Need For Speed
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If you think your business day is already hectic, fasten your seat belt--it's about to speed up considerably. That's the contention of Ernst & Young LLP's visionary business gurus Chris Meyer and Stan Davis, who have outlined how entrepreneurs can cope in Blur: The Speed of Change in the Connected Economy (Addison Wesley).
According to the duo, the driving force behind this acceleration is the Internet, which has already changed the speed at which business is conducted.
This new faster economy will put an even greater premium on companies' intangible assets, such as intellectual capital, brand loyalty and employee relationships. Meyer and Davis' often radical insights have been described as "a decoder ring . . . to make sense of the turbulence in the world of work today."
As director of the Ernst & Young Center for Business Innovation in Cambridge, Massachusetts, Meyer researches emerging business issues and is an authority on the evolution of the information economy.
Davis is an independent writer, speaker and senior research fellow at the Ernst & Young Center for Business Innovation. He's also a consultant for leading companies worldwide and the author of 2020 Vision (Addison Wesley) and the bestselling Future Perfect (Simon & Schuster), the recipient of Tom Peters' "Book of the Decade" award.
We asked Meyer and Davis to share their secrets on how to avoid perishing in this brave new world--and how to prosper from the accelerated pace of business.
Entrepreneur:How do entrepreneurs fit into the blur economy?
Stan Davis: Entrepreneurs are the wave of the future because power is migrating to organizations where the employee and customer are in touch with each other. The computer infrastructure enables this. You need small, adaptive companies to respond quickly, and those are most often entrepreneurial businesses.
Large organizations are simultaneously downsizing and outsourcing, and the real job growth is coming from entrepreneurs filling these needs. This allows someone in a home office with a couple of employees to operate in a global economy. Large companies have to learn how to act small and large at the same time, while small companies can now act as if they're large. Over the Net, you don't necessarily know if a company is small or large, just how well it provides a product or service.
Entrepreneur:Your book describes a world that promises to be much more dependent on computers. With all the computer hardware, software, internet connection and service problems many businesses already experience, won't this vision get bogged down by the daily realities of technology?
Davis: If you consider how far we've come in becoming interconnected even with all these problems, imagine what will happen when these things get debugged. There will be a quantum leap in the speed of doing business.
Entrepreneur:Won't the increasing speed only exacerbate the standard problems of doing business?
Davis: Any change of the magnitude we're talking about will have advantages and disadvantages. Our ability to get supplies overnight and letters instantaneously now has a bright side as much as it has a dark side.
Entrepreneur:Overworked entrepreneurs might find it alarming that you foresee business survival as being dependent on companies being able to deliver 24-hour service, seven days a week, with home and work life blurring together. Don't people need downtime?
Chris Meyer: Technologies like e-mail and voice mail have raised expectations about availability. For a customer, the next best thing to [talking to someone] is to be able to leave a message. And better than a message machine is the ability to leave a message and have a software program [respond] that the message was received and that you will get back to them within a certain time frame.
Entrepreneur:We're already overloaded with information. How can we cope with an increase?
Meyer: There has always been too much information flowing in, but recently the offense has had more of an edge. More than anyone else, entrepreneurs have to be concerned about how this affects them, because time is their most precious resource. They need to use the techniques that are available, such as e-mail filters and caller ID, to filter out time-wasters.
There will also be more entrepreneurial opportunities as managing attention becomes critical. Imagine a whole set of mechanisms and players that will appear to help us invest our attention optimally and provide reports on the return we've gained. There will be a shift from managing transactions to managing relationships.
Ways for sellers to get around the information overload are also emerging, such as permission marketing, in which information is sent only to individuals who indicate they want it.
Entrepreneur:You argue that the old theories of economics are dead. If that's true, how does that affect the creation of a business plan?
Davis: Traditional planning for a product was part of the old economy, in which you planned something, it was enacted, you evaluated how it went, and you adjusted your strategies accordingly. When it becomes instantaneous, that cycle is no longer relevant. Connectivity gives you constant feedback in real time from customers, suppliers and employees, and the flexibility to adapt and respond becomes more critical than planning, although obviously you still have to do some.
