Steve Mizrach February 18th, 1997
In their book Competing for the Future, authors Gary Hamel and C.K. Pralahad attempt to offer their insights on business management for the 21st century. In their book (henceforth referred to as CFF for simplicity's sake), the authors provide advice on a forward-thinking strategy where companies can attempt to "seize the future" rather than maintain their status in the present. For, as they argue, companies which are focused entirely on the present, and lose sight of the future, are merely running in place, and will quickly be outpaced by their global competitors.
CFF suggests that businesses have become too preoccupied with their competitors for existing markets, rather than seeking to create new markets where they can occupy the competitive advantage simply by being the first ones to get there. Rather than focusing on the minutiae of market tests and product surveys, the goal of companies should be to anticipate the needs of consumers - even if they're not yet aware that those needs exist! CFF claims that the success of a new product depends on a future where people can't even consider functioning without one -- and point to the telephone and the Microsoft Windows OS as successful examples.
Although CFF is not aimed specifically at media, telecommunications, computer, or consumer electronics businesses, it certainly focuses heavily on such "new edge" companies when it lists the "visionary" businesses that are worth emulating. It also contains advice for companies in financial services, biotechnology, or anyone willing to seize the "knowledge advantage" in their market niche. Obviously, CFF is targeting "Second Wave" businesses with its advice; businesses stuck in the past, manufacturing things the same way they did one hundred years ago, probably won't find much of use in the guidance offered here.
Companies are not just merely competing for profits or for consumer loyalty, CFF claims. Their stakeholders are more than just their shareholders or their associated industries. What companies are competing for is actually a share of the future -- the opportunity to be a key player in what life in the future is like, and to guide the "conventional wisdom" of what's possible and permissible. Companies are challenging each other over who will be able to shape the future and the vectors of technology, society, and business. Even beyond the bottom line, it becomes a question of who has the "vision thing." Those who aren't willing to "re-engineer" themselves to compete in this way risk obsolescence, irrelevance, and, ultimately, bankruptcy.
Thus, the role in business firms of divisions that do forecasting will become ever more critical. Rather than leaving forecasting to out-of-touch egghead futurist "wizards," companies will have to make long-range planning a central part of everything they do. Rather than acting like a overblown fortress of solitude, guarding its present competitive advantages jealously and zealously, CFF's "cutting edge" company is constantly searching for new areas to expand into and dominate. Instead of protecting 25 year-old formulas and time-tested ways of doing things, companies need to be constantly inventing the methods of tomorrow.
A key argument in CFF is that companies should not abandon their core competence - they feel Xerox made a mistake diversifying into the totally unrelated field of financial services - but they also should be willing to utilize the expertise of other companies, and invest in the research and development necessary to build on that competence into new and unexpected areas. This is precisely what they suggest the Kodak Corporation did when it developed its new PhotoCD technology - took what they already knew from the world of photography and film, and built a new digital technology on top of it. Or how Japanese companies are parlaying successes in flat screen technology into a new generation of Personal Digital Assistants (PDAs.)
CFF proposes a "synthesis" for companies to follow which avoids complete lack of structure or anarchy, and also avoids excessive rigidity or bureaucracy. Balance is the key -- management and employees should be forward-thinking, innovative "activists" rather than mindless, yes-men "clones" or loose-cannon, play-it-by-ear "renegades." Companies, rather than being led around by the day-to-day whims of consumers or the technical and engineering imperatives of their technology, should be "benefits-led," trying to imagine ways in which they can create new benefits for customers (such as more control over their time, more mobility, etc.) Successful firms should combine a willingness to experiment and revise assumptions, with a precise timetable and vision for the future.
