Ridderstråle, Jonas and Kjell Nordström

Ridd-Nord.jpgKaraoke Capitalism: Management for Mankind (available from amazon.co.uk and the authors' own website). The co-authors are Jonas Ridderstråle and Kjell Nordström.

Dr. Jonas Ridderstråle and Dr. Kjell Nordström are at the forefront of the new generation of European-based business gurus. They cut through the madness and hyperbole surrounding the economy and their appeal is truly global. Jonas and Kjell have been featured on CNN and CNBC. They have appeared in Fortune, Fast Company, Time magazine, Financial Times, Paris Match, and many other publications worldwide. The 2003 Thinkers 50, the bi-annual ranking of management thinkers, ranked Nordström and Ridderstr&aringle at number 21.

Kjell's and Jonas' uncompromising and decidedly fresh take on contemporary business life makes them two of the world's most sought after speakers. They also practice what they so persuasively preach. From their Stockholm base, Jonas and Kjell act as advisors and consultants to a number of multinational corporations and are on the board of several companies.

They both hold PhDs in international business from the Stockholm School of Economics and have been recognized as Sweden's outstanding young academics of the year.

Their previous book, Funky Business: Talent Makes Capital Dance, quickly became an international bestseller, selling more than 250,000 copies. The book was recently ranked at number 16 in a survey of the greatest business books of all time.

tompeters.com asks …

What’s Karaoke Capitalism?

Jonas Ridderstråle: Essentially, a karaoke club, at the end of the day, is a place for institutionalized imitation. You go to the karaoke club to be someone else. It may be Frank Sinatra or the Beatles or Elvis. But the problem is that no matter how talented you are or no matter how many beers or how much wine you consume, you will always end up being a pale copy of an original.

Our argument is that, today, the business world is absolutely full of karaoke, copying companies. We even have names for it. We call it “benchmarking,” “best practice,” as if those fancy labels would really make a difference. That’s why we picked Karaoke Capitalism as the title of the book.

I’m afraid that instead of trying to become a first class version of themselves, too many a company settles for being a second-rate copy of someone else—a mini-me GE. But we admire the likes of Microsoft and Madonna, Dell and Dylan for their ability to innovate and then re-invent themselves. Successful corporations and individuals create monopolies in time or space. In fact, a monopoly is the Holy Grail of business. Success boils down to identifying imperfections—cracks in the wall of karaoke competition—and exploiting them.

Right now, we claim, there are only two ways in which organizations can create sustainable competitive advantages. Either they create and exploit market imperfections or the imperfections of man—supply-side and demand-side innovation, respectively. The former strategy is about practicing rational innovation by creating unique business models that are well adapted to the new business conditions facing us today. The other alternative is to focus on emotional innovation in order to create moods that attract and addict customers. Model companies like Dell are designers or parts of value-creating networks exploiting transactions, trust or talent. Mood competitors such as Apple are providers of experiences that seduce and sedate customers. In the book, we revisit Darwin—evolutionary economics, I guess. You see, in a world of information mania only super models are fit, and in the age of individual choice moods are sexy.

Kjell Nordström On the karaoke thing, there are a number of rather fundamental changes in our society that enable us to check out what is going on in Japan, in the U.S., the East Coast, the West Coast. We can get hold of the technologies. We can travel, and we do travel. It’s cheaper than ever.

There are a number of factors that drive us into this state of karaoke, as we call it. As we see it, this implies that innovation, at the end of the day, becomes the way forward, but we can come back to that later.

JONAS: It’s also understandable from the point of view that copying someone else certainly reduces a lot of uncertainty. But it also effectively hinders you from creating real wealth. So, from one point of view, it’s a bit like treating creative impotency with Prozac instead of Viagra.

And you say early on in the book that experiencing and expressing your individuality, being different, lie at the heart of the modern enterprise and modern life. Can you elaborate on that?

KJELL: Anything we do, whether we philosophize, build companies, establish political parties, whatever we do, we usually have an assumption, somewhere in what we do, about who the human being is, our character, so to speak.

Now, industrialization also had an underlying assumption. The underlying assumption was that, well, human beings are primarily cogs in the machinery. Furthermore, they are rather similar, look rather similar, can be rewarded in a similar way, etc., etc., etc., a kind of homogeneity, which was reasonable at the time in a way. Because what you needed was to be rather similar, at least at the macro level.

