Harvard Business Publishing

Wow - great questions Umair. I can wrap my head around the "we have enough stuff like cars etc" so ZipCar etc starts to make a lot of sense -- however the "phase change" that society would have to pass thru seems overwhelming. I wonder how much of Obama's stimulus vision will get morphed into building stuff we don't need/want and might actually make things worse once it passes thru the Congressional filter.

I where at a conference a while ago where the danish professor Steen hildebrandt said that "the leadership and organisation of a company hasn't changed since the industrial revolution". I think he was totally right. I also do believe that a lot of companies want to implement these changes and don't know how to do it though. Where the going get's tough is if you tell them to change on behalf of everything they know, they have to let go of control and they have to reinvent themselves completely. Great stuff Umair =)

Wow, Umair. I don't know why I haven't come across your writing before, great work.

Your comment about marketing shifting to a role that is meant to create real value, a la Nike Plus, clarified something I've been struggling with. This kind of marketing has been talked about as brand or branded utility - which is an interesting idea but is a bit clunky for marketers to get their heads around. Instead, I like the idea of marketing as a value creation or even new business model creation exercise.

Rather than living at the end of the old industrial production supply chain (now that we've created this thing, let's stimulate demand for it), marketing becomes a value creator when we're innovating (how will people, when learning about and discussing this new innovation, create value for each other and for themselves).

Cool.

Your comments are spot on. It's hard for companies to change the way they've always done things, but as you point out there are so many examples of successful companies turning tradition on its head.

We wrote about the idea of marketing creating value in 1to1 Magazine a few months ago (Marketing Lends a Helping Hand), mentioning Nike Plus and some other examples. Nivea is doing a lot of value creation in its marketing programs as well. "We wanted to market our brand more as something that could play a role in the consumer's life than selling a cure for a problem," says Nicolas Maurer, vice president of marketing for Nivea's parent Beiersdorf.

We discussed it as "marketing as a service," but I like your idea of considering it marketing as a value creator.

Brilliant! This is the kind of message we need.

Thanks - I will tweet and linkback.

Vickie

Very much like the idea of flipping a competitive strength on its head and this trough makes for the perfect time to incubate drastically different approaches.

How do you beat WalMart's scale? You don't out scale them, you out communicate to their highest value customers.

How do you beat the Detroit 3's product breadth and global production? You don't, you create a technically advanced, very focused line that is highly customizable.

All of these things are so hard to do within one of the existing companies (instead of starting fresh), but that's part of the sport, isn't it?

Good stuff, U.

Umair,

Your words are inspirational and invigorating.

However, as an adviser to many B2B clients that make up the supply chain, at first glance, it seems difficult to reinvent when you are only one part of the process and dependent on other companies both up and down the chain.

Is it possible for a supplier to lead its dependents to a 21st century path? Or, is it merely at the mercy of the ultimate producer?

I'd like to think that a supplier can innovate in a way that benefits all other companies in its ecosystem.

Thanks for yet again causing me to think.

Jake Yarbrough

Umair, I totally agree with your insights and questions as they are right on. The conditions of our business environment are fundamentally changing, in large part because the changes to our natural environment and our culture are so massive. We need to explore what it will mean to be a "business" in the future as we simply can't continue the endless path of relentless growth and consumption that we've been on.

Although this is scary in many ways, it should also be electrifying to entrepreneurs who thrive on opportunity and evolution. Here we have the chance to develop new ways of doing business, working in harmony with the forces of nature, engaging people in meaningful ways, and rebuilding healthy communities around local economies and networks. If we do this right, the next generation of businesses should be engines for social change, arts and culture, healing the environment and creating happiness...not engines of consumption and destruction.

Tomorrow definitely looks different than yesterday, but let's embrace that opportunity and all it offers. After all, what is the alternative?

this is exactly how I feel and see what's in front of us. there could not be a better time to enable the very changes we need from ailing ecosystem, to failing health care system, and a back to basics from over engineered financial derivatives madness. bravo!

a nice read, thank you for sharing. there's a lot here, so i'll just touch on the question:"What is the role of marketing in a world where consumption must slow?"

at an enterprise level disproportionate amount of effort is placed on marketing (esp branding). even tho i recognize its role will become more central in a connected consumption world (incl branding at some level) -- most of the REAL change is beyond the marketing function, and needs attention a the the central organizing function of the business.

at some level the core organizing function of many firms are far too obsessed with measuring brand (y&r, interbrand etc -- hangover from the 70s). this is a BIG distraction imo.

focus instead, on achieving whole new levels of value. real step function increases. as Umair has so eloquently articulated here for some time.

additional thoughts to my earlier post above on;

...or more simply put, forget brand 2.0 overkill. it really is waay too much.

viva la value 2.0 ;)

You say that: "Yesterday's businesses were built for a world of overconsumption, artificially cheap production… ” and that “marketing was the pusher of a consumption addiction.”

