"We're all the same. Buy our product."
Part 2 exploring the New Business model of the 21st century. Part 1 was Self-Righteousness: the bold new Sales technique! In Part 2, I take a look at the convergence of ... well ... everything!
Often, I write in order to find out what I think - what I really think. The process is the thing itself, forcing me to analyze a topic and try to reach a conclusion. Sometimes an emerging conclusion can be startling - “Bloody hell, is that really what I think?” Such is the case in this instance.
The conclusion startling me right now is that, although I suspect most of us would say that digital tech has enabled and promoted a huge variety and proliferation of work activity … it has also had the effect of homogenizing everything, eliminating difference and competitive edge in the process and, not infrequently, promoting a top-down tyranny capable of killing off much of the human potential in any enterprise. All of which might help explain why the search for ‘difference’ or ‘competitive edge’ has had to go to extremes.
Let me explain …
‘New’ Business
Twenty-first century Business is fundamentally different from earlier forms of commercial venturing.
From the Industrial Revolution to the end of the 20th century Business went through several evolutionary phases, but they were all built around a common set of factors, key among which were:
A focus on Products and/or Services as the core rationale for the existence of an enterprise …
… which led to Production and Finance establishing themselves as the ‘boss functions’ of a business …
… with Sales volume as a key success measure …
… and profit and shareholder returns as ultimate outcomes.
Today, something different is emerging and the key success factors seem to be:
A focus on conformity to Approved Social & Political Opinions (ASPOs) …
… leading to the dominance of the HR and Marketing functions (HR via, for example, E.S.G activities, and Marketing via social and political signalling) …
… with Second-order Approvals (that is, “not directly observing something, but rather observing it as it is observed by someone else”1) as a key success measure …
… and with profit and continuing access to finance (for which the gatekeepers are those who decide upon and oversee the ASPOs!) as ultimate outcomes.
Why and why now?
Perhaps counter-intuitively it all stems from success. Here are some of the key points as I see them:
Technology
As ever, a breakout technology (‘digital’ in this instance) led the change (for the rationale, see, for example, this earlier post). In pre-digital times, the ability to manufacture marketable goods, and the level of quality in any instance, depended upon knowledge developed and held on a local, often individual company, basis.
This meant that, until recently, companies had literally to be built from scratch. Not just in terms of bricks and mortar, but also their systems and processes, and pretty much everything else apart from the paper clips. (“Paper clips?”, you may well ask.)
Digital technology changed all this: the availability of ever more sophisticated hardware and software meant that there was increasingly little point in companies reinventing everything. Throughout the 1980s and 1990s, businesses learned that Enterprise Resource Planning (ERP) solutions, although often over-engineered for any individual application, were a good option. The take-up meant that the enterprise software companies were able to imagine and realize ever more comprehensive solutions - including a vision of entire business suites that could be provided ‘out of the box’.
In the early 2010s, I was a member of a team on a transformation project for a leading telecommunications company - the update of its entire core technology stack. I witnessed my first ever out of the box solution. It was a game-changer: the ability to provide the core technology set for a complete, specific application. It cleared the way for the law firm out of the box, say, or the retailer out of the box; the automobile manufacturer out of the box or, as in my example, the telecommunications company out of the box.
In summary, the NEW TECHNOLOGY supports:
MORE standardization and reliability of design, manufacturing and all other business processes
MORE top-down control of all functions, regardless of geography
MORE Command & Control overall. Around the millennium, I recall tech developers and consultants saying that their efforts marked an end to ‘Command & Control’ so that ‘Empower & Enable’ could flourish. This was an entirely false claim! Digital tech brought with it much more Control … and it’s Control that leads directly to today’s much-discussed disengagement of people - employees and customers.
LESS required proximity of all corporate elements
LESS tolerance of nuance and individual variations
LESS requirement for communications other than direct orders
So an enterprise became a very different animal …
Organization
Before the digital era global operations as we now experience them were impossible, and international operations were managed on a country or regional basis. Early in my career I worked in sales and marketing roles in the United Kingdom for Procter & Gamble and then for Hertz Corporation. In both instances we had a high degree of autonomy over our marketing. Yes, we followed brand rules and general approaches but there was significant leeway when it came to specific messaging and activities. The point was, we knew our culture and our audiences, we knew and understood the segments, and so were best situated to tune the messaging. Consequently, we were trusted to do so.
