Umair Haque made a bold post on his Edge Economy blog on the Harvard Business Publishing site this week. In it he calls for the development of next generation businesses that will challenge the rot he sees at the heart of the institutions of business, most lately indicted by the fall-out of the Sub-Prime crisis.
Haque proposes that there are five steps in the process toward building next generation businesses.
- realize that we moved beyond “strategy decay”
- understanding how the global economy is really changing
- understanding that next-gen businesses are built of new DNA
- infusing that DNA into all levels of economy
- putting meaning back into business
I think that Haque’s diagnosis is sound and that it shows the relevance, even the necessity of the Unfinished Business project.
Beyond strategy decay: The simple claim here is that the issues at the heart of the current financial crisis do not represent failed strategies or unsound business models per se, but a fundamental (genetic) corruption of the very institutions of business. What does this mean, other than rhetorically claiming that these businesses (e.g. investment banking) are beyond saving? The evidence for this is the core meltdown of the underlying financial system that the failure of several of these businesses over the last two weeks has set off. When the profitability and growth of these institutions of business has become so leveraged to uncertain and ungovernable forces, the volatility of the system itself suggests these intitutions are fundamentally unsound. As Haque puts it: “poor incentives, near-total opacity, zero responsibility, absolute myopia - that was the problem. The rot [is] in their DNA, in their institutional makeup, not in their strategies or business models.”
The global economy is really changing: This powerful charge is that the world that insitutions of capital were designed to address no longer exists at all or at least is in irrevocable decline. Globalism has been disrupting business and economy like mad for the last decade. Starting with the collapse of the Russian economy in 1998 and the expansion and acceleration of the economies of India and China in its wake, it has become a truism that the fundamental global economic order has shifted profoundly. Does this mean or entail that the underlying principles of the economic order are no longer tenable? It does seem reasonable to assert that the ability of nation states to control their economies and for global financial insititutions to efficiently and securely allocate capital is now in serious doubt. “The centuries-old institutions of orthodox capitalism cannot support the transition to a hyperconnected global economy. They are increasingly unable to allocate capital efficiently, much less grow it productively. And so what we are seeing nothing less than the wholesale deconstruction of the global financial and economic system.” This is a bell, it seems increasingly clear, that cannot be unrung.
Next-gen businesses have new DNA: This rests on the claim, like the one David Weinberger makes about the shift in the order of order of knowledge and information, that fundamentally new forms of business and economy are emerging. These new forms, this DNA (though I personally do not love this metaphor), is very clearly an emergent phenomenon of the scaling of the Internet, though it is not reducible to the “thing” of the Internet (if that’s even a coherent idea). Michael Porter’s conception of strategy, that it “requires a strong focus on profitability rather than just growth, an ability to define a unque value proposition, and an ability to make tough trade-offs in choosing what not to do,” does not seem to hold with the same force that it once did. The investment banks did all these things and are failing, Amazon and Google do few or none of these things and are challenging Porter’s orthodoxy about competition.
New DNA must be infused into all levels of economy: “The centuries-old institutions of orthodox capitalism cannot support the transition to a hyperconnected global economy. They are increasingly unable to allocate capital efficiently, much less grow it productively. And so what we are seeing nothing less than the wholesale deconstruction of the global financial and economic system.” If Haque is right about this, what is next? It seems clear that there is no one answer to this question, but perhaps should be our first clue. Perhaps we no longer need a single system (if indeed there ever really was one), perhaps this is precisely the first and deepest innovation of the “hyperconnected global economy”, that it enables a proliferation of forms that can each generate value and which do not have as a requirement that they must cohere into “a” system. Haque’s list of new forms of organizing and designing work, “open-source production, peer production, viral distribution, radical experimentation, connected consumption, and co-creation,” is incomplete, but suggestive. We are daily creating new and more ways of working, living, organizing and producing and we are starting to radically change what, where, how and why we produce in the process.
Putting meaning back into business: This, I would like to propose, is the meaning we should give to the word sustainability. To put it in a definitional form: Sustainability is progressive commerce, it leaves things better than it finds them, from “cradle to cradle“. Sustainable businesses and economies would have good as integral to their design, rather than externalized . There does not, indeed, there cannot be a single definition of what is good, but to follow William McDonough, our idea of good or successful has to be stronger than simply being less bad. We do not have a remedial task facing us as we confront the failure of our institutions of business, economy and government. We are dealing with root corruption not of individuals or of people primarily, but corruption of the very constitution (or foundations) of the systems we have come to rely on. This will not happen overnight, it will not take the form of “total revolution”. It will, I think, be a more diverse, more social, and more surprising cascade of human innovation.
Now that the old forms of business and economy have unravelled, the point is not to reconstruct them. We all know how the Humpty Dumpty story ends, not with bailouts but with a bang. The point is not only that the old economy is finished, but that the emerging economy is Unfinished.