I noticed a broad consensus among attendees that things are different now – that the challenges and the opportunities facing large organizations and their leaders are not the same as they ever were. And they’re different in both degree (competition has always been nasty, but it’s getting nastier) and in kind (open source communities? Huh?). We came from a broad range of disciplines and job titles, but none us said any form of "Hold on a minute, everyone. Things really aren’t all that different now for executives and companies. Let’s not oversell the current era."
So I just want to sanity check this belief, and then ask a follow-on question. First, the sanity check. Have corporations and other large organizations really entered a new period, one in which new things are happening and all things are happening faster? What evidence do we have that this is the case? I presented some evidence to this effect in the Harvard Business Review article I wrote with Erik Brynjolfsson this summer and in these blog posts. There’s also other evidence of ‘hypercompetition‘ (an upcoming special issue of the Strategic Management Journal will be devoted to this concept).
But are they any skeptics out there? If so, I’d love to hear from them, or about them. Are there reasonable and thoughtful people who believe that things aren’t all that different now than they were 40, or even 20 years ago? We have a constant tendency to overstate the importance of our own circumstances – our time, our surroundings, etc. – so it’s important to guard against that tendency, and to be sure that when it comes to organizations and competition it’s not the same as it ever was.
The follow-on question is a simple one: if things really are different now, why are they? It seems very unlikely to me that the leaders of organizations as a group suddenly said "You know all the books the management scholars have been writing for several decades now? Let’s all start putting that stuff into practice now." In other words, I don’t think that we reached any tipping point where the weight of writing and thinking about management actually started to influence management much more than it had done previously. In short, this isn’t about us.
So what is it about? I can think of three things that have substantially changed in the world of business over the past 25 years (to pick a pretty arbitrary time period). The first is the market for corporate control – the emergence of LBOs, private equity, and all the other alternatives to big public corporations in which executives are paid like bureaucrats. The second is the appearance of several huge new players into the game of modern capitalism. At the risk of saying something inexcusably obvious, China, India, Russia, Brazil, and others are a big deal.
The third, of course, is information technology. In 1983, US companies spent $32 billion on IT, which accounted for 9.8% of their total investment in fixed assets that year. By 2006, spending had risen almost tenfold, to $294 billion, and IT accounted for 21.1% of new fixed assets purchased that year in the US. To put it mildly, this is a big change in what companies are composed of, and it has to be having an impact (or several of them).
I believe that IT is the biggest of these stories, but I don’t want to argue that point here. Instead, I want to ask if this list of three big things that have changed the game of business is incomplete. Has anything else changed over the past quarter century that could plausibly account for or contribute to the widely-shared feeling that we’re in a new era now? If so, what is it, and why do you think it’s such a big deal? What evidence do you have to support your belief? Leave a comment, please, and let us know. We’d love to hear what you think, and why.