In the latter decades of the 20th century, however, the burgeoning possibilities of digital tech to enable increasingly global operations were seized upon. As I understand it, the World Economic Forum, founded in 1971, was actually created to capitalize upon this situation and it was supported, knowingly or not, by all of the participants in the Great Outsourcing (GO) that took place from the 1980s onward.
The GO movement was based upon the premise that businesses could and should become ‘exoskeletal’: all that was required inside a business, the argument went, was its brain; all other ‘organs and bones’ could be distributed externally, around the globe.
Digitally-underpinned globalization enabled and encouraged new activities, but at significant cost. Right across the board, it involved greater control by management. There were new rules to follow, new protocols, new governance. And all supported by new automatic measurement systems to ensure that everything was done exactly as prescribed.
In addition, some newly empowered activities, although commercially innovative, proved to be morally ambivalent. A simple example serves to make the point. From the late-20th century, food retailers invented Permanent Summer Time (PST). Yes, just as “It’s Five O’ Clock Somewhere”, it’s Summertime Somewhere, so wouldn’t it be a great business booster, food retailers argued, if we could have fresh strawberries and avocados and melons and more all year round? The primary justification for this was that it provided better consumer choice, but also, the retailers pointed out, it created jobs in the sourcing countries. HOWEVER, hat they were less voluble about was the fact that it often also led to land use change in the sourcing countries and generated billions of carbon-producing food miles. (I’ll expand on this in Part 3.)
So, in summary, the ORGANIZATION changes support:
MORE, and broader, distribution of commercial activity, generating more strategic alliances, but also more isolation between between parts of a business
MORE Command & Control from the ‘brain’ to other parts of the body-corporate, to manage the distributed elements efficiently
MORE power to, and reliance upon, the ‘soft’ functions of HR and Marketing (the old boss-functions are now so rigidly and reliably governed that no flexibility can be permitted there!)
LESS direct communication between different parts of the organization, including, effectively, zero informal communication between separated units and between ‘classes’ of worker … which is to say, the old concept of an enterprise as an iterative, interactive community had been discarded - which inevitably leads to the people in a business being less able to trust each other.
LESS power to question or deviate from centrally-decreed approaches. All resulting, ultimately, in …
LESS differentiation between competing enterprises
Differentiation
Let’s pick up on that last bullet … LESS differentiation between competing enterprises … or, to be more precise, less differentiation between all of the core activities and peripheral services that competing enterprises deploy.
In a nutshell, this means that everything is converging! Which, in turn, means that enterprises need to look elsewhere for their distinctiveness. But where can they turn?
Current evidence points to the fact that they are resorting to factors that are completely external to the enterprise. I emphasize completely to differentiate current behavior from the previously established Value in Outcome approach (about which, more in Part 3).
Before I elaborate on this, permit me a quick diversion because there is an exception to the rule. As I see it, the world now features two types of enterprise:
Entrepreneurs, the True Innovators
Ongoing Businesses
The mega-convergence issues apply to the latter - the Ongoing Businesses. To understand the distinction between the two types let’s first consider the exception to the rules that I have sketched above.
The Entrepreneurs, the True Innovators
There is an exception to all of the above. Just one, I think. It stems from the fact that, if the above argument is valid, all established enterprises must progressively converge on a small number of common operating models. If they all access the same technological systems and standards for design, manufacturing, logistics and so on, this convergence must occur. Which is to say that, within any specific market, they must all become more and more alike.
The exception is what we might term the Entrepreneur or True Innovator. The True Innovator sees an opportunity and focuses on it. Actually, more typically, True Innovators don’t just focus - they obsess. Steve Jobs was such a person. Here’s Walter Isaacson writing about him:
Caring deeply about what customers want is much different from continually asking them what they want; it requires intuition and instinct about desires that have not yet formed. “Our task is to read things that are not yet on the page,” Jobs explained. Instead of relying on market research, he honed his version of empathy - an intimate intuition about the desires of his customers.
Or, consider the pioneers of powered flight which became a reality on 17th December 1903 at Kitty Hawk, North Carolina, when the Wright brothers’ Flyer flew a distance of 260 metres. The flight lasted just 59 seconds but it was the result of four years of dedicated endeavour. The evidence is clear that Wilbur and Orville Wright were far more focused on the challenge they were tackling than on any business implications.
