Stan Davis addresses The Masters ForumStan Davis addresses The Masters ForumThe view from the crow's nest
by Michael Finley
On the sailing ships of old, the main mast was topped by a lookout post from which a crewman, perched high over everyone else, could get a first glimpse of events gathering on the far horizon. This observation post was called the crow's nest.
Standing 6'7" in street shoes, Stan Davis is a kind of one-man crow's nest, seeing over our heads and over the choppiness of today's waters to the distant trends that are already shaping the world we will live and do business in. Author of eight books, Davis has been patrolling the outer perimeters of change for many years, keen to identify patterns of evolution in society, trade, and organizations.
In his May 9 appearance at the State Theatre, Davis occasionally wished he were down at our level. As he paced the sloped set of Joseph and the Amazing Technicolor Dreamcoat, peering out in the darkened theater for his audience, he sometimes resembled a wobbly sailor negotiating the deck in a choppy sea. Like any decent mariner, he has glimpsed in his travels some of the good things the future has in store for us, along with some of the not so good things. Unlike the grocery checkout prognosticators ("Hillary pregnant with Bigfoot's baby!"), Davis is able to provide a why for most of his whithers.
Birth Pangs
To describe the future, Davis began with established patterns of the past. History is a floating platform of economic cycles, he said. The first human cycle or economy was the Hunter/Gatherer Economy, lasting 100,000 years. On its heels followed an Agrarian Economy lasting only a tenth as long, 10,000 years. Then came the Industrial Economy, which lasted less than 200 years, roughly from the 1750s to its apex in the 1950s. Currently we are, by Davis' estimate, about 40 years into an Information Economy, which he guesses may last another 20 years.
What is significant about these economic megacycles, besides the fact that they are speeding up (Davis joked about an upcoming 60-second economy), is that they occur in four predictable stages, with the final stages of one economy overlapping with the birth pangs of the economy still being born.
These stages or quarters of an economy parallel the life cycles of organizations and even individuals. They are:
An organization in its third or fourth quarter is particularly vulnerable. Change is moving very fast, and chances are that your company, in its deepening managerial wisdom, is completely unaware who its real competitors are. News of the outer world is drowned out by an organization's own internal noise. Mature companies under-
estimate the speed with which change is overtaking them. A company in its third period today will go into its decline phase before a decade goes by.
There is a sad tendency for fourth-quarter companies to see themselves as third-quarter companies.
The Egg and Us
OK, so you're in the final stages of maturity in an economy (the Information Economy) that is due for a complete upheaval. What do you do?
First, you must look for signs in our current economy of the embryonic new economy. Davis stressed that new economies are based not on invention, the sudden appearance of something new and unheard of, but on discovery, the dawning realization of a potential that has been latent all along, just waiting to be understood and appreciated.
What seems hot may actually be cool. Sure, the mainframe computer has metastasized and it is now everywhere, from desktops to laptops to hand-helds and beyond that. But the next era will not be a computer era because computers are a given, a holdover from our own era. They are so ubiquitous now that they are not noteworthy.
The next economy will be the next phase of an overarching information age. This age began with a data-based approach (mainframes and batch processing), evolved into an information-based approach (PCs and networks), and will be consummated with a knowledge-based approach — thus its name, the Knowledge Economy.
The Knowledge Economy is as different from the Information Economy as the Information Economy was from the data-based economy. At the same time, Davis is fuzzy on the details. No one in one economy, with the natural assumptions that its infrastructure dictates, can plausibly envision what the next economy and its eventual infrastructure will be like.
But Davis, together with help from Masters Session attendees, offered some good clues. Knowledge economy products are likely to be able to:
In the same sense that physicists have found that even substances as material as solid steel are really a mesh of atoms, with mostly space between the particles, hardware (forks, tires, computers, lamps) are really just momentary images of the software or coding that locked in and created them.
Smart Mousetrap
Ralph Waldo Emerson is credited, falsely, with the old nostrum that if you build a better mousetrap, the world will beat a path to your door. But in the Knowledge Economy, mousetraps won't mean squat, unless they first ascertain that the mouse is not really your pet hamster out on furlough, offer the mouse a choice of lethal injection or electrocution, and comfort it by simulating maternal rodent cooing sounds until the worst is over.
But there are products out there on the market right now, or almost out there, that are harbingers of this new economy:
It's a strange world where automobile companies make more money financing cars than selling them outright, Davis said. But look around, and you see many companies drawing second wind from a subordinate business they had to learn to value. American Airlines makes more money selling scheduling information than it does flying passengers from place to place.
Davis suggests that every business keep its nose in the air for clues to the next-generation business. New industries are often born from the emissions of existing mature industries. In some cases this is quite literally true. The natural gas industry was created as an alternative to torching the fumes from crude oil wells. Not only did saving the gas prevent the environmental degradation of never-ending fires at well sites and refineries, but the second-generation gas provided a cleaner, more efficient fuel than its first-generation predecessor.
The same with auto emissions. To reduce pollutants, the auto industry developed a turbocharging engine that recycled its own fuel. The result was not just cleaner cars, but more efficient, better performing cars.