But at the micro level, when it comes to our fingerprints, our eyes and, of course, our intellect, we are rather colorful and extremely different. The more micro you go, the more different we become. The closer to the intellect and brain power we come, the more different we become.

Jonas and I are basically changing the underlying assumption. Let’s assume that we are different, which we happen to believe, we are very different, and start from there. What happens then? Everything changes. Contracts, marketing, reward systems, organizational structures, what have you, they all change when you alter that underlying assumption.

And it’s reasonable to do that, we believe, in our time. In 1910, maybe homogeneity was a reasonable approximation or assumption. Today—

JONAS: Attraction of human capital becomes so much more important than allocation of financial capital when the scarcest resource is no longer investment but imagination. So, all organizations need to ask themselves one critical question: Do we have a seductive story that will make talent fall in love with us? Because a story they have, whether they like it or not.

Markets are conversations, and with the advent of the Net, these are increasingly global conversations. Everyone who has ever interacted with a company is telling their story. Prospective employees will communicate with present employees. The guy who was fired last week will not keep his mouth shut. And stories are really sticky, for better and for worse. Organizations either try to prevent the inevitable from happening or chose to contribute to these conversations. Advice: Appoint a couple of CSOs—Chief Storytelling Officers!

Let’s face it. Talented individuals are not bulk goods. We differ—especially Generation I. Gen I is international, informed, informal, impatient, intense, and extremely individualistic. I mean, from a demographic point of view, it is absolutely clear that soon most Western industrialized countries will experience this white-haired revolution. So, more and more companies will have to do with this pool of young me, me, me men and women. And a talent deficit will only result in an ‘idiocracy.’ It used to be XM—extra medium. Now it must be XMe.

Well then we were in the age of industrialization. And now we’re actually, according to some people, we’re in the post-information age.

KJELL: We are at least somewhere else, as compared to 1910. If we use the scientific language, what we are testing is another assumption.

JONAS: The word individual means cannot be divided. The root of the word is fairly close to the root of the word atom, which also means indivisible. For a fairly long time, we had this idea of the corporation where we could divide individuals. Some were basically supposed to show up with their head. Some were supposed to show up with their hands. What we need today are, of course, whole people. I think it was Henry Ford who once said, “Why do I always get a whole person when what I really want is just a pair of hands?” Today, it’s the other way around. We need this total individual.

The second thing which I think is important to realize is that this is individualism way beyond the traditional American type of individualism which is well known throughout the world. Because at least as a European, it’s fairly obvious that when you talk about individualism, collectivism, you tend to relate that to the societal level and, quite often, to political parties.

And, while it’s certainly true that political collectivism in the form of communism was challenged during the 1980s, and then brought to its knees and collapsed, it’s also true that corporate collectivism in the form of monolithic organizational cultures was challenged. It was challenged at a company such as IBM, and the company almost went bust before it changed.

So it’s the kind of individualism which causes a company like Motorola to enter a joint venture with Russell Simmons, this iconic hip-hop/rap personality. Historically, you wouldn’t expect Motorola to collaborate with the likes of Russell Simmons. But today, you have to, because the world is more or less shaped and reshaped by very strong individuals, much more so than the institutions of the past.

KJELL: This phenomenon has been written about by Robert D. Putnam, in his book titled Bowling Alone. The hypothesis of the book is that people are becoming more and more and more individualized in terms of how they live their lives. Divorce rates are up, there’s less community work done, less money given to charity, less solidarity, even in the U.S. This is really critical because Jonas and I don’t believe the United States is a country in the traditional sense of the word—it is an idea. We can all become Americans. If you’re lucky, it takes but a few months. In the best of all worlds, it takes 200 years to become Swedish … and 675 years to become French.

We see exactly the same tendency toward increasing fragmentation here in Europe. It’s difficult to hold a community together, a party together, a symphonic orchestra together. If you look at companies, one effect is that Levi’s 501 is not a hit anymore, for the simple reason that you want something completely different than I want. My wife wants a third thing. The kids want a fourth thing. It’s all about individualization.

But all this individuality also brings with it more responsibility: for oneself, one’s community, one’s career.

JONAS: Of course, that’s the flipside of the coin, all the duties, all the responsibilities that come with more liberty. It may be responsibilities for your own health, for your own education, your own career, in the long run, responsibilities for your own little life and, lo and behold, for the life of others.

