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Embracing Corporate Obsolescence

Change is an immutable force. Some of us embrace it, some of us resist it, but no one escapes it. In today’s Information Age the speed of change is accelerating at such a dizzying speed that it’s rewriting the rules of business.

“Corporate bureaucracy is becoming obsolete,” writes Alan Murray, in his WSJ article, “The End of Management.” Businesses built to thrive in the Industrial Age must now adapt to the Information Revolution. Murray observes:

Corporations are bureaucracies and managers are bureaucrats. Their fundamental tendency is toward self-perpetuation. They are, almost by definition, resistant to change. They were designed and tasked, not with reinforcing market forces, but with supplanting and even resisting the market.

Yet in today’s world, gale-like market forces—rapid globalization, accelerating innovation, relentless competition—have intensified what economist Joseph Schumpeter called the forces of ‘creative destruction.’ Decades-old institutions like Lehman Brothers and Bear Stearns now can disappear overnight, while new ones like Google and Twitter can spring up from nowhere. A popular video circulating the Internet captures the geometric nature of these trends, noting that it took radio 38 years and television 13 years to reach audiences of 50 million people, while it took the Internet only four years, the iPod three years and Facebook two years to do the same. It’s no surprise that fewer than 100 of the companies in the S&P 500 stock index were around when that index started in 1957.

Hangzhou, China, at night

Hangzhou, China

Access to information 24/7 has unleashed a new era where ideas can be developed, tested, launched, succeed and fail all in the span of less than ten years. Innovations and new information can spread in seconds via new channels, rendering age-old companies or even entire industries obsolete. To paraphrase D.H. Lawrence:  Cool, unlying life is rushing in and institutions are curling up like burnt paper. Industrial Age corporate rules simply no longer apply.

We all knew this day was coming. In 1970, Alvin Toffler, opened his seminal work, Future Shock, with these prophetic words:  “In the three short decades between now and the twenty-first century, millions of ordinary, psychologically normal people will face an abrupt collision with the future.”

“Future shock,” as he called it, is a “time phenomenon.” It is “a product of the greatly accelerating rate of change in society.” In terms of technological innovation, where knowledge is fuel, change is measured as the span of time from idea to practical application — that is, “time-to-market” or “time-to-takeoff.”

Toffler used a study by Robert B. Young at the Stanford Research Institute to illustrate the speed of innovation and the diffusion of technology:

Young found that for a group of appliances introduced in the United States before 1920–including the vacuum cleaner, the electric range, and the refrigerator–the average span between introduction and peak production was thirty-four years. But for a group that appeared in the 1939-1959 period–including the electric frying pan, television, and washer-dryer combination–the span was only eight years. The lag had shrunk by more than 76 percent.

Another futurist, Ray Kurzweil, in his book The Singularity Is Near, asserts that the “rate of paradigm shift (technical innovation) is “doubling every decade.” (This was in 2005.) For information technologies, he says, “there is a second level of exponential growth:  that is, exponential growth in the rate of exponential growth.” He illustrates his point:

Thus, the twentieth century was gradually speeding up to today’s rate of progress; its achievements, therefore, were equivalent to about twenty years of progress at the rate in 2000. We’ll make another twenty years of progress in just fourteen years (by 2014), and the same again in only seven years. To express this another way, we won’t experience one hundred years of technological advance in the twenty-first century; we will witness on the order of twenty thousand years of progress (again, when measured in today’s rate of progress), or about one thousand times greater than what was achieved in the twentieth century.

As Kurzweil points out, all this rapid evolution is not necessarily dystopian or utopian. Human traits can never totally be submerged even as we gain more control over the universe and ourselves. Reality, its existents, and reason remain absolutes. We will never be infallible or omniscient, and there is no historical inevitability when it comes to man-made things or events. Much of our future will depend on the value of our ideas and on our ability to remain free and defend against overreaching government power or despotic movements. Heavily regulated or government-run industries will always lag behind the technology curve, bogged down by their bureaucratic, self-perpetuating natures.

In a sense, we are all becoming businesses of one, each with our own unique brand, yet we are part of a vast, interconnected community. No one is quite sure what the new “Wikinomics” will look like. As our lives improve and last longer, we only know the economic rules will keep changing. Like businesses, we will have to adapt—fast.

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