Corporation.
Non-Profit.
Community.
Business.
Cause.
Platform.
Government.
The clearly defined borders that have traditionally enveloped the institutions above are blurring and we’re trying to make sense of it all. The music industry is still trying to figure out what happened. Broadcast media, newspapers, and publishing are in the midst of a dramatic reshuffling. Governments are trying to figure out what organizations like WikiLeaks really mean, and how to deal with them. Groupon and ZipCar and countless manifestations of various crowdsourcing and sharing models are flipping previously well defined economic models on their head. Chief Marketing Officers are coming to grips with the fact that their brand is truly in the hands of the market. I’ve seen projections of Facebook becoming the equivalent of its own nation in 5-7 years. There are at least two experiments of new countries; one is developing off the coast of California, and a there is a floating island making its way around Europe. Occupy Wall Street has morphed into a global distributed movement dissatisfied with the status quo.
We like definitions because they help us make sense of the world. But we’re seeing a rise in new constructs and entities and they don’t quite fit into the boxes and definitions that have helped us manage and make sense of the world around us for decades. Debates cascade and echo across multiple domains, all sounding strangely similar as leaders and industry analysts in their respective verticals try their best to accurately frame the issues upon us.
Is this simply evolution as it has always been? Is this a paradigm shift? Is this the modern version of the Dutch Tulips mania, or just a new flavor of new and improved snake oil?
Ultimately, IS THIS (whatever this is) WORTH OUR TIME AND ATTENTION?
As I watch and interact with people across different domains of my life, I see lots of different responses to what’s happening right now. Some are oblivious. Check that, many are oblivious. Some are panicked. Some don’t care. Some are focused on one narrow aspect of the bigger picture. Some are simply trying to put food on the table, pay their mortgage, and get their kids to soccer practice on time. Amongst the digerati, there are plenty waving pom-poms, singing social kumbaya, and congratulating themselves with digital ego metrics and accolades.
But, perhaps the most common scenario is that many of us have a hint of what’s happening, trying to make sense of newsbyte fragments flying past in the activity stream, but aren’t quite sure what to do, how to respond, or ultimately what any of this means for us, and the generations behind us.
What’s really going on?
Institutions are, in fact, being rewired before our very eyes. Industries and niches within them are being born, and/or being recast. While it’s easy (and important) to discuss the financial crisis of 2008, the de-leveraging of excessive debt, and high unemployment, set against the backdrop of a rapidly emerging environment of social, mobile, and cloud technologies, it’s equally or more important to recognize the additional and perhaps more foundational long terms shifts happening beneath the surface.
A team of folks at Deloitte Center for the Edge in their 2011 Shift Index highlight the sobering fact that:
“...asset profitability (Return On Assets) has shown a downward trend over the past four decades; a trend illustrating a steady decline in firm performance that not many have even noticed, much less investigated. Indeed, there continues to be a profound cognitive dissonance around this point: on one hand, we all acknowledge experiencing increasing stress as performance pressures mount; on the other hand, we seem unwilling to accept that all of our efforts continue to produce deteriorating results…
…we expect, over time, that performance will improve as firms begin to figure out how to participate in and harness knowledge flows. Doing so will require significant institutional innovations, not just changes in practices, resulting in value creation through increasing returns performance improvement.”
NY Times Columnist Thomas L. Friedman stated something similar in 2010:
We are shifting from a world where the key source of strategic advantage was in protecting and extracting value from a given set of knowledge stocks — the sum total of what we know at any point in time, which is now depreciating at an accelerating pace — into a world in which the focus of value creation is effective participation in knowledge flows“
Reconsidering what we thought we knew
Not only are institutions being redefined, but even age old terms like Employee, Profit, Currency, and Capital are being reconsidered, revised, and expanded.
The digitization of everything, increased connectedness, and media innovations, by which ideas are communicated, challenged, and iterated upon are changing the fabric of our world, and how it works. Some of these changes are incremental. Some are dramatically disruptive and will change our world in ways we can’t yet comprehend.
The factors above are also paving the way for new methods of measurement. Triple bottom line measurement continues to gain traction, where corporate success is measured not just on economic profit, but also on ecological and societal impact. The switch from accountability and focus on short term shareholder profit to long term stakeholder benefit will likely continue to also reshape the “mashup institutions” of our future. A new entity type, representative of these shifts, has recently been created. B Corporations use “the power of business to solve social and environmental problems”.
Answering the pressing questions
While senior executive teams wrestle with the present mandates and realities of operating in a slowly fading industrial economy, there are a number of questions that leaders should be asking to guide existing organizations, and/or create new relevant organizations for the future.
I’ve started the list below – what else would you add?
– Who are the stakeholders who we can and do impact (in addition to shareholders)?
– How do we (co-)create value for each stakeholder group?
– What value can we realize in exchange for the value “we” create?
– What are the (new) mechanics and measurements associated with these value exchange scenarios?
– How do we gain access to new information, human, and capital resources?
– How do we harness these new resources, in combination with our existing resources to further create value for our various stakeholder groups?
– How do we structure our organization to be more adaptive and responsive to market needs in (near) real time?
– How would we perform if we were to evaluate ourselves based on Triple Bottom Line Measurement?
I suspect that for some organizations, the end result of a deep series of questions may ultimately result in the strategic creation of a new hybrid organization that straddles the boundaries of industrial age institutions…and they won’t be alone on their journey. The scope of implications on the mid-market are not different than the enterprise or small businesses. The societal changes described and the pressing questions above are equally relevant to organizations of all sizes.
This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet.
