Org. Champion Webcast 014 - Your Company's Problems Could be Bigger Than the Economic Downturn
Deloitte has a brand new report called The Shift Index, and today we are going to talk about why you need to know about it.
Why the report was written:
From the Executive Summary - Paraphrased
- The Winners are barely winning while the Losers are losing big time
- Companies are losing their key leadership at twice the rate companies were in 1965
- Competition has more than doubled in the last 40 years
- While the performance of U.S. firms is deteriorating, the creative class of worker is seeing greater growth in pay than any other class of worker
- Customers have more information and are less loyal to brands
- Computer and Internet access costs have plummeted and the world is adopting this technology at a 5 times greater rate than past technologies such as electricity and telephone networks...
What is the Shift?
Deloitte took a look at Return on Assets (ROA) and saw a very disturbing trend. Despite the fact that American companies were making modest but solid gains in efficiency when compared to the mid 1960s, we are getting only 1/4 the return on our investment in assets. What could be causing that?
- There are three major shifts occurring simultaneously
- Foundational Shift - Nearly ubiquitous Computer/Communications/Internet access
- Flow Shift - Access to information and wider access to networks has sped up the flow of information to nearly instantaneous. All the stakeholders have information they didn't just a few years ago.
- Impact - This area talks about the negative effects that companies are currently experiencing. This area also speaks to the opportunity that is out there for the creative company that can execute in a new economy.
Let's hone in on the Flow Index. The Flow index talks about what is flowing because of the nearly ubiquitous access to the Internet and wider social networks.
- Inter-Firm Knowledge
- Wireless Activity
- Internet Activity
- Migration of People to Creative Cities
- Travel Volume
- Movement of Capital
- Worker Passion
- Social Media Activity
Who is making the most in this shift?
US companies are generating fewer and fewer tangible products. There is a shift of power from the working class to a new class called the Creative class.
- Super-Creative Core - Computer science and mathematics; architecture and engineering; life, physical and social sciences; education, training, and library management; and arts design, entertainment, sports and media studies.
- Creative - Management; business and financial operations; law; healthcare and technical fields; high-end sales and sales management.
Other Workforce Class
- Working - Construction and extraction; installation, maintenance, and repair; production; and transportation and material moving.
- Service - Healthcare support; food services; building and ground cleaning and maintenance; personal care and service; low-end sales and related areas; office and administrative support; and community and social services.
- Agriculture - Farming, fishing, forestry
Why is this important?
This marks major disruption occurring in the market right now. When there are disruptions, there are opportunities. When everyone is running for the hills, doing the best to protect eroding markets, champions see opportunities to change the game. Right now there is a growing divide between our realized performance and our potential performance.
- Consumers have low switching costs in adopting new technology and seem to have an insatiable appetite for finding new ways to connect and gather information.
- Companies conversely, are driven by efficiency and systems that ensure greatest return. These systems do not die easily, and thus companies are agonizingly slow to adopt new technology opportunities. Consumers and stakeholders are beating them to the punch, and companies are paying the price.
What are companies to do?
At the turn of the century, we were experiencing the industrial revolution... The most iconic representation of that shift was Henry Ford who looked at the way cars were being manufactured and said there has to be a better way. He invented the assembly line. The assembly line worked because it built greater and greater efficiency into the manufacture of cars. We have squeezed every last penny out of that model, and there is now so much competition, there is little to be made by becoming more efficient than we are.
Companies must shift from scalable efficiency to scalable learning. Our stakeholders and customers are learning more and more everyday, we as leaders of our companies need to invent, reward, and allow learning to happen across the whole organization.
If a company is going to thrive during this Economic shift, everyone in the organization has to be a learner, and we need to be listening to everyone in the organization as a source of learning. Learning can no longer be the exclusive role of the creative elites in your company. The company that will replace yours will be the one that is listening to the guy that pushes the broom around the floor after hours.
Mike where can people get a hold of you?