I’m surprised you use two companies in the fashion industry as models of change (Threadless and Zara). Isn’t fashion the ultimate statement of consumption? We replace perfectly serviceable clothing with a new set because of fashion, and status.

Zara, which makes lower-priced look-alike copies of high-end clothing fashion, was described as "possibly the most innovative and devastating retailer in the world.”

So how does making cheap copies of expensive fashion represent a new paradigm? Isn’t Zara the Walmart of fashion? And is that where innovation is headed – more Walmart-type production and sales?

I wonder if a guide to the 20th century written in 1909 would have been applicable in 1999? Maybe a guide to the decade might have been more appropriate. Also, can you arbitrarily draw a line in the sand between one century and the next? I don't see an end to a "world of overconsumption and artificially cheap production". Agreed, change needs to occur, but where humanity is in charge of that change, can it really be made wisely?

Yes, the article is very relevant as the internet has de-mystified & lifted the corporate veil of formality & hierarchy to a large degree allowing people with pure talent to emerge & test new ideas.

One other thing is needed to allow a lot of new innovation is the need for local, state & Federal Governments to embrace change at the creative level & allow easier legislative process to encourage beneficial change.
e.g. An Australian Company recently came 3rd in the world's enviro Awards for company change & adaptation to greener business practices.
However, his business practice is "illegal" in his home city, because of draconian laws! Our State Premier also stated that laws would have to be thoroughly overhauled, just to allow those little "stand on/up motorized riding things", which can save enormous fuel/ gas emissions etc & also for electric cars!
Our current laws don't allow for any of these time, energy, fuel saving innovations...So, imagine business practice with their own "Politics"
It is going to be an exciting next 20-40 years for sure.

Umair, your insights are bang-on. Great stuff

Mubashir

Is there anyone at the Lab focusing on 21st century jobs for the positions reduced/eliminated by technology? Thousands of support / service positions have been eliminated or outsourced, affecting millions of workers (travel agents, gas station attendants, photography and graphic design workers).

How many incomes are created by a company like Threadless?

Hi Umair, I am curious what would be your comment on this analysis: http://www.semyon.com/crisis.html

Awesome post. Truly.

But are you avoiding stating clearly the main disruption? Large, centralized corporations don't work in your model.

Even though the net result of TARP is building bigger firms, the future is in disaggregation. The argument for large corporations used to be diversification of risk. But the average mutual fund or index fund does that better than a conglomerate.

Then the argument was that the costs of communication with outside providers of the various functions was such a high tax that having it under your roof gave an advantage.

But now, where communications is virtually free, and innovation is far more valuable than process automation, the argument for a large, multi-divisional bureaucracy is bankrupt. GM should buy motors from Michelin, batteries from A123, and power controllers from AC propulsion. They should be smaller, and they would be better.

There are few value-creating reasons why large corporations exist today. Yes, they can create market pressures through monopoly and monopsony that should create profits, but in reality they tend just to depress innovation - look at cable and telephony. The other prospective value is that the scale at which they operate concentrates spending power, which is used for lobbying, negotiation, and perks (jets).

Lobbying destroys value in the macroeconomy, and perks are obviously distortional. Price negotiation is profitable in a stagnant, commodities-driven economy, but it can depress innovation among suppliers and make the entire network calcify.

In the end, big is bad.

Great piece.

Your thinking and Tim O'Reilly's has mostly led me to this: as traditional assets become more temporary, illusory, and value-less, the only "asset" worth investing in becomes the organization itself.

It isn't about building a great product. It's about building a company that knows how to build great products in an increasingly fast and fragmented landscape.

A great analysis of economists fall short:
http://www.wilmott.com/blogs/paul/index.cfm/2009/1/1/Economics-Makes-My-Brain-Hurt

How is Zara different from any other chain of clothing stores? To me, it's GAP with a Spanish accent. Nice enough stuff, but little differentiation from the other higher-end rag peddlers. There must be something else about Zara that I'm not aware of.

