For a while now I have been talking to friends and colleagues about this gut feeling that I have, that what we talk about as the economic crisis or downturn is possibly not a traditional crisis and/or downturn in the sense that once it is over things will return to normal.
I have this very clear feeling that a fundamental shift in many of the ways that we have been used to conducting business and interacting with each other is underway. (see also my previous post are you a frog in the pot) And that when the dust settles things will not return to what we have known previously as normal but will have undergone a clear shift. This is not a passing storm but fundamental climate change.
In pursuit of that theme I have been hunting for signs that would support this gut feeling.
This has led me to The 2009 Shift Index published by Deloite and presented on the Harvard publishing website.
Her you will find the following resume of key findings:
The 2009 Shift Index reveals a disquieting performance paradox in the US corporate sector. On the one hand, labor productivity has nearly doubled since 1965. During those same years, however, US companies’ Return on Assets (ROA) progressively dropped 75 percent from their 1965 level.
How can firms be getting lower returns even as they’re becoming more efficient? The answer resides in the heightened competition among firms. Competitive intensity nearly doubled between 1965 and 2008, forcing firms to compete away the benefits of productivity gains, which were instead captured by creative talent in the form of higher compensation and numbers of consumers through increasing performance/price ratios and wider choice.
It’s little surprise to find also that the highest-performing companies are struggling to maintain their ROA rates and are increasingly losing market leadership positions. Taken as a whole, the findings portray a U.S. corporate sector in which long-term forces of change are undercutting normal sources of economic value. “Normal” may in fact be a thing of the past: even after the economy resumes growing, companies’ returns will remain under pressure.
To respond to this performance challenge, U.S. companies will need to let go of industrial- era organizational structures (and the reporting relationships, incentive systems, and managerial processes that go with them) and operational practices in favor of the new institutional architectures and business practices needed to create and capture economic value in the era of the Big Shift.
Companies must move beyond their fixation on getting bigger and more cost-effective to make the institutional innovations necessary to accelerate performance improvement as they add participants to their ecosystems, expanding learning and innovation in collaboration curves and creation spaces. Companies must move, in other words, from scalable efficiency to scalable learning and performance. Only then will they make the most of our new era’s fast-moving digital infrastructure.
So what does this Big Shift entail in pratical terms?
John Hagel one of the co-authors of the 2009 Big Shift index does a superb job summarizing what he essentially sees as a shift from push to pull on his blog Edge Perspectives
What obviously caught my atention was this:
From knowledge transfer to knowledge creation
Most companies today will acknowledge the importance of knowledge flows, but they tend to focus on transferring knowledge more efficiently, especially within corporate boundaries. While useful, this is ultimately a diminishing returns game on multiple levels. The greatest economic value will come from finding ways to connecting relevant yet diverse people, both within the firm and outside it, to create new knowledge. They do this best by addressing challenging performance requirements that motivate them to get out of their comfort zone and come up with creative new approaches that generate more value with fewer resources.
This correlates well with the experiences that we have using action learning as our primary developmental tool in helping managers and organizations tackle the changes that they are in. It is not our job to teach but to help them learn – and that is a very different story.
But I urge you to read the full unfolding of this thinking here under the following headlines:
From knowledge stocks to knowledge flows.
From knowledge transfer to knowledge creation.
From explicit knowledge to tacit knowledge.
From transactions to relationships.
From zero sum to positive sum mindsets.
From push programs to pull platforms.
From stable environments to dynamic environments.
Lots of food for thought, and now I realize that my gut was telling me something important and I shall continue to pursue this investigation.
