Last Modified: ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?



Homepage / Publications & Opinion / Archive / Articles, Lectures, Preprints & Reprints

New Technology, Horizons & Attitudes
Weekly Diamond, Japan, 22 March 2000
By Peter Cochrane

Predicting future trends is a dangerous pastime, but to slightly misquote Charles Darwin: "It is not the strongest or smartest who survive, but those most adaptable to change". The last time this was both a challenge and considered significant was during the Victorian era when the telephone started to transform our ability to communicate and organise. This single invention changed everything, and today it is the Internet that is fulfilling the same transformation role, but on a much larger scale.

In most countries and industries there has been a stark realisation that globalisation means tough competition and a fight for survival. But unlike any previous period in our history, businesses face a world that is becoming increasingly fast, counter-intuitive and commercially more dangerous. Consider, for example, the polarised perception of e-commerce in the US and Europe, exemplified by recent events in the entertainment industry. European headlines and reports recently read along the lines: "Time Warner buys AOL" and within a week it became, "Time Warner buys AOL and EMI". This was followed by reports expressing some sense of relief that real bricks and mortar money had overcome the unreal and inflated world of internet stocks. Meanwhile, on the other side of the Atlantic, the headline was: "AOL buys Time Warner and EMI" followed by reports that unreal money does it again.

It seems that value is actually perception. But are today's investments in the dotcom world any less credulous and long lasting than the purchase of an Old Master - just paint on canvas with no intrinsic value. Or antique furniture - just a few sticks of wood. Here we have items fundamentally worth nothing that are valued in millions of pounds or dollars. In comparison, the dotcom world looks more solidly founded, with customers, a service base, knowledge and a growing influence over the lives of everyone on the planet. The only uncertainty hinges on their real value, and that comes down to what people are prepared to spend, which we generally count in financial terms. A wiser choice of metric may turn out to be time. The key to calculating the value of a dotcom business may be how many people are attracted to a web site or service, and how much time they are prepared to devote it.

Richard Feynman, one of the greatest physicists that ever lived, once said "I think we can safely assume that no one understands quantum mechanics". This is probably even more likely to be correct today. Unfortunately there has never been a Richard Feynman of economics, or indeed any theories that come remotely close to explaining what is happening within markets. Nevertheless, "I think we can safely assume that no one understands the internet and the dotcom world".

Why is it we lack any models or theories of economics that are worth a dime? My guess is the dynamic nature of relationships and the involvement of human emotions, creativity and greed result in a high level of unpredictability. But when a Feynman of economic theory does turn up I suspect the key formulae for value will include knowledge, information, access, reach, relationships, time, products and customer base as wholly stronger parameters than raw money.

If we could understand all of this it would be easier to predict the future. But just looking at dotcom stocks and their rate of growth - where companies are amassing billions in less than five years - it is clear that many of today's bricks and mortar megaliths face the risk of being bought out within the next 18 months. Banks, insurance companies, telcos and cable companies are all threatened, but I'm not at all sure many of them see it coming.

I watch with interest as the technologically celibate pontificate on the pros and cons, the opportunities and dangers of information technology they have never experienced. The innovation of the internet and its enthusiastic embrace by the US seems merely to promote one talking shop after another in Europe, where the predominant focus seems to be on the abuse of IT and the internet rather than the commercial or social advantages they offer.

As far as I can see, the next big deal has to be the notion of zero government involvement and intervention in business. Two states in the US are actively considering a total move out of control and regulation on all forms of trade. Could this be the end game? After all, we started with total freedom and migrated through dictatorship, communism, and capitalism in cycles that now sees capitalism the current victor. In fact, the only system to create most change and benefit in terms of standard of living and basic freedoms has been capitalism. But is it sustainable in the grand context of the use of raw materials and preserving the ecosystem of the planet? I think not. Rampant commercialism will ultimately fell all the trees, burn all the oil and coal, and gradually destroy the environment to a level where we cannot survive. The rise in the number of cancer cases, allergies, overcrowded cities, and the possibility that we have triggered global warming are but a few issues already evident.

So how could total freedom work - will it not be even more damaging to the planet than capitalism or communism? Broadly, we are seeing commercial focus gradually moving from the industrial economy to the electronic economy (or e.conomy) to be followed by the corporate conscience and the ECOnomy. Ultimately, this could result in a freedom of trade and action that borders on anarchy, but in a constructive and dynamic manner that may realise the maximum benefit to society and the players. What is surprising is the length of time that it has taken for governments to recognise that they not only have no role, indeed they are now the most likely impediment to progress. IT not only changes the speed and manner in which we can trade and do business but, more radically it changes the fundamental characteristics of modern societies.

The population concerned with start-up businesses is around 3 per cent in the UK, 5 per cent in Israel, 7 per cent in Canada and 9 per cent in the US. In each case, about 30 per cent of new economic growth is generated by start-ups, and most of those involved are under 45 years old. Those in the lower quartile of the league table have discouraging tax systems and an inadequate infrastructure that discourages the exploitation of our primary wealth generator - ideas. It is difficult to rent floor space by the day, or week, and support services are expensive. They also tend to have a scattering of start-ups operating at a subsistence level and nothing remotely approaching the US model where incubators are being developed on a massive scale. Unfortunately only a few people seem to recognise the need, a grudging delay in the acceptance that failure is OK, and taking risks deserves greater reward. As a matter of economic survival they will have to fix all of this fast to ensure our future prosperity.

So what must be done to realise a magical transformation of industry and business? Here is a short list of actions that are self-evident and necessary to ensure future success:

  1. Keep it simple: Create a clear and easily understandable vision - evangelise and sell to all the players and people involved - communication is always the vital element
  2. Under rather than over manage: Let go at the top, empower people to succeed and provide the framework in which everyone is a partner
  3. Seek out supportive relationships: Find companies, organisations and people who salute and support your cause, and with the skills and facilities to satisfy and supply your needs - it is easier to be a winner when working with winners
  4. Build networks early: The return in any form of network goes as N2 where N = the number of nodes, people or organisations
  5. Invert the rules: The value chain of the new is unlikely to resemble the old and will almost certainly be inverted
  6. Seek exponentiation: Find the routes to and mechanisms for explosive growth that far exceeds the old linear markets
  7. Focus on customers: The future of business is about sucking up - really sucking up!
  8. Virtualise: Outsource as much as possible - the days of Do it All have long gone
  9. Technology: Use the best available - ultimately it costs far less than people - and you cannot win against competition with superior fire power
  10. Make information free: Let people have access - for without communication and data availability they will be disabled and ineffective
  11. Reward everyone: Make sure that all involved get a significant slice of any win
  12. Celebrate the winners - care for those in trouble: Remember the power of praise and the rehabilitating impact of concern and support
Consider a Fortune 500 company that didn't exist 15 years ago. It manages the expenses for over 20,000 staff with only two people. Everyone is trusted and electronic screening, with a few spot checks on reports lying outside the norm, is all that is required to police the system. Now consider the governmental or "old company" approach - no one is trusted and hundreds are employed to watch and police the activities of the rest. The cost is huge and the benefits negligible. People feel untrusted and unloved, while those wishing to defraud the company do it anyway and largely escape because it is unrealistic to devote sufficient resource to detecting and tracking crimes. IT, the internet, and freedom really work - but it is more about changing mindsets and behaviour than technology.

Word Count = 1602

All materials created by Peter Cochrane and presented within this site are copyright ? Peter Cochrane - but this is an open resource - and you are invited to make as many downloads as you wish provided you use in a reputable manner