The market, the dominant institution of this day and age, is a machine. It’s a machine that is extremely good at sorting the efficient from the inefficient. But it is by no means a substitute for responsibility. I think what progressively we’re beginning to understand is that, at a societal level, we’re now facing, at least in Europe, the very same challenges that a lot of companies were facing during the 1980s when we dramatically decentralized a lot of our organizations just to find out that decentralization needs to be accompanied with a lot of training and a lot of education. Otherwise people at the lower levels within our organizations just end up confused.

To some extent, I think that situation is now appearing on a societal level where a lot of people feel confused. It’s a learning process. Freedom, especially if you talk to people in Russia, Poland, or Hungary, is a learning process. On the other hand, it also opens up a lot of opportunities for corporations because with this vacuum in terms of someone providing people with a personality, someone providing people with identity beyond the single individual is something that companies can exploit both as employers and as producers and marketers of products and services.

Of course people are not only individualistic creatures. We also want to belong. So the intelligent company responds by building an organizational tribe—sometimes including also customers and suppliers—with a shared identity. And since the easiest way to get people to share your values is to hire those that already do, we do see more and more organizations recruiting people with the right attitude and then training them in skills. Look at Hell’s Angels or Southwest Airlines. Just imagine Hell’s Angels hiring people for skills!

KJELL: Just some observations from my last couple of weeks of travel visiting companies in different industries. Pharmaceutical industry. I visited one of the four major players in the world two days ago.

What are they talking about? Personalized medicine. What they say is that personalized medicine is such a major, major change and threat that it’s probably beyond what IBM was facing once upon a time when the computers became personalized. It’s the completely individualized drug made for you, exactly for you, in relation to your genetic makeup. A major challenge.

At a major American soft drink company, what are they talking about? The complete individualization of the drinking habits. When families go out for dinner, each and every individual drinks something completely different.

The fashion industry. You talk to H&M, one of the major players here in Europe, or Zara, what do they say? Shorter and shorter and shorter product lines in the sense that you produce 40, 30, 25, 15 down to 10 of each and every item, and then it’s over, then you do something else. Because if you wear it, I don’t wear it.

You write about meeting two Japanese women on the street in Paris. They want you to go in and buy them a Louis Vuitton bag. They want that brand name, but they want a different looking one than the one they can get back home in Japan.

JONAS: People are schizophrenic, and I don’t think it’s a new phenomenon. But what has happened, I think, is that today smart companies can combine individualism and collectivism in the way in which they approach both potential employees and potential customers—tribal and personalized.

Now what happened in this example was, of course, that on the one hand they wanted to express their individuality. They wanted a very, very specific pattern, a very, very specific color, which was more or less impossible, as I understood it, to buy in Japan. But, they also wanted to be part of this global Louis Vuitton tribe which is made up of people from Japan, the U.S., France, Germany, from just about anywhere in the world. So what used to be either/or, today, has become the challenge of doing both for most companies.

KJELL: But what is happening here, I think, and it’s well known among philosophers, anthropologists, and psychologists, is that the human being is a walking paradox. We want to be free, completely individual on the one hand, and we want to belong to something, on the other hand. We want to be part of a flock but, at the same time, you want to be you.

There is a certain tradeoff. We want to be local. We want to live somewhere, have a home, with some neighbors maybe even. At the same time, we want to be international, global, cosmopolitan.

JONAS: You were touching upon what I think is probably one of the most important trends of this day and age, the fact that identity is so much more linked to consumption today. Whereas, in the past, it was very much linked to production. You were a coal miner, a farmer, a carpenter. Your job, your profession, gave you your identity.

Identity was very closely linked to production. Later on it became, “I was an IBM person” or “a GM person” or whatever. Today, it may be superficial, but it’s still a fact of life, identity is much more so linked to what you buy, your consumption patterns.

KJELL: When you go to dinner in any part of the world, Western world at least, one of the first three questions you will ask the person to the left or right of you that you haven’t met before is, “So, what do you do for a living?” We ask that question because, then, we can start to form an opinion about who that person is.

JONAS: It reduces uncertainty.

KJELL: But that question, “What do you do for a living?” is losing a little bit of its power. Instead, if you ask the following thing, “What brands do you buy?” that’s a much more personal question. It’s almost impertinent because it will say a lot about who you are.

