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Thus far in this series we’ve outlined Generation 1 (G1) and Generation 2 (G2) of the modern Business Era (that is, from the late-18th century onwards) in the West. These two periods might also be labelled, respectively, the Product Era and the Added Value Era. Now think about the periods in a broader context. When you do, it becomes clear that G2, which encompassed the period from 1970 to 2020, was a special case. It was the run-up to a Great Reset and, therefore, a transition period.
In The Notion of Customer #3 I suggested that innovation-at-scale comes in two steps:
STEP 1 = TURBOCHARGE THE PRESENT
STEP 2 = EMPOWER THE FUTURE
And, indeed, when we look at what comes after 2020, it’s clear that G2 was the transition period from an analogue world to the current digital world. So, inevitably, there will be G2 Step 1 and G2 Step 2.
At G2 Step 1, it was possible to turbocharge a wide range of activities. To give just one basic example, the widespread availability of desktop and portable computing dealt a swift death blow not only to the typewriter but also to the huge workforce that used the typewriter - a majority of the secretaries who shadowed business management at all levels.
Nascent digital technologies, of course, also enabled much more fundamental change. For example, redistribution of corporate functions on a hitherto unimaginable scale, most notably in the form of Outsourcing. In turn, this re-engineered the power dynamics of an enterprise. One of the most powerful functions in a G1 business enterprise was Production. But, arguably, Marketing, and associated Customer functions, stepped in to the top spot.
Here are some notes about three key features of G2 Step 2:
Outsourcing: the Reverse-Golgafrincham Manoeuvre
First, Outsourcing and I hope you’ll forgive my introducing this by reference to the humorous writings of Douglas Adams (1952-2001). Adams was an English author and humorist, best known for his wonderful creation, The Hitchhiker’s Guide to the Galaxy. In The Hitchhiker’s Guide1 Adams references a planet called Golgafrincham. If you are not familiar with this tale, here’s a little background.
The people of the planet Golgafrincham, home to the Great Circling Poets of Arium, decide to rid themselves of the useless third of their population who actually make nothing and simply provide services to those who do. These hairdressers, insurance salesmen, personnel officers (forerunner of HR managers. Who’d have thought it?), security guards, management consultants, telephone sanitisers and the like are packed off in a spaceship (the B-Ark), believing the lie that others would follow.
The real world adopted a far more fantastic policy: from the 1980s, the western world executed a Reverse-Golgafrincham Manoeuvre, progressively outsourcing more and more of the manufacturing and business functions that had for a long time provided a great deal of social cohesion and national prosperity and, not least, kept less-academically-inclined working people employed.
By 1990, some commentators were hinting at the possible social downsides of the wholesale outsourcing of manufacturing jobs. To give just one example, in his final work2, American social historian Christopher Lasch, referencing the work of New York journalist Jim Sleeper, wrote:
The glory of New York, according to Jim Sleeper, lies in its “integration of proletarian strength with professional excellence and high cultural achievement” – precisely the integration that is breaking down ... in city after city ...
Nonetheless, for management consultancies, and management services and business management process specialists, outsourcing was a licence to print money: and once they could demonstrate the cost reductions and margin enhancements swiftly available through outsourcing, they were able to demolish any resistance to what had, up until then, been a fierce obsession with keeping everything in-house and secret.
In the late 20th century Western management voices were heard loudly asserting … “Outsource manufacturing? You must be joking!” “Human resources management? No way!” “Financial management? You’re out of your mind!” Nonetheless, in astonishingly short order, the ties that bound these functions came loose and business organizations reinvented themselves.
However, the financial gains that immediately followed outsourcing were short-lived for the simple and obvious reason that pay rises followed the outsourced goods, as did a lot of innovation. Here’s Apple CEO Tim Cook at the Fortune Global Forum in Guangzhou in early December 2023:
There's a confusion about China. The popular conception is that companies come to China because of low labor cost. I'm not sure what part of China they go to, but the truth is China stopped being the low-labor-cost country many years ago. And that is not the reason to come to China from a supply point of view. The reason is because of the skill, and the quantity of skill in one location and the type of skill it is.
The Enterprise Sale
The emergence at scale of mission-critical business arrangements between enterprises and outsourcing providers transformed the ways things were done. The outsourcing boom changed the very nature of the relationship between a supplier (i.e. an outsourced service provider) and its client (a customer organization). It changed it because, in the outsourcing relationship, the outsourced service provider quite literally became part of the client’s organization – an endogenous resource.
