From the April 1997 issue of Entrepreneur

Watts Wacker is a hot futurist--in heavy demand by a stream of clients including Dreamworks SKG, Gateway 2000 Inc. and Boston Chicken. They knock on his door at consulting firm SRI International, where he is formally titled "Resident Futurist" because he has had an uncanny series of spot-on predictions about tomorrow. He predicted the boom in garden supplies sales as well as Clinton's '96 election margin, and, nowadays, he sees change happening at an ever more furious pace.

How does he come up with his ideas? Wacker's methods are as unorthodox as his ideas. Although he spent a decade at Yankelovich Partners overseeing the polling company's trends surveys, Wacker's favorite technique for getting a take on tomorrow is to hang out in unexpected places. He's put in hours everywhere from a Taco Bell, where he bused tables, to panhandling in New York City's ghettos. The logic of this "observational research," as Wacker calls it? "A key to knowing the trends is to listen, really listen, especially to people with points of view that are different from ours," says Wacker, co-author of The 500 Year Delta: What Happens After What Comes Next (HarperBusiness).

Just as unorthodox is how Wacker thinks. The linear, number-crunched predictions of many pollsters aren't his style. Instead, his thoughts tumble out, and listeners have to scramble to keep pace with his accelerated train of thought. But read closely, because these days Wacker's telling his clients that there's just one essential key to succeeding, and that's to make promises . . . and keep them.

"The great ideas are all basic--if you can practice them," says Wacker, who here elaborates on how to successfully keep corporate promises in the coming years.

Entrepreneur:You've said there are "no more virgin consumers." What does this mean?

Watts Wacker: Charles Barkley had a great quote during the Barcelona Olympics when the "Dream Team" was drubbing opponents by 60 points a game. That spawned lots of "Ugly American" articles. But Barkley said, "Wait a minute. We should be beating these teams by 60 points. Basketball is something we're good at."

My argument is that America is good at three things: basketball, making war and buying stuff. The key here is that consuming is no longer about tactical or strategic decisions. It's about psyche definition. We define ourselves as good or bad based upon our consumption skills. It's not whether you buy a Lexus; it's how much you paid for it. In your peer group, if you paid too much for a Lexus, you're subject to ridicule. And the companies that are fastest to embrace everyday low pricing and put their brands back in sync with appropriate price levels are the ones that will succeed.

Entrepreneur:Are you telling merchants they have to compete on price?

Wacker: Consumers have realized that if they wait, the price will come to them. Except they don't wait on brands that deliver their promise. Be--and the money will come to you. It's not about trying; it's about being. Like Starbucks. I pay more now for a cup of coffee than I do for a vodka martini. Starbucks delivers on its promise.

Entrepreneur:How does a company make a promise?

Wacker: A brand is a promise, and, in the end, you have to keep your promises. A product is the artifact of the truth of a promise. Coke promises refreshment; Gateway Computer promises to be your wagon master across the Silicon prairie. There is no difference between what you sell and what you believe.

Entrepreneur:Then there's Saturn, which promises not to dicker and doesn't offer discounts.

Wacker: If you have a promise--and work at keeping it--the price will take care of itself. The promise of Saturn is to respect you, which is why they can say it's a new kind of car company. I don't believe it's a new kind of car, but it is a new kind of car company. And Saturn gets better margins because it knows what it is.

Know the promise, and then figure out how to consistently deliver on it. If you have a problem with a Saturn, it's nothing more than another opportunity for Saturn to demonstrate that it delivers on its promise. There is no trick to any of this. It's say what you mean and do what you say.

Entrepreneur:We don't have to deliver 100 percent on a promise?

Wacker: Companies have been talking total quality but not realizing that you cannot offer 100 percent satisfaction guaranteed because that is an impossible promise to keep. The re-engineering gurus preached zero-
defect management--the elimination of mistakes--at the same point in time their customers were expecting failures. And customers have been evaluating businesses not on whether you make mistakes but on how you handle them once they are made.

Entrepreneur:What can a small business do with your ideas?

Wacker: Your first step is to realize that you've got to write a 500-year plan. Forget five-year plans! If anything, a small business has a better opportunity for developing a 500-year plan than a big business does because it doesn't have all the bureaucratic levels. The 500-year plan is: What are you promising, what do you stand for? If you know that and you can keep your promise, you've cleared 70 percent of the hurdles to success.

Entrepreneur:A 500-year plan!?

Wacker: I studied more than 300 companies that had been in business between 150 and 600 years. What did these companies have in common? Number one, they had access to money. The main reason for business failure remains undercapitalization.

Secondly, they had a great understanding of all their stakeholders, which includes employees, customers, prospects, the media and the government. Third, they had a tolerance for diversity in the organization, a willingness to try new things.

The fourth thing--and this blew me away--is that none of these companies still make their principal source of revenues from the business for which they were originally created. Only one company that will be on the Fortune list of the 100 biggest companies at the beginning of the 21st century was also on the list at the start of this century, and that's General Electric. And GE today makes 42 percent of its revenues from financial services.

Entrepreneur:What did you learn during your time as a panhandler?