But that means we designed our societies, our thinking, against the backdrop of the so-called proletariat; namely, what do you do, what do you work with, was a major issue. Today, consumption is more important than production.

If I ask you, “When you buy underwear, what brand is it? What car are you driving? What computer? What brands are you consuming?” hey, now we are talking. It will tell me a lot about who you are, what kind of education you have, whether you perceive yourself to be part of the elite, what dreams you have.

Back to this thing about the individual and the importance of the individual now as opposed to times past. Those organizations that grew up based on that human being just having two hands and turning the nuts and bolts still exist to some degree. And yet, the individual working within them has changed dramatically. It seems we’re in a moment of great conflict about the individual and who he or she works for at this point in time.

KJELL: But at the top of the organization, you find the guys that were born and raised during that time. And at the bottom of the organization, you find the people that were born and raised in a society that already, at that time, was rather individualized. That’s number one.

Number two. We are educating people now. Sixty years ago, people had on average half the number of years at school as compared to what they have today. The higher level of education, of course, does have some implications for the degree of personalization of your life, the fact that you do understand some basic things.

JONAS: We’re also progressively beginning to understand that the kind of differences that we saw within the industrial company, when Frederick Taylor did his time studies, watching these men carrying pig iron around in the factories, the difference between a really good worker and an average worker may have been a factor of two to one, five to one at the max. But in a knowledge-based organization, it’s a factor of one to 100 or perhaps even one to 1000.

That’s why we sometimes say that Karl Marx has been proven right. People—or at least some of us—now own the most critical resources: their own brains. And they know it. The consequences are mind-boggling. Organizations used to be consumers of competence. Today, they must be both co-creators of competence and providers of personality. Once it was money for mastery. Nowadays, it must also be meaning for membership. I believe that in firms with a future, people have a calling as much as a career.

KJELL: Many of us see this. Many of us understand it. Politicians, industry leaders, what have you, do understand that it is more individualistic, all these things. But we do not want to take the second step, namely public confessions, because it will have a lot of implications for contracts, how we run things. You then basically accept something that will introduce a lot of problems for yourself, personally.

So what you do is that you basically hold on to, say, “Ah, well, we haven’t moved that far yet. Maybe in ten years, but not now.” We try to postpone it a little bit, if you see what I mean.

JONAS: Because as with all changes, it comes with pros and cons. And, of course, while we on average have always developed better lives, once we’ve gone through a major paradigm shift, there will of course be new winners and new losers.

KJELL: For instance, the single society is here. Around 60 percent of the households here in Stockholm are single. When I mention this figure in my talks, people say “Wow.” Then some guy that usually sits in the back says, “Well, but the family will bounce back.” That’s the conclusion that Robert D. Putnam comes to at the end of his book. He says, “We have to bring the family back. We have to bring traditional values back.”

You can forget that. It won’t happen. Before we die, the nuclear family will only be five or ten percent of the population. Still, we act as if that is the norm. In statistics, people talk about, well, families. When you go talk to hoteliers, well, and then we have the families. What is a family these days? It could be two lesbians. It could be a mother with two children. It could be anything. But it’s there, again, as an underlying assumption.

Because so many were born and raised with it, number one. Number two, in a way, that’s the way some of us wanted to be, including Robert D. Putnam. Because, I don’t know, he’s 70-something now, and he’s a Republican, and he fits very well into the present government’s thinking on communitarianism, as it’s called.

Well, they can keep talking about communitarianism, but we will be more single ten years from now than today.

It is beyond politics. No one, Mr. Bush, Putnam, Blair, anyone, will be able to stop this. It’s called evolution. You can’t stop it.

JONAS: This, of course, doesn’t mean that the nuclear family will disappear, it’s just that it won’t be as much of a dominant design as it used to be. It will be one of the ways, one institution for living together, but not necessarily the dominant.

But, it seems that the issue here is sort of our memory as humans. I have two brothers and a sister, and a mom and dad who remained married. That for me is the norm. That’s what my brain defaults to when I think about family.

KJELL: If the decision makers in a society have a background similar to your own, they cannot not take that into account when they make their decision. They are the person they are, which means that they will act as if this is the norm, take the decision as if this is the norm, which it is not.

JONAS: With the exception of increasing returns that we see in certain parts of IT, high tech industry, scarcity is something which becomes valuable. What is scarce becomes valuable in most societies. Now, remembering the days with your mother may be a scarce resource. Solitude and silence may be scarce resources in this day and age.