Think what this involves. There are planned meetings which, of necessity, discuss the plans and aspirations of the client company ...
Client: “Well, over the next two years we think it would be good to achieve X ....”
Outsourcer: “Interesting. What’s your thinking? How far have you got with any plans?”
And ad hoc conversational opportunities can be initiated by either party.
Outsourcer ...
“You know you were talking about X. Would it help if we ....?”
Or Client:
“You know we were talking about our plan for X. Seems to me we need some sort of (solution). Could you help with that?”
Alongside the explosion of outsourcing deals and strategic alliances a new kind of sale evolved, The Enterprise Sale, identified, designed and defined by Neil Rackham and John DeVincentis3:
Image: from Rethinking the Sales Force by Rackham and De Vincentis.
The Enterprise Sale recognized the newly evolved Customer-Supplier relationship but, initially, because of the time and cost involved, it was conceived - and conceivable - as being possible and cost-effective only in a business-to-business (B2B) relationship. However, new technological developments - including, for example, apps - made the Enterprise Sale increasingly practical for business-to-consumer (B2C) relationships. This represented a massive shift at the Customer-Supplier Interface.
The Strategic Alliance
And finally in this trio of new capabilities, another phenomenon that took off in the ‘90s & ‘00s4 – the Strategic Alliance (an arrangement between two or more enterprises to collaboratively produce some agreed outcome). It is complementary to Outsourcing and a trailblazer of some of the features of today’s emerging customer relationships. Again, as with the Enterprise Sale, what once was viable only on the large-scale canvas of B2B work is now economic in small and one-to-one situations including B2C relationships.
The importance of the ‘90s & ‘00s experience is that it enabled management experts to clarify and classify the elements of a successful strategic alliance. Work by, among others, Robert Porter Lynch5 of The Association of Strategic Alliance Professionals defined the need for four ‘interrelated connective architectures’6: The bullets shown below are just a small sample of those that were defined; sufficient, I hope, to provide a flavor of this work.
Information Systems:
Put the Customer FIRST
Speed acceleration
Focus on wisdom and knowledge, not data
Strategic Alliances
Three-dimensional fit: Strategy; Chemistry; Operations
High level commitment with reciprocal relationships
Transformation and readjustment as market and competitive forces change
Co-creative Teams
Design breakthroughs
Differentials in thinking cause breakthroughs: ‘Synergy of compatible differences’
Breakthrough Teams must: build trust; thrive in midst of ambiguity; handle paradox
Individual Relationships
A ‘fast-time’ networked world is based upon alignment of: strategic vision; synergy of compatible differences; commitments to results
Key factors for success: organizational support; selection of champions to lead the charge; ability to handle ambiguity & uncertainty
Trust is essential for: speed of decision-making; elimination of duplication and non-value add; turning breakdowns into breakthroughs; innovation on co-creative teams
Much has happened since this work was done, as evidenced by the ubiquity of Lean and Agile in today’s business conversations, but much of the groundwork for the cause of Full-engagement Customer Centricity is articulated in the above points. It’s just that, when they were drafted, it was exclusively with large B2B applications in mind. The idea that these features might eventually be refined and extrapolated for small B2B and, even, B2C applications is more recent.
So, there we have it: three of the transformational business techniques that evolved throughout G2 Step 2 - elements that contribute massively to EMPOWER THE FUTURE … and that have transformed the Customer-Supplier Interface.
There’s no doubt about it, the Notion of Customer has undergone a massive change. From here we can proceed, next, to G3.
Thanks for reading.
Adams, Douglas. The Hitchhiker’s Guide to the Galaxy (1978 onwards) - it started out as a radio series.
Lasch, Christopher. The Revolt of the Elites and the Betrayal of Democracy (1995). In this quote, Lasch references …
Sleeper, Jim. The Closest of Strangers and the Politics of Race in New York (1990)
Rackham, Neil & De Vincentis, John. Rethinking the Sales Force (1998)
I should perhaps qualify that statement by making the point that of course the strategic alliance has been with us for much longer: we know, for example, that the Phoenicians used alliances 2,500 years ago. My comment regarding the ‘90s & ‘00s relates to the specific form that the alliance took in this recent iteration.
In 1999, Robert Porter Lynch was a founder of the Association of Strategic Alliance Professionals (ASAP) and, today, is its emeritus chairman.
The Warren Company, Providence, Rhode Island. The Dynamics of Strategic Alliances and the Emerging Networked Enterprise (Presentation, 1999)