Entrepreneur:You say that business decisions should be "made on the edge of chaos." Shouldn't entrepreneurs be in possession of all the facts and in control?
Meyer: If you remember the familiar phrases "the perfect is the enemy of the good" and "analysis paralysis," it's easier to swallow. You can never been in possession of all the information you supposedly need. Striving for the old comfort zone of a slower world in the blur economy isn't realistic.
Entrepreneur:Your book advises entrepreneurs to concentrate on their core competencies and outsource the rest, and even avoid owning their infrastructure. Doesn't that put business owners at the mercy of others?
Meyer: You are equally at the mercy of the capabilities of your own company if it can't produce [enough] or when someone is out sick. At a small company, this is particularly acute. The best thing you can do is put tasks that are not part of your expertise in the hands of someone whose business it is. They know how to do it best, offer the lowest cost, and have the greatest incentive to do it right.
Entrepreneur:"Minimize the lifetime of consumer and durable goods" is another assertion of yours that goes against the competitive rule that business owners should want to make products that last.
Meyer: When you think of building something to last, you should be thinking about building something to accommodate change. When you design a product, be conscious of what is durable and what a customer may want to reconfigure or upgrade over time. For example, there is a European dishwasher manufacturer that says its cabinets and motors are durable, but if environmental regulations or other factors change, the company will [modify the] software that governs the wash cycle.
Entrepreneur:You argue that business owners should share information with competitors and tear down firewalls that are barriers to the flow of information. This goes against the policy of secrecy that most companies feel is essential to maintain an edge.
Davis: If I asked you to draw a firm in relation to the environment, you could draw a circle with everything inside representing the firm, and everything outside representing the market and the external environment. There is a boundary that separates the two, and that is where businesses establish firewalls of secrecy.
With connectivity, companies are less freestanding and more interdependent. Among large companies in core industries, competitors are making strategic alliances. So what you have is a permeable boundary. With firewalls, it's very hard to discriminate who should get in and who should be kept out.
You're better off erring on the side of making information public because the speed with which competitors can get your information is so fast and too much time is devoted to keeping the information secret, even from those who ought to have it. You gain less than you lose.
Entrepreneur:You suggest that companies encourage employees to build relationships with competitors. Doesn't that mean you risk losing them to the other companies?
Davis: You can't isolate your employees and still get the benefits of learning from other companies. You may ultimately lose some employees, but you'll still benefit from your contact with competitors.
The old business model involved trying to retain employees, but the reality today is that most people aren't going to stay with you for their entire career; adjusting to that fact is a better idea.
Turnover is actually good because it gives you a chance to hire people who have learned from competitors. The areas like Silicon Valley that have the greatest turnover also have the highest wage structures, the highest number of new jobs and the best local economies. There is a quicker and quicker sifting to find what works.
Entrepreneur:You discuss the importance of diversity in a large company, but what about diversity in an entrepreneurial business?
Meyer: Diversity means a lot of ways of looking at the world. The risk a small-business owner has is in getting too focused on your own idea and not hearing customers and innovative ideas that the market may throw back to you. Diversity among personnel makes it possible to hear those ideas.
Entrepreneur:How are the roles of buyers and sellers changing in the blur economy?
Davis: The key idea is that every buyer will become a seller and every seller, a buyer. The difference [between the two] is blurring. The old relationship was a purely economic, arms-length relationship. The provider offered a product and, in exchange, got money back. But buying has also become an information exchange. Sellers need to see the value in compensating customers who give feedback.
Entrepreneur:Your book talks about "organizing your customers." Why and how does that work?
Meyer: Because customers know the most about how their needs are being fulfilled. For example, Netscape offered money to customers who helped it improve its product. Customers can make you better faster than anything you can do yourself, and in the blur economy, close relationships with your customers will become more critical to having the flexibility to respond quickly.
Scott S. Smith writes full time from his Los Angeles home, covering business, health and animal topics.