Hamel and Pralahad want business managers to "think differently" about what competitiveness means. It's meaningless, they suggest, to look at 'national' competitiveness (U.S. firms vs. Japanese firms), because now almost all industries are global, interconnected, and interdependent. Capital and ideas cross national borders too quickly. Furthermore, who your competitors are at any given moment in a particular industry may not be as important as who your competitors will be in the future. They suggest that established companies often ignore young upstarts at their own peril and also fail to see how past allies now have become adversaries and vice versa (as happened when IBM joined forces with Apple against Microsoft and Intel.)
The key to "competitive restructuring," CFF suggests, is reexamining a company's "genetic code" or industry structure, and one of the key things in this "code" is how managers think about the roles and functions of their companies. The key to the global marketplace involves the external policy of forming coalitions and consortiums, and the internal policy of "empowering" business units and teams to pursue objectives without cutting them off from the technical expertise contained within other units of the firm. Businesses need to re-think "what business they're in," and start thinking of a new business world without boundaries, where people will increasingly start encroaching on each other's "turf."
CFF suggests companies need to go beyond simply "strategic planning" and embrace "strategic architecture building" -- planning that doesn't just focus on the short term of a point of market share here or there, but that also doesn't get lost in the wildly abstract forecasting and pontificating of impossible dreams. The proper strategy, CFF proposes, is to look at ways to constantly enhance and build upon functionalities, opportunities, and competencies; to consider ways to increase the companies productivity well into the future, so that when new demands arise from consumers, the company will also be able to rise to the challenge.
"Customers are notoriously lacking in foresight. Ten or fifteen years ago, how many of us were asking for cellular telephones, fax machines and copiers at home, 24-hour discount brokerage accounts, multivalve automobile engines, video dial tone, compact disk players, cars with on-board navigation systems, hand-held global satellite positioning receivers, automated teller machines, MTV, or the Home Shopping Network? As Akio Morita, Sony's visionary leader puts it: 'Our plan is to lead the public with new products rather than to ask them what they want. The public does not know what is possible (my emphasis), but we do. So instead of doing a lot of market research, we refine our thinking on a product and its use and try to create a market for it by educating and communicating with the public... our emphasis has always been to create something out of nothing."
(CFF, pp. 108-109)
The public doesn't know what's possible...? Where, then, do companies get their ideas from? Are their managers, R & D teams, and employees not part of the "public?" This paragraph begins to point to what I see as the main problem with CFF... does the future belong to elite corporate think tanks, or to society?
Unfortunately, while CFF may be of considerable advantage to business students and corporate executives, for scholars interested in telecommunications, technological forecasting, and the impacts of new media technologies on society, it's of limited utility. Hamel and Pralahad can't be faulted for this, as their book was aimed at the type of people who go to $5000 seminars on "reimagining" their companies. Still, as someone who's interested in the human aspects of technological change, and who thinks that there are "activists" without white collars, my critique will necessarily focus on the scholarly shortcomings of this book.
While it seems unfair to protest the "business-centric" perspective of a book aimed at businesses, I think Hamel and Pralahad are still doing a disservice to CEOs by minimizing the role of governments, universities, nonprofit organizations, advocacy groups, and non-Western perspectives (Islamic cultures, indigenous groups, multicultural populations in the U.S.) in "competing for the future." Any business that pays attention only to the business pages and the Wall Street Journal, no matter how visionary in their corporate practices, is missing a big part of a rapidly changing world.
Bill Gates admitted that Microsoft failed to foresee the rapid growth and exploding popularity of the World Wide Web. Why? CFF won't talk about this, but part of it, as Gates admitted in a TV interview, was that the W3 initiative and the Mosaic graphical browser were both produced in a university setting; and the Internet itself was largely originally a noncommercial, academic network, where the protocols and early client-server software were all mostly nonproprietary and based on open standards. Something like the W3 initiative could not have been developed at Microsoft.
In an organized anarchy like the Internet, there was no way that a single operating system or way of doing things could ever dominate. So Gates and Microsoft can't necessarily be faulted for a lack of vision or foresight; but they can be faulted for fundamentally misunderstanding, and underestimating, the culture of the Internet. The same can be said about companies who think that just because some technologies will benefit some segment of people, they won't sometimes cause a great deal of harm to others. Ultimately, the problem may lie in the very idea of "competing for the future" itself. Already that prevents one way of thinking about the future.
