want you to work in the same industry; they want to see progressive upward steps that validate your company performance. Forget that it’s most likely your internal political performance that defines your success, rather than what you actually deliver for the company.

The problem is that our business environment is changing quickly and the habits of large organisations are not.

They prefer all replacement staff to have the same industry experience, the same education, the same previous job title, the same customer experience, and experience in the same channels of distribution, which is essentially a risk-reduction strategy for the hiring manager if things turn out badly rather than a growth strategy for the organisation. It’s not surprising, given that the primary role in large organisations is to protect against the financial downside rather than chase a revenue upside. This course of action works as long as the business and technology environments remain stable. The problem is that our business environment is changing quickly and the habits of large organisations are not.

Lifetime employment

It used to be that you’d get a job and stay with your employer your whole working life. Smart employers, and certainly startups, are now beginning to look for people with wide experience, otherwise known as ‘horizontal personnel’.

A thin experience base of vertical climbing is not robust enough in a world that’s facing shake-ups in every economic arena. It’s not going to augur well when things get shaky. The more specialised any person or company is, the higher the risk they can be replaced in a technology revolution. We’ve been encouraged to diversify our investment portfolio since the beginning of investment and portfolio theory. And yet, people are not encouraged to do the same thing with what’s most often their primary form of income for life — their salary.

This puts employees into a career paradox: the obvious strategy for achieving high office in a company is ultra-specialisation and vertical climbing. Yet, the probability of being successful this way is low. At the same time it reduces the value of the employee who doesn’t make it to a corner office and has to follow another career path because they have what I call a thin market proposition. In the end it often becomes an all-or-nothing bet. Companies creating employment didn’t care about this while all the risk was with the downsized or stagnant employee. However, these days the risk of not having employees with wide experience is starting to impact the future performance of companies. It’s not a very future-proof human-resource plan.

Over the past 20 or so years, since the internet has been opened up for use as a commercial platform, the strategy of staying in the one industry and trying to climb the corporate ladder hasn’t served the humble employee well. It has displaced many employees and many employers who couldn’t see the error in their ways. While many employers espouse that their employees make the company, it’s sometimes hard to believe they really mean what they say.

From employees to projecteers

Over the past 10 years I’ve transformed myself to de-risk my career and income. I’ve made a transition from a consumer-goods marketing executive to something I haven’t quite been able to define as yet. The most apt description is probably ‘entrepreneur’, although it doesn’t always translate to my advantage on an immigration card when travelling overseas.

projecteer: a person who works independently for others on projects

Essentially, I’ve gone from a thin, singular career base of ‘marketing person’ to a range of income-generating activities including business blogger, web startup founder, startup investor, university lecturer, technology journalist and radio commentator, viral video maker, public speaker, car company board member, industrial era company consultant, government technology adviser and business author — none of which involved vertical climbing, but horizontal hopping. What I try to do is find the Venn-diagram overlap in each opportunity. Each overlap invents the right to step into another realm, which then overlaps with the previous one, and so on. It’s something businesses have been doing for a long time: related diversification. Unfortunately the people working within these businesses rarely adopt the corporate strategies they implement for their own careers and income purposes. When it comes to careers in the technology age I always tell people that Venn is Zen. (It must be true because it rhymes!)

The important point to note is that I didn’t have the right, or permission, to do or learn any of this. I just went ahead and did it. I did it because I could. There was no gatekeeper and I could do most of it for free using the gift of democratised knowledge and connection tools. Now it makes me antifragile. ‘Antifragility’ is a term coined by author Nassim Taleb to describe something that improves when it breaks or is disrupted by shocks so it can reconfigure and grow stronger. I have multiple sources of revenue and the relative diversification of a personal index fund of tech revolution-proof skills. It’s what both employees and employers need to do: focus less on functional departments and more on connecting seemingly disparate skills and overlaps.

Industrial education

All of this comes back to the education system. It’s not surprising, given our current government-funded education systems are a child of the industrial age. The industrial template was used to design a schooling system that could produce great workers for the industrial era and promote orderly political behaviour. This model has indoctrinated people’s thinking. From the government, to parents, to kids, to companies, to their eventual employees. Learn the syllabus, reproduce it in tests, do well at school, get into university, get a qualification employers want, get a job in a good, stable (preferably big) company, climb the hierarchy, get paid more and, finally, retire in a reasonably independent financial state. It’s the path most people I know are on. Yet most people on this path agree that it rarely leads to riches. It’s a linear and rational B-follows-A method for educating our children and grooming them for their working life plan. It doesn’t work now, and it’s only going to get worse as new systems and technologies increasingly disrupt the workplace. I’ll go into detail about this in chapter 16.

The skills that get someone to the top within a company are, unfortunately, not the same as those needed when they get there. This may just be a contributing factor to the highly paid, please-take-this-money-and-go-away exits of corporate CEOs.

