Preparing for the Biggest Change in 2000 Years
In last week’s column, I discussed two transformations that are revamping today’s corporate landscape: (1) the arrival of an age of unprecedented uncertainty, which is toppling all known management theories, and (2) the death throes of herds of sluggish corporate elephants and their replacement by responsive newcomers, or gazelles, as I’ve labeled them. In addition to those two fundamental changes, consider these four.
3. From the age of the Pyramid to the destruction of hierarchy and the 2000 Revolution. Some say we are in the midst of the most significant reconsideration of the way we organize since the Industrial Revolution began 200 years ago. I think not. Instead, we are witnessing the most significant change since the Chinese invented the concept of hierarchy over 2000 years ago.
As a result of both the technology revolution and the uncertainty described last week, companies with traditional hierarchies will not be able to withstand the challenges of tomorrow. They simply won’t have time to respond to the moves of gazelles (like The Limited or Genentech) with memos and staff reports, carefully masticated by layer after layer of middle managers; and they will not be able to weather the time-consuming wars between the functions that mark traditional enterprises.
Although I’ve been among those who rail at established firms to “flatten the pyramid,” such terminology is far too bland a response to the new pacesetters. These upstarts are outperforming the stars of yesteryear by orders of magnitude. They have mastered the new information-based technologies—and created radical organizational forms to exploit them (e.g., wholesale decentralization with virtually no middle management). Moreover, they are growing big, yet doing so without taking on the bureaucratic accoutrements of the old giants. An example: Walmart is still without excessive bureaucracy, though it is now a $20 billion firm. So I insist on using the phrase “destruction of hierarchy.” Nothing less will even insure access to the playing fields of tomorrow.
4. From the age of the machine to the era of the worker. The dominant paradox associated with the new organizational reality is that much more dependence on information technology means much more, rather than less, dependence on the work force.
After shedding unworkable layers of middle management, companies must necessarily place decision-making authority at the front line, or very close to it. Lightning-fast response and the improvement of everything can be achieved only through what I refer to as “continuous learning by everyone”—the phrase I now insist upon using in place of the word “training.”
Let’s be bolder still: The line operator must become a strategist. Normally the term “strategic thinking” is reserved for the top of the pyramid. But now, to compete with gazelles, the front-line person must be equipped and prepared to make what amounts to strategic decisions concerning customers and suppliers, for instance, on a daily basis.
5. From the age of standard products to the era of customization. Thanks to the explosion of new competition, most aiming for high value-added niche markets, and new miniaturized technology, we rapidly are entering the era of across-the-board customization. Almost every product is being reinvented. After decades of incremental improvements, the automobile of 1995—from basic material and on-board computers to dealer-selection aids and service-station diagnostics—will bear little resemblance to the automobile of 1980. Likewise, the futuristic “smart house” is fast becoming reality, turning even the traditional construction industry upside down. Customization of every product, and new information-technology-based services accompanying every product, are causing upheavals in the chemical, steel, food processing, and pharmaceutical industries, as well as in the retailing and banking sectors.
6. From the Age of the Atlantic to the Pacific Century. Even the map is changing. Want to know what’s up—in automobiles, high-tech manufacturing, low-tech manufacturing, or financing? While Manhattan still grabs most of the business headlines, the leading-edge action in all the areas I just mentioned increasingly centers in Los Angeles.
California is, of course, the heartland of biotechnology and electronics. But it is also the center for creative financing (e.g., venture capital groups, Drexel Burnham Lambert’s junk-bond operation). And Los Angeles has become our top manufacturing city. Moreover, just about all of Japan’s and Korea’s automobile and electronic firms have chosen West Coast nests.
This dramatic geographic shift of power, though slow to be recognized, is immensely significant. It is affecting politics, as well as the form of our organizations. The blending of California’s entrepreneurial energy and fast-paced informality with Asia’s approach to managing people, for instance, is quickly becoming a hallmark of pioneering firms. Make no mistake: The shift of innovation and experimentation—and volume of business—toward the Pacific Rim is just in its infancy.
These six shattering changes are more than predictions. Their impact is already unmistakable in every industry. But figuring out exactly what’s up has never been so tough. Analyses that depend on trend lines are useless. The appropriate question: What are the pioneers doing? For the manager of anything and at any level, delaying consideration of radical new approaches to strategy and organization means failing to focus on survival.
(c) 1988 TPG Communications.
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