TV Guide is a classic example of how one industry's useless exhaust (free data about broadcast programming) created a whole new industry. The current TV Guide is an obvious Information Economy product: a passive listing of programming, printed on paper, and perfect-bound. But what would a knowledge-based TV Guide, for a 1,000-channel entertainment nexus, be like?
Well, it probably won't be on paper, for its weight would then crush a Laz-E Boy recliner. It will be portable, the size of a credit card. TV Guide will actually be one of the 1,000 channels. Point it at any TV, and the TV itself will show the information. It will know your viewing interests, and it will always have a ready menu of the 10 offerings coming up you won't want to miss. It will never get lost in the seat cushions; it will let you know where it is with a beep or blinking light. It will schedule programs for taping, and let you know if you have already seen the rerun.
Irregular Ed
Davis' next topic was education. The problem with education in our era, he said, is that it was designed to serve an economy that no longer exists. Indeed, it hasn't existed for a couple of economies.
When we were an agrarian nation, the church was the major educational institution. It has only been for the last hundred years that government has been seen as the primary educator. Summer vacation was originally an acknowledgment that people needed their kids to help out on the farm during the summer months. People no longer live on farms, yet students from preschool to postgraduate still take summers off, for no particular reason.
Our educational system arbitrarily decides that the people in need of "educating" are kids from kindergarten through high school. We see education as an expense to taxpayers, and we begrudge it. Thinking of education as a kind of business, Davis asked what other business decides on its own that its customers have "bought enough." Yet that is the effective position of schools that boot their customers onto the street at age 17, when hardly any of them have "bought enough" to be competent.
If business has learned anything in the past generation, it is that people need lifelong learning. Public education's nod in this direction was to create "adult ed," but to force it into the same old irrelevant paradigm as regular ed, and focusing largely on crafts and recreational topics.
With corporate training a $50 billion annual concern, and rising exponentially from year to year, businesses know better. Though far too many still see education as an expense, and not as an essential investment, businesses have come to accept that if they are to have a competent workforce, they will have to equip it with skills — even such basic ones as elementary literacy and math abilities.
With the onset of the knowledge age, and products that impart information to customers, business becomes for the very first time a significant teacher of the public.
Davis believes that in some way business must accept its role as the primary educator of the future. The "monster under the bed" is the danger society faces when it accepts ignorance about how to do things in a world where even good knowledge quickly becomes obsolete.
Unless we acknowledge soon that the monster of self-created incompetence is there, and it is real, our society will awaken to find itself in its grasp.
Future Clues
Now that we have a glimpse of the future, what do we do with it? Bearing in mind that managerial skills are the province of mature businesses, how do you run a business that doesn't exist yet? How do you manage a company whose products you can't imagine?
Davis doesn't pretend to have a bulleted list of do's and don'ts for the economy now being born. But he offers some general hints about to prepare yourself.
* Know who your competition is. Mature companies always make the mistake of thinking it is the other company selling the same product, kitty corner to your company. Invariably, however, the competition that will kill you is someone unexpected, coming out of nowhere to make your business look slow and overpriced and, yes, a little stupid.
* Follow the bouncing ball. Keep an eye on the trends that are building momentum. The services versus manufacturing debate is over — services won. The thinking behind a thing is where today's value is, not in the thing itself. This is as true of railcars and lemonade as it is of software and investment services. Intangibles rule; tangibles just sit there. Knowledge makes the world go round.
* Look outside your own industry for clues. General Motors can learn more from Walt Disney or Federal Express than it can from Ford or Toyota.
* Ignore conventional wisdom. The notion that pleasing the customer is everything has been twisted beyond recognition, Davis said. He was especially hard on the idea of serving the "internal customer" — a recipe for bureaucracy, he called it. The end customer is the only customer that matters. Purveyors of such organization-padding nonsense will eat 21st-century crow.
* Think big and small simultaneously. An ideal company would be one in which every employee deals directly with customers. In such a company every employee would be a virtual business, creating measurable, comparable value. Davis envisioned a world in which companies are partnerships between big organizations and many individual employees.
* Think of a new employment contract. The old employment covenant was "You give us loyalty and we give you job security." The new covenant will be "We can't guarantee security but we will train you and make you employable."
* Rebalance the risk load. Davis even imagined a kind of mutual fund that invests in good employees/-
businesses, and thus shoulders their risk and increases their potential payoff. Imagine a mutual fund of the world's top 100 actors; a fund of the world's top 100 authors; the world's top 100 baseball players. We could do this with every profit-generating profession.
* Think holistic. Not in the sense of beads and incense, but in the sense of a paradigm that makes obsolete the old mechanistic way of viewing systems, in which a system was only the sum of its parts. In the new view, a system is more than the sum of its components: everybody contributes, everybody matters. The opinion of one upset customer is as valid as the opinion of a hundred satisfied customers; the individual is not cast out as an anomaly, but is listened to and heeded.
* Think outward. A knowledge-based company is structured not like a conventional pyramid, with the controls at the top, but as a ring, with employees in continuous interaction with customers. In this paradoxical paradigm the periphery is the center, the farthest point from the customer. That is where management has traditionally been, and where management, to succeed in the economy now dawning, must exit, the quickest way possible — as the crow flies.