The two imperatives for success as an employee in a large organisation are financial risk mitigation and internal political performance; in other words, don’t blow the budget, and make the quarterly number for Wall Street. Regardless of the long-term impact of their decisions, the high-performing corporate executive must find a way to get the number. No brazen careerist would push out a game-winning launch if it risked their position at the firm or if the probability of its success wasn’t high, regardless of the benefits the company could receive from a significant innovation. They’d rather research the goodness out of any innovation, ‘wait and see’ how the technology emerges and incrementally refine what they already have in the market. It’s what their employer rewards, so it’s the right choice for staff in most organisations.

Startup culture

The reason we see so many startups doing well isn’t because the entrepreneurs are necessarily smarter than their corporate-dwelling counterparts. It’s because the reward structure for entrepreneurs is different. As a startup founder, you win if you create value and invent revenue. The corporate executive plays an entirely different game, one of reducing cost and protecting against losing market share. The prize in the corporate executive game is a relative wages contest against fellow staff members, which endures regardless of the company’s performance.

Yes, there’s an obvious difference between a large existential revenue base and trying to build something from scratch. Some may even say comparing the two types of organisation is irrelevant because they’re at different life stages and trying to achieve different outcomes. But this is no longer the case. How people operate within these different structures matters more than ever because when eras come to an end, the rules change and we all have to start again, regardless of how big or established we are.

The culture of big is ‘don’t make an error on the big project’. Mistakes are bad and costly, or they’re perceived to be bad and costly because that’s the way it was for a very long time. This thinking is largely driven by the history of where companies emerged from, rather than the reality of the market they compete in today. It was super expensive to get a factory design wrong. It was (and is) expensive to get your product ranged in a national retail chain. It was downright scary to run a national advertising campaign that didn’t resonate with the audience. It was a disaster if the new warehouse had design flaws. If a company failed to launch something, it hurt financially. In an industrial world, all the things that major brands and companies did had a lot riding on them financially. And that’s why we mostly see incremental innovation — which is an oxymoron, if you ask me.

In a technological world, the cost of mistakes is lower. If you happen to be running a nondustrial company, mistakes are actually good. The cost of getting it wrong in digital firms becomes low-cost iteration, a form of market research that’s actually tested in the market, rather than in some contrived, demographically profiled research group. And the mistakes we make are sometimes invisible. Perhaps no-one used whatever was launched; it most likely didn’t have national advertising support; and it most certainly can be replaced by reconfiguring the computer code that went into building it.

nondustrial company: a company whose DNA is not of the industrial era, but the new technology era

The truth about competitors

Sure, not every business will be digital. Sure, factories, mills, warehouses and other complexes and expensive business infrastructure will still exist. And yes, it’s clear that not every business will be involved in technology. Hard costs that come from delivering industrial-level, hard, physical goods are valid, needed and will remain a part of the business landscape. But the reality is that every legacy industry is competing against its digital brethren. They’re competing even if they’re not chasing the same customers or revenue pool.

During a transition from one age to another, companies don’t just compete for market share. During a shift in ages we start to compete heavily in a way that’s indirect and difficult to perceive. We don’t just compete for customers or shelf space either. We compete for a wider set of fundamental business resources.

We compete for awareness and interest in what we’re doing. The more boring the item we’re selling, the more we need to spend on media.

We compete to get high-quality personnel who understand the emerging landscape and people who can provide intellectual horsepower in a changing landscape. If our industry or brands are undesirable to work for it becomes difficult and expensive to attract the people who can create the changes needed to escape the boring downward spiral to irrelevance.

We compete for financial capital. In a market where funds are being raised in non-traditional ways (crowdfunding, for example, which I cover in chapter 12), we compete against industries whose financial upside is greater. It starts to increase our cost of capital as we’re limited to traditional and more expensive methods of financing growth.

We compete for the ability to collaborate with others. The new platform orientation in business means brands need to collaborate more often. Brands without in-market cache will find it increasingly difficult to find collaborators. Mash-ups and corporate marriages of value tend only to occur when both players get positive rub-off from each other.

We compete for the future and making it through the transition to the emerging landscape as if we’re competing for the primary resource of sustenance just to stay alive.

The global nature of this revolution has conspired to give us a global voice. And what’s most interesting about the voice is that it hasn’t just been magnified, it has also been unified.

What is fragmenting

This revolution is a truly global one. It’s affecting every person, not just the fortunate few in developed economies.

What it means for business

Business can’t simply try to implement industrial-era strategies in emerging markets. The technology revolution means that many industrial-era ideas and markets will be leap-frogged by developing economies.

Notes

1

http://60secondmarketer.com/blog/2011/10/18/more-mobile-phones-than-toothbrushes

and also

www.chartsbin.com/view/1881

2

Frederick Winslow Taylor,

The Principles of Scientific Management

:

http://books.google.com.au/books?id=HoJMAAAAYAAJ&pg=PA3&redir_esc=y

CHAPTER 3The social reality: beyond the surface of social media

Social media is only a small part of the change we’re living through; it’s a surface indicator or a symptom of the times. The fact that all of it has been enabled by an omnipresent and ultra-cheap space race in technology tells us much more about why it matters. The wormhole goes deep, and social media is just the entry point to the hole that we’ve recently entered. We’d do well to think of social media as the introductory 101 course for something much more significant.