Certainly, the other alternative - cooperating for the future - falls through the cracks. It's in the nature of businesses to compete; that's the basis of capitalism. Our notions of intellectual property reinforce this concept, that once we develop a new way to do something, we have to erect a fence around it (or others will profit from it.) However, developing new technologies sometimes requires a certain degree of collaboration, open sharing of information, and willingness to let outsiders "run with" the things you've started. According to Steven Levy, this idea of the Hacker Ethic - that "information wants to be free" - was radical in its time, and probably not one that business schools would adopt right away.
The social benefit of open systems, standards, and protocols like UNIX, HTML, TCP/IP, Java, MPEG, and PNG (Portable Network Graphic) is that anyone who wants to can come along and study how they work, and fix bugs, improve them, or devise something original along the same lines. This is the basis of object-oriented programming: code is meant to be reduced, reused, and recycled. Proprietary systems like Windows, PostScript, AppleTalk, ActiveX, AVI, or the NeXT OS may meet consumer needs, but the consumer is prevented from customizing them in any way beyond how the company has designed them. Instead of seeing the source code or the hardware schematics, they have to settle for poorly written manuals and second-guessed human interface designs.
The corporation in its modern form is only about a century and a half old, and multinational corporations are far younger than that. In the present, they do seem to be one of the dominant forces shaping social life and expectations, about leisure, work, and life. So it makes sense to challenge them, as CFF does, to shape the future. But an honest 'visionary' futurist might also be willing to see that in the future, multinational corporations might be sharing this role with a lot of other interests (artists, hackers, religious prophets, terrorists, who knows?), or that the very idea of the corporation itself could metamorphosize into something else, or that the capitalism we know today could become quite different.
Some companies, like the Mondragon Cooperative in Spain or Scott Paper, are making the truly revolutionary step of becoming totally employee-owned and operated. Others are seizing upon the Tofflerian "Third Wave" idea of prosumption - instead of looking at customers as "consumers" with standardized needs to meet, they are empowering individuals with the tools to produce things that meet unique and special needs. Still other companies, like Ben and Jerry's, are questioning whether a business' only responsibility is to its shareholders, or whether it also has some obligations to its employees, to the community, and to society as a whole. To me, these companies are truly "seizing the future" - daring to do things unexpected and unexamined by the 'business community'.
Technology is changing the very way in which some things have to be done by "corporations." Time was when in order to produce television you needed a major capital investment - in major technology for filming, editing, and transmission. You created a "product" (programming) which was "sold" to advertisers and consumers. You had to be in the "media business." Now, with cheap camcorders, desktop editing, and micropower TV transmitters, an individual can do it all from their basement with a small investment, and as a hobby rather than a "business". It may not reach a mass audience - but this may be an inevitable result of the "demassification" of media that Alvin Toffler predicts will occur in the future.
A lot of "new media" professionals are interested in the ways that this "stuff" can make lots of money. But the problem again is a lack of vision: there's more to be done than just make money. We're replacing the old technology of one-way broadcasting with interactive 'multicasting'; potentially everyone becomes a producer and/or a consumer. Instead of companies "selling" media to people, we may become involved in a more internetwork-like series of "microexchanges" of capital and media. Some of the new technology is a vast leveller; Kodak or PepsiCo may have more money to throw around in making a Web site, but a 14 year-old kid can still potentially make a site that's equally as interesting and compelling, even though it has nothing to sell.