Wacker: One thing I learned is that there is this cornucopia of stuff. If you look at a penthouse on Park Avenue and a tenement apartment in the South Bronx, they both have the same stuff. The poorest household today has more stuff--television, VCR, radio, microwave--than the average household had in 1971.

There has been a homophylyzation of stuff-- that's the tendency of things when touching to become like what they touch.

Recently, I was in Vietnam, and I wanted to buy my wife something unusual--but I couldn't find anything I couldn't buy in Macy's! When I look at that, I start talking to companies about why a promise becomes so critical. Your products cannot differentiate you; your promise can. Put Coke next to Pepsi, and people prefer Pepsi [in a blind taste test]--but Coke outsells it 4 to 1. Coke has unfailingly learned how to support its promise.

Entrepreneur:Today's changes seem more profound, more fundamental than those in prior decades. Are they really?

Wacker: Every 500 years there's been a renaissance. From the birth of nations in about 1000 to the discovery of the new world in 1500 to the Age of Enlightened Anxiety in 2000--that's the new renaissance, and what we'll see in this renaissance is an economy built around intellectual property more than physical property.

Entrepreneur:What will prosper in this new economy?

Wacker: The first industry to be created in the Information Economy will be the privacy management business. If TRW is a company that once did defense contracting and made automobile parts and overnight became a credit management company, some business will overnight become a privacy management company in the Information Economy.

The other big change is that now our individual lives have huge economic value. Everything you do in your life will be chronicled, catalogued, stored, recalled, assembled and then sold. In fact, I believe someone in every household will have the job of chronicling the activities of everybody in the household, then selling them to businesses for a quid pro quo.

Apply this to the records you keep on your customers, and look for how much more you can do. You can not only chronicle the growth of your customers; you can also tell them more about themselves than even they know because you are chronicling them. This lets you anticipate their needs.

Entrepreneur:What do you mean when you say we're in a period of cultural schizophrenia?

Wacker: It's the ability to move in two directions at the same time without feeling inconsistent. It's why the woman who created Mothers Against Drunk Driving can also testify on behalf of the spirits industry. It's why we can say we want less government at the same time we expect more from government.

Why is this happening? It's a demonstration of the crisis of confidence in the institutions left over from the Industrial Revolution. Before the last election, I had the good fortune to predict not only that Clinton would win by eight points but also that this would be the lowest voter turnout of the last century. Where I live in New England, we have what are called "100-year storms." What we had is a 100-year election, and what it said was that government is irrelevant as it is currently defined.

Entrepreneur:You've said lawn and garden catalog companies will do well. Why?

Wacker: Gardening took off because people get a tremendous sense of achievement from it. In the age of access--when so many things are accessible to us--we almost genetically crave the things that are scarce.

One of the scarcest things on the planet today is creativity. Gardening is more about creativity than anything else, and when you put together scarcity and the desire for creativity, you start seeing things like gardening for internal--not external--satisfaction needs becoming prominent.

Entrepreneur:What are other examples?

Wacker: Managing your money is another example. The accessibility of information will allow you to manage your money and derive a sense of accomplishment from doing it. The same tools that let Ford Motor Co. use just-in-time inventory management to cut 12 percent out of its cost structure are accessible to you, too. You can give yourself a 12 percent raise by creatively restructuring how and when you order the goods and services you need and when you pay for them.

Entrepreneur:You say technology is about connectivity. What do you mean?

Wacker: Computing has met communicating. On the most pedestrian level, this means IBM has met AT&T. Satellites, fiber optics, copper wires--all the "carriers" have met the content providers, and what we're seeing is the creation of a new paradigm.

Technology is allowing for accessibility--anything you want, anywhere you want. We're literally on the verge of seeing people in two locations simultaneously. A doctor can be in his office in New York City--and performing surgery in Los Angeles at the same time. That's about computers being applied not to crunching numbers but to doing other things we want. That's what I mean about connectivity. It's changing our sense of concepts such as time, space and location.

Entrepreneur:What can an entrepreneur do to think a bit more like you?

Wacker: We're sitting in one of those rare points in time where what was spills over into what will be. If anything, I try to help companies understand that everything they have learned that has let them be as successful as they are may actually work against them in the future.

The first thing you have to do is start listening to people whose points of view are different from yours. Most people don't listen well--they're thinking about their response instead of listening.

So many great thoughts are simple. The most profound thought I know is "No matter where you go, there you are." Here's another example: If a customer has a problem, the biggest mistake you can make is to defer it to another person. That's simple. But how often do we get it wrong?

Entrepreneur:Aren't many people simply shutting down to growth possibilities in the face of rapid change?

Wacker: We've never had more species going extinct in the history of humanity than we do now. But in less than five years, we'll have more new species being created than go extinct.

To borrow from the movie "The Lion King," what we see here is the circle of life. Some people are saying "I don't know how to cope." But many more people are saying "I can make this future work for me." All we're seeing is an accelerated evolution. It's Darwinian.

Contact Sources

SRI International, (203) 226-2805, < a href="mailto:watts_wacker@qm.sri.com">watts_wacker@qm.sri.com.