Reflections on what might have been
You know how it is; you’re wondering what you’re going to write about this month and then three ideas come along at once. I was inspired to open the blank document by an old friend, Professor Lynn Martin at Manchester Metropolitan University Centre for Enterprise who was looking for ideas and thoughts on encouraging growth. I was further motivated to get ideas on paper by a well publicised blog by Graham Jones, MP for Haslingden and Hyndburn, who had let rip a swyngeing attack on Lancashire County Council for the way in which they were spending 40.11 million euros on superfast broadband while identifying few business benefits. Then I read the Institute for the Future’s post on the outcome of their 2012 retreat where they looked at the “Two Curve problem” where we make our strategy decisions based on where we are, not on where we are going.
So, let’s think about growth!
How to generate growth for a business, for a town, for a region for a whole national economy? There is a lot of nonsense talked about growth and that’s because it’s become the stuff of policy geeks, politicians and sound bites. “Projects will not be authorized unless they contribute to growth”; “Funding will only be allocated to those projects that contribute to growth”. It has become the watchword for gatekeepers everywhere and yet I doubt any one of them knows what it means.
“Growth refers to an increase in some quantity over time” Wikipedia
The old models for growth have not served us well; growth by acquisition achieved by leveraging cheap credit has profited the few at the expense of the many. Growth through promoting shareholder value, maximizing returns on investment by cutting costs and compromising innovation has brought companies to the brink of disaster, witness General Motors. So what do we mean by growth? Do we mean an increase in revenue or do we mean an increase in employment? Do we simply mean an increase in turnover? As a business it would be my aim to increase revenue, which would mean increasing turnover but not at the risk of increasing costs, which would mean not by increasing my employment costs. One of the myths abroad is that business exists for the wider benefit of society: it does not, it exists for the benefit of itself so what do we mean by growth? How can I grow my business?
There are, what I call, the three business benefits: You can do things faster, you can do things better or you can do new things. By doing things faster I can do more, I can respond more quickly than the competition, I can add value by turning around commissions in a shorter space of time with the same or with improved quality. In this way I can increase turnover. I can do things better; I can do more things on line so reducing the time and cost of travel, I can make it more convenient for my clients to contact me 24/7/365, I can provide a better product at no additional cost by improving my own processes. In this way I can increase turnover. I can do new things: by understanding the commercial environment in which I operate I can generate new services and new products; I can leverage the delivery opportunities in order to customise my services and tailor them for each individual client; not just build a better mousetrap but build your better mousetrap.
The problem with this approach is that it builds on what is, it doesn’t prepare for where we are going and our strategy for growth should consider the way in which the world is changing. In April the Institute for the Future held its annual retreat and it picked up on an idea established in the late 20th century of the two curve problem. Curve one is as I have just described where I know my commercial environment and I have “ideas” of how I might exploit it; which is no guarantee of success but it’s where I can make a start. IFTF take a different stance in which they describe curve two, a new environment which is changing:
I see these trends arising from the connected nature of the modern environment. One of the impacts of always on communications has been the ability to make the most of the distributed supply chain and just in time delivery. Whereas once the raw materials, the expertise, the labour and the control mechanisms all had to be brought together in one location the “parts” of the process can exist independently of each other. The coal does not have to exist next to the steel works. The order processing does not have to exist in the same city. The sales enquiry team does not have to exist in the same country. I do not have to be employed by the company which makes the product or commute to work by 8:00 in the morning.
What the next generation of communications technology will do is take that distributed supply chain and remove the linearity, just in time will become “now”. Not all processes will have to be time based any more than they will have to be location based; we will do things “now” because now is a good time and the location is irrelevant. Yes, the steel ore will have to be at the plant before the steel can be cast but we won’t wait a week for delivery because it was ordered to be here now because the processing happened in real time and if discussion was needed it took place now, because an appointment wasn’t needed and nobody had to travel and no space had to be arranged.
If we are to have growth and from that growth generate enough surplus revenue to create employment we need to understand the impact of true time and location independence on the supply chain. It is no good creating businesses that operate as if this were the late 20th Century when we moved thousands of people each day to generate growth by doing something called knowledge working where computer processes overlaid manufacturing processes that hadn’t changed since the industrial revolution. We can’t all live at the top of the value chain and the value chain no longer has its pinnacle in the Western economies. It’s time for a change in approach which recognises that the world today is not the work of the 19th century industrialists and that “growth” will not happen because our politicians say that it must. Creating the conditions for growth demands a truly democratised approach to the generation of wealth in which the units of production can be brought together as needed and a recognition that growth arises from creating an ecosystem not from focusing on single traditional places.