We don't just have to rethink how we do business; we need to rethink how and why we do business. There are other ways to think, to work, to earn a living, and to live a life. I'm not suggesting capitalism is going to disappear or be replaced by socialism, but its "genetic code" may undergo some restructuring soon too. Fordism was based on the idea that you came up with a cheap, standardized product for the masses, and then the masses could have it in any color that they liked, "as long as it was black." Second and third-wave industries, moving into the service, information, and 'human growth' sectors, are challenging this model. Rather than asking forecasters, marketers, and business school experts for blueprints, they're opening up various kinds of outside participation and "economic democracy," allowing people (not just 'consumers') to work with them in shaping the future.
CFF wants corporate managers to focus on long-term planning rather than short-term analyses, but they don't seem to want to acknowledge that the profit motive is a strong disincentive for thinking this way. The shareholders are interested in the profits for this quarter, and it probably won't appease them to suggest that they forego their dividends now so that twenty years down the road they will be raking it in. Measures that are supposed to raise corporate productivity and competitiveness (electronic surveillance/employee monitoring, Taylorist "scientific management", etc.) in the short run only produce demoralized, burned out employees in the long run. Business as we know it discourages long-term thinking, and may even hinder technological advances.
Again, it might seem like to some people these criticisms of CFF are attacks on a "straw man." As members of a business school talking to business managers, they're not going to talk about things outside of the universe of business. What I'm suggesting, however, is that they are doing businessmen who are readers of this book a vast disservice by not asking them to think about and consider a larger and more complex world that exists outside of Wall Street, Madison Avenue, and corporate think tanks and research parks. Hamel and Pralahad provide a theory for producing a more efficient, more adaptive, more dynamic form of Fordism. They've made a rusty model T all bright, shiny, and elaborate, but it's still a model T.
Hamel and Pralahad want to chastise businesses for being stuck in hidebound, stodgy, outdated ways of thinking about their industry. Now I want to chastise them for failing to reinvent, rethink, and reposition "business" itself. Is it always right for a business to cause consumers to think of something they originally considered a luxury to now be a necessity? Someday, marketers will pat themselves on the back when everyone in society comes to believe that they couldn't possibly live without a universal phone number that follows them everywhere. Thousands of U-phones will be sold. They will have given people a new "customer benefit." But, as people find themselves pursued relentlessly everywhere they go by telemarketers, will they really be happier? Really have a better quality of life?
CFF considers examples of business triumphs the fact that some people refuse to do without (and hence have come to own) what some people consider a highly mediocre and poorly designed computer operating system (Microsoft Windows), what some people consider a device for the "dumbing of America" (broadcast television), and what a good portion of the population of the world still manages without (a telephone in the home.) Convincing people that they can't live without these things is a remarkable result of modern advertising and targeted marketing, and not necessarily good technical engineering or "human factors" (ergonomics) research. I'm not doubting that television, Windows, and telephones have transformed the world. It's just that only history will really be the judge as to whether they, on balance, did so for the better. As technologies go, each of them could have been designed better.
The problem with a lot of today's technologies is that they were designed by engineers and corporate committees. An alternative model, of participatory design, exists. A forward-thinking company can anticipate what people might expect in terms of energy sources in the future (for example.) A socially responsive company might not only ask people what they would like in terms of energy sources, but also even invite them to contribute to the process of designing and implementing those sources. The consumer in Fordism is only supposed to offer his "input" at the end of the design process: voting with his dollars, he either chooses to buy or not to buy. But ours is an information age; why not include the "prosumer" throughout the whole cybernetic process?
Hamel and Pralahad want to come across as bold visionaries, sweeping away the past, embracing the future. But the future they are asking companies to compete for is like the world of Jules Verne or the Jetsons. A future of bright, shiny technofetishes and Wired electrogoodies mass-produced for continually conspicuous consumption. It's not the only future we could imagine, and lots of other people (like feminists, hackers, and other weirdos) have imagined others. (Like Howard Rheingold, some people are thinking about how to transform human civilization itself, revitalizing democracy and strengthening community, even without making bucks at it.) CFF gives us the future as some people imagined it to be decades ago (beginning probably with Walt Disney) - a future that's already become stale and out of date.