What was the last big business management theory? Porter's Competitive Strategy was written way back in 1980; Drucker's Concept of the Corporation is from 1946. Clayton Christensen's The Innovators Dilemma was written in 1997 and is probably more applicable now, 15 years later, than it was then given what is happening with social technology.
Moving cheese, good to greatness, various habits and 4 hour work weeks are all interesting bits of wisdom, but I'm talking about big, groundbreaking concepts. Foundational insights that reframe our minds and our future around why business exists, what it's role is in society, and how and why it makes money.
I'm talking about seismic shifts in business management theory and thinking. Porter had these, Drucker too. Why has there been so little of this of late? Are we tapped out, has business reached its peak? Are there diminishing marginal returns to business management thinking and theory?
The Mooch Effect
I have a theory. I'll call it The Mooch Effect. Mooch is my cat. Mooch sleeps, plays, eats, sleeps, wakes us up, and sleeps some more. In short, Mooch does the easy stuff. No heavy lifting, not when there's a lot of easy stuff that he can spend his days on. What is exactly what business has been focused on for the last twenty years or so. The easy stuff around cutting costs -- outsourcing, offshoring, M&A, downsizing. Anyone can cut costs, and anyone has. Mooch can cut costs.
Now there's nothing wrong with that per se, cost cutting improves profitability too. But cutting costs only works as long as there are costs to be cut. Being able to produce at a lower relative cost is one of two paths to superior profitability from Porter's teachings. But it's the easy path -- and we've been on the path for so long that we've forgotten that there's also another path. This other path leads to superior profitability as well, but it does it by making it possible for you to charge a premium price relative to your competitors for your products or services. It's the path of value creation; or being unique.
Remember Creating Value?
Wow, actually having customers who will pay more for your offering? That happens today, it's all around us actually -- Apple, Whole Foods, Starbucks -- are all firms who have premium prices in arguably some commodity markets. Porter teaches us that the litmus test for knowing if you have a competitive advantage is whether you are able to charge a premium relative price or have lower relative costs. Have these, and you have superior profitability, which is the point of strategy in the first place.
But leaders have been doing the easy stuff; coasting with The Mooch Effect. Figuring out how to create value? That's tough. But it's precisely what business now needs. Business needs to expand the pie, to find new ways to create value, which then gives them an opportunity to capture some of it to really drive superior profitability.
Fortunately, you have some new tools at your disposal. Social technology or social tools, techniques and devices have made it possible to deliver on value creation in ways never before possible. Not by yourself, but with the team that you've pulled together, your company. This technology lets you free yourself from the artificial barriers of the modern corporation to create value in new and unique ways.
The Social Enterprise Will Set You Free
New management ideas? We don't need big new management ideas because we haven't used the old ones that are already out there. Firms who use today's social technology to change their business models to deliver an experience off of the back of these incredible tools are called social enterprises. The social enterprise competes on innovation, not imitation. The social enterprise is a big idea and a big opportunity, one that Michael Porter told us about over 30 years ago.
Cost cutting has diminishing returns over time, value creation doesn't. Use the tools you now have to find new ways to create value, to deliver a unique experience. You'll be glad you did when you start capturing some of it for yourself. The social enterprise as a big management idea? Yeah. But one that's been there all along.