What I’m getting at might best be conveyed by reference to the pharmaceutical sector where there are both True Innovators and Ongoing Suppliers.
A True Innovator focuses on a specific therapeutic solution - a molecule, say, that will alleviate or cure some illness or condition. If the True Innovator succeeds, s/he has a period during which the discovery is protected by patent.
An Ongoing Supplier (the long-term business enterprise) focuses on the ongoing supply of pharmaceuticals once they are off patent - termed ‘generic’.
Will this principle apply more and more across all product and service categories? I think it might … except, perhaps, there may not be much of a ‘patent period’ in the big wide world. First mover advantage does give a break-out leader an edge, but it sure isn’t the big advantage that it once was! Why? Because our universal tech savviness now means that me-toos are empowered at phenomenal speed.
Think back to Steve Jobs and the Apple iPhone: it was a huge breakthrough. People had been reasonably content, up to that point, with their Nokia phones, but the iPhone changed everything. Then, however, it became an ongoing battle of relatively small differences between Apple and Samsung. Google then came on the scene and no doubt X and others won’t be far behind.
Okay, with the True Developer point made, what happens to all of the Ongoing Enterprises?
The Ongoing Enterprise Challenge
Okay, you’re an established Ongoing Enterprise: a manufacturer, a retailer, a service provider. You’re finding it ever harder to differentiate your enterprise from your competitor set because the technological resources available to you are at the same high levels throughout your industry, throughout the world.
So, how best to achieve meaningful differentiation? How best to gain a competitive edge?
Well, first, let’s just draw attention to what Ongoing Enterprises are actually doing. They are increasingly trying to ‘push the envelope’, so to speak, and differentiate themselves by reference to societal and political causes.
For example, in 2022, the then-ceo of Unilever, Alan Jope, referencing their Hellmann’s Mayonnaise brand said: “Fighting against food waste - that is the purpose of Hellmann’s.”2 But, although they have long-since talked about eliminating the un-recyclable single-use sachets that they create (not only for Hellmann’s products but for a whole range of other items) by the many, many millions, they have not delivered on that promise3. Then there are the coffee shop chains that signal support for transgender issues. And Proctor & Gamble, my alma mater, promotes an entirely social change in India in its “Share the Load” campaign4.
I’m not suggesting that all of these messages are wrong. What I am questioning is their sustainability within a business setting. Where does it all lead? In a few years’ time will people be choosing their supermarkets, or any other purchase options, primarily on the basis of political opinion? “I’d love to get Product X but I obviously can’t buy anything from that awful supplier!” And, from the enterprise’s point of view, “If you’re trans-critical, you’re a bigot and not welcome in our stores.” (Oops, that’s a real example from the coo of UK DIY chain, Wickes.)
Logically, in this world of ASPOs, this trend must surely also mean that employment decisions, by both a company and its employees, will be made on the basis of alignment with a company’s societal and political views rather than anything to do with what the company actually markets or with the skills required to fulfill specific roles? And how will that help the enterprise in the long-term?
Next time, in Part 3, I’ll dig deeper into the Customer Value issue but, for now, perhaps you might ponder this …
In the past few years, thanks to new technology, companies have been able to effect cost savings by outsourcing various functions. They’ve probably felt confident about doing it because the same technologies give tremendous control over what goes on, whether it’s across the office or across the world.
But here’s something to think about. What have these control functions done to the trust within businesses? Doesn’t control actually inhibit people from trusting each other? Is this perhaps a source of the oft-quoted problem of employee and customer disengagement? If so, is there a means to rectify the situation?
The answer to that last question is “Yes!” More coming up in Part 3 of this series.
If you have been, thank you for reading.
Moeller Hans-Georg & D’Ambrosio, Paul J. Sincerity, authenticity and profilicity: Notes on the problem, a vocabulary and a history of identity. Philosophy and Social Criticism 2019, Vol. 45(5) 575–596
https://www.ft.com/content/8feb8f98-c6d9-4288-9ce8-9e68be621a60
Lawson, Dominic. Unilever’s bleach won’t clean its Russia stain. The Sunday Times (22 August 2023)
https://youtube.com/watch?v=DA64FF7MR58