Why Business Needs a Reboot


Rebooting, or the act of starting over is an obvious way to deal with a lot of issues when you have a problem with your computer, iPhone or any other piece of technology.

But it's a phrase used less frequently when it comes to business management and how companies operate and manage themselves.  

However,  it's a concept that increasingly applies to the state of today's business world—business needs to reboot. 

Every company has been created on the collective wisdom built up over a century of trial and error in business management theory and practice.   The practice of modern business management is barely a century old, and it's been one great big social, economic and financial experiment.  So, how has the experiment gone?

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It depends upon how you keep score.  By the measure of corporate profits recently, it's done exceptionally well.  Corporate profits as a percentage of GDP are close to their fifty year highs.    

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But by the measure of jobs and wage growth that corporations deliver to one of their largest stakeholder groups, their employees, it's done very poorly.  Wages as a percentage of GDP are approaching their fifty year low.

Wages as GDP Overlay.jpg

If you are like me, the first thing you did with these charts was to look at the data together.  It would seem that when wages are low, corporate profits are high and vice versa.  Here's the overlay of the data to emphasize this point.      

There shouldn't be much surprise to this, but is this the best that the modern corporation can deliver?  Is succeeding at the expense of others in the supply chain or ecosystem a zero sum game?  It's not, and actually it was never intended to be.  

The distinction is between value redistribution, which American corporations have excelled at for the last several decades and value creation, which many of them have struggled with.       

Value Redistribution

There is no right answer in business management, only solutions or approaches to a particular problem or challenge that exists at some point in time.  Modern business management theory and practice started a hundred years ago with a focus on the work—how can tasks be carved up to make them efficient and reliable to get something done or produced.  Then scale became an issue in the middle part of the last century as a focus on the organization of large groups of people took hold.  Big monolithic corporations started to evolve that were modeled on the other big monolithic organizations of the day, the church and the government.      

Then the individual was folded into the equation, and the fact that individual motivations are complex and that markets of one needed to be reached and understood.  The output of individual employees needed to be maximized as did the relationship that companies have with their individual customers.  

The totality of these practices have had their merits as they've allowed the modern corporation to produce or deliver pretty much anything at scale, with a decent amount of quality and efficiency.  

Business, or management activity over the last decade is rife with tactics that advance this approach to value redistribution.   Outsourcing, offshoring, downsizing, M&A, IT driven productivity initiatives all help organizations achieve what they've been taught over the last hundred years—how to efficiently produce at scale into growing markets.  

But this approach is no longer enough.  Markets have dramatically slowed their growth and knock off competition creates an incessant focus on value redistribution as the only way to maintain margins.   This approach isn't growing the pie—it's simply redistributing it.    

Value Creation

Change has proven to be the enemy of this way of business management thinking.  Rapidly evolving markets and an unprecedented and permanent shift in power to buyers because of today's social technology now demands a reboot to the last hundred years of business management thinking.  The future is about value creation—economic growth and prosperity is dependent upon it.  

Some leaders and their companies do this very well.  Many don't, they focus on the easy part of the equation, value redistribution.                

The future of business management is about innovation and value creation, it has to be.   Fortunately todays social technology is providing the tools to reinvent the way that products and services are created, delivered, produced, financed, serviced, maintained, etc.   Today's social technology can reinvent many things, and influence most things.  It is both a productivity driver, and a tool that can be used to make us smarter and more innovative.  

Social Technology Makes Us Smarter and More Productive

Being smart is good for companies and great for humanity.   For example, efforts are underway to use today's social technology to eradicate illiteracy for the 1 billion + people on the planet who cannot read.      

In the very near future, for the first time in history, the majority of the people on the planet will be connected, in real time.  We'll also be increasingly connected to our environment and the things around us.   What will do with these unprecedented developments, what will we create, and what will we destroy.          

Corporations need to recognize that these tools are an opportunity for growth—tools that can be used to create more value, and where value can be created it can be captured and shared across an entire ecosystem.   Business isn't merely a zero sum game.  

As a social technology empowered force, we need to expect and demand more, and finally we can.   

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