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One of the most important lessons from this year’s World Business Forum in NY, is the need to update our business models for the 21^st century. Believe it or not, most of today’s business models are based on how the military and large industrial companies were managed over 100 years ago.  Gary Hamel’s presentation, in my opinion, was brilliant in presenting why we need new models and what they might look like and how to get there. The best quote I jotted down was “How do we build an organization that can change as fast as change itself?”

Don’t worry; you don’t need a degree in calculus to get the jest of this post.  But when you’ve finished reading it, you will understand the point.  In the graph above, the red line is linear, the blue cubed, and the green exponential.  Image the vertical axis is the rate of change, and the horizontal one time.  The point being that as time progresses, the change we see in our lives, society, technology, etc is increasing at an increasing rate.  A couple hundred years ago, change was very linear and much slower.  Now we are in a time of exponential change, where many of the new technologies and new insights allow things to change on the fly.  In other words, the reality of rapid change is already built in.  Think about the iPhone, even if you purchased the first model, you still get many of the great upgrades because they put new features in the software instead of the hardware. The question then becomes, are today’s business models equipped for such a world.  My answer is a resounding NO!  The good news is, we can get there fairly quickly.

Even the military recognized the need for a new model.  Commander’s Intent, or Miliary 2.0 Thinking involves the realization that there is great value in today’s soldiers’ ability to see and thus communicate things that their leaders cannot.  Thus today’s soldiers often operate under the Commander’s Intent as a guiding concept rather than absolute orders.¹

The primary goal of large-scale manufacturing companies during the industrial revolution was to get people to do the same job day in and day out without complaining while paying the least amount possible in wages.  The great production innovations created millions of un-fulfilling jobs.   In 1913, the year of the first moving assembly, large groups of workers at Ford began to leave with turnover peaking at 380%.  Ford finally ended up offering workers $5 per day (twice the minimum wage) and reduced the workday from 9 to 8 hours.  Thus the traditional relationship between employer and employee was born, dictating that employees would do as they were told by their superiors in return for more money and time off.² It was a trade most were willing to make because they desperately wanted a better quality of life.  It solved the issue it was aiming to resolve, but I would argue that it masked the root cause of an unfulfilling job.  This foundation still today, underlies many modern companies . . . and we wonder why so many workers, and even executives, are unhappy and dispassionate about their jobs.

The issues today’s companies face are quite different.  For starters, they want people to think, and collaborate, and innovate especially as we come out of this recession.  However, most companies are not aligned with any of those outcomes.  They are aligned with rule followers, and people who are afraid to even consider revolutionizing anything.   Sure, there are some industries, or departments, or companies that have figured out how to promote creativity and passion in the workplace, but most have not.  Command and control methods of management won’t work in a world where people want to feel valued, care if the company they work for is a good steward of the earth, and want to be challenged and grow as human beings.  Fifty years ago, very few believed that kind of job was possible.  Today, most people know that they do exist and there are more examples every year of companies with enough courageous to challenge the status quo.  That courage will pay off and provide the first movers with a tremendous competitive advantage.

The rate of change that occurs today in society, technology, infrastructure, and knowledge is far greater than it was 200, 100, or even 50 years ago.  Traditional business models are very linear in nature, which generally worked in the past because for a long time the rate of change was relatively low.  You could decide on a business plan and it would work quite well for a decent amount of time.  When a crisis hit, it was time to try something new.  Today’s business models need to handle change occurring at an exponential rate.  The 21^st century requires a business model that is fed by change.  Where crisis will hit if you stop changing, updating, and improving, not when it’s too late.  This is where competitive advantages will be born in the near future.  Is your firm ready?

It is imperative to start challenging long held beliefs about how businesses can and should be managed.  It starts with a commitment to change and a willingness to be brutally honest with yourself and your team about what works and what doesn’t.  If you have those two things, you will be amazed at what you can create, and you will be even more amazed by what your team can create once you give them the freedom to succeed.

This is a tremendously exciting time in business, and the ones that are more creative, have the courage to challenge old beliefs, and want to have a bit of fun along the way will WIN.

1  Smartsourcing by Tom Koulopoulos

2 The Support Economy by Shoshana Zuboff and James Maxmin

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