It should be something that you decide for yourself. I saw a really interesting study two weeks ago. It was presented by a Danish guy. In Denmark, they had made a study of how people spent a day in 1982, on average, and how they now spend their time in 2002. And percentage-wise, the activity that people spent more time on today compared to 1982 was time spent in the toilet. [Laughter] Now why is this? Because people eat more? No. Is it because they want to look nicer? Not necessarily so. But when you’re in the toilet, you are alone. You can only find that solitude by going to the loo.

His projection was that, in the years to come, we will have lots of toilets in all houses that are sort of modern and newly built.

The main point of this book, I think you say, is that you’re conducting a horizontal analysis of society early in the 21st century, and that’s what you’re offering to the reader. What would you hope a reader of your book would come away with?

KJELL: We would hope they come away with the same thing as you come away with when you read an atlas of the world, an overview, which probably makes it somewhat simpler to plan your journey. If we have been successful, this is a little bit of a map of the contemporary society.

You can see the overall pattern. It is like one of those atlases in the sense that the scale is such that you can’t discern the smallest cities and the smallest changes. But the continents are there, roughly where they should be, at least I believe so, and Jonas, too, I think. The countries, if you again compare to the atlas, they are there, roughly as many as there should be, and the size is roughly right. This is a text that has no ambition to be exactly right. It has the ambition to be roughly right. It’s certainly not exactly wrong. That, I’m quite sure of.

JONAS: Because essentially, what we’re trying to do is to invite people to think, much more so than tell them what to think. Because if we could tell people exactly what to think, exactly what to do, it may be extremely practical for them, but it would also be commercially useless because then everyone could do it, and it wouldn’t be worth doing. It would become necessary, but it wouldn’t be sufficient for the creation of competitive advantages. Competitiveness just isn’t for sale.

Hopefully, once having gone through the book, talked about it with friends, readers will have a point of view of how to—in unique ways—provide market with meaning and products with personalities. That would be my sincere hope.

Your concluding chapter is almost a cautionary note. You acknowledge all of this massive freneticness, and how institutions are changing, values are changing. And yet, I think you say at the end that you’ve got to exert your humanity in your decisions. Is that accurate?


JONAS: There is a great scene in Alice in Wonderland where Alice comes to a crossroads, and I think she meets the cat. She asks the cat, “What road should I take?” And the cat says, “Where would you like to end up?” Alice says, “I don’t know.” Then the cat replies, “Then it doesn’t really matter what road you take, does it?”

I think if we let the market principle, which is essentially very good in terms of dividing between efficient/not so efficient, if we elevate that principle to almost religious stature, we’re going to end up in a world where a lot of decisions will be taken automatically without us realizing and without us really having a clear point of view of where we want to end up, what kind of capitalism do we want to create. Because there are, of course, different dialects, different versions of capitalism.

KJELL: It will be capitalism, as far as we can see today. But it will be capitalism with the color or with the dialect or with some kind of characteristic to it. There will probably be an Eastern version of capitalism, the U.S. version, the European version, and other versions in certain parts of Africa and in the former USSR. There could be five, six, seven, eight or nine different dialects.

JONAS: Let’s put it like this. No one is happier than we are that communism collapsed. Given the location of our home country, Sweden, it should be understandable to anyone. We were very close to the Soviet Union. But, in any area, it’s also pretty clear that lack of competition is never good for development. So I think what we’re trying to say in the final chapter is that, while capitalism has certainly won, that does not mean that the current version of capitalism is the end of history. We need to reinvent capitalism, redefine capitalism, and have an ongoing dialogue about how to include more people in this great project of ours.

Capitalism, like communism, comes at a cost. Without empathy and ethics to complement efficiency, the invisible hand that Adam Smith once wrote about quickly turns into a very visible fist coming down on those who lack capabilities and capital. What we need is capitalism with character and a cause.

KJELL: Capitalism is a little bit like democracy. It has to be reinvented all the time. You cannot take it for granted. It has no meaning in itself, which means that you have to conquer it over and over again, and go through it and revise it, and fit it in with present day technologies and challenges. There is no standard condition here; it’s always in a state of change.

Thank you.

Email: funky@speakersnet.se
Web sites: www.karaokecapitalism.com