Hi there. Although there are so many comments that support your view, I will not totally. My first point is, that you write about what you and your people found out about the described topics. How did they find out, where they just thinking in groups, did they accomplish by brainstorming,....?
I really do not like to generalize as you did, because I think that this is contrary to your text and some points I agree with. For example about the Marketing. You are right particularly by telling us, that:"At the Lab, we've found that companies who create perceived value are significantly less profitable and more vulnerable than companies who are rethinking marketing to create real value. Think (the awesome)." In a way, but you cannot put all the different products, services,... in the same tray, some are more advanced than others, some should differenciate to create real value to the client. Some will change in the way you suggest and differenciate later. You do not get always the clue to an absolute new world. It was and is always popular to tell the people, especially at the early years of a new century what will happen. It is a very interesting topic but mostly you look back to generate a new sight of future, being involved with the past. As a result of the latest changes within the worlds political problems I would never be so appodictive to tell how something will happen as you did. Overconsumption is correct for USA, Europe and some others, but not for India and China, or others. Certainly mostly the so called Western World is a kind of archetype for many cultures, but not in any way! As a business consultant focused on Marketing in Austria, I suggest my clients to think about their busnessstrategy every second year, but changes in the way you would suggest would be to radical, not only for my customers but also for most middle sized ones. The markets are mostly not changing that radically, even when some should, but slower. The crisis as the point of change is not sufficient, because the financial system collapsed and not the real industry. They (industry,..) are in crisis because they are not given the loans to fullfill the nescessary and the investments for future projects. This fact also will hinder them for lets say half a decade to develope such strategies you suggest. Certainly there should be a way out of the overconsumption especially in the USA, but being that dependant as the US is on private consumtion, I do not think of a change so far. Please do not understand my wrong, I would appreciate a systematical change, but the situation we are focusing politically and economically are different from your sight. I am spezialised on guerillatecniques and support every idea especially in this direction, but Iphone, Zara,... are not focused on your ideas but involved in the day to day business and therfore the needs to perform, nothing else. Many greetings from Austria:
Bernhard

Gosh, is this a political manifesto or a business article? Evil corporations? Sir, corporations are legal entities and thus have no personal traits. Loose the Che Guevara T-shirt from threadless, leave your lab, and spend some time in the trenches with real business people instead of the macro-biotic munching niche types who will be gone or forgotten in a few years. Business is about meeting the wants and needs of targeted customers, offerning products/services at the best value to the target customer, and treating your employees as more than soulless factors of production. How people like you continute to peddle your poppycock only proves P.T. Barnum's maxium.

anything goes; one person's view may not be the other's. so whatever sentiments expressed in the article may not necessarily be acceptable to all. so those who disagree better come up with theirs.

Umair - this is absolutely brilliant. Once I'm done with my comment, I'll be sharing the URL to this article with my 1000+ friends on facebook.

So where to begin to point out with what I agree...I'll pick one point: "destroys tomorrow for today. The 21st century demands a rethink of what's "strategic" - versus what's merely selfish. Think (the eminently anti-strategic) Google."

The green-hearted have been saying this for decades - but now it's inescapable and mass knowledge that any mischief we do here in Sydney, for example, will be felt in your backyard too - because the world is everyone's back yard, yours, mine, ours. Think economic downturn. It was the sum of minor greedy decisions and actions, day in and day out, that got us into this mess. What we're living now is only one of the examples of what happens in an interconnected world when bad actions add up. Just imagine what happens when good actions add up...

I'm always surprised at men who don't get Zara.
Just to take the last few months, they were the first to bring in narrow-lapel high-button early 60's style suits in grunge colors, ear-lobe level high-collar dandy formal shirts, winklepicker laced shoes, black plasticized 'sick' Tokyo T-shirts, graffiti'd pink sneakers, ladderized jeans, dirty green opensource crumply shirts.
And every three days there's a new truck in front with edgier stuff.
Sure they get inspiration from Couture runways, but they always trash it just a bit to put some nasty in. Usually in about 5 days. At China prices, without all the China supply-chain downsides.
Plus you can get more sophisticated tailored stuff they get from their couture-trained Moroccan partners, if you work in a legacy corporation.
Nothing to do with Gap, Esprit, Dolce, Gucci, Diesel. Different world.
When you come out of Zara you know you're ahead of the game.
But you'll still pop in when you see the next truck.
That's what getting under customer's skin is all about.
Cheers
Mike