Saturday, August 06, 2005

Two types of change

While reading one emotional overview of the trends in the ICT market, it dawned on me that the constant change everyone keeps to be talking about for the past few decades is not monolithic.

There are two distinct components in it.

  • One is the squabble between the competitors in the global marketplace. The outsourcing, the competitive threat from emerging markets of China and India, the need to serve the needs of diverse international customers. This kind of stuff. You can no longer be safe, no matter what your business is, and you need to change. But at the core this is essentially a pointless zero-sum game that noone really benefits from. When Walmart forces you to squeeze out every penny from your suppliers, the economy overall suffers (or gains only marginally). When Procter & Gamble introduces another "NEW!!!" shampoo, customers' lives don't really change. Yes, the market economy causes everyone to strive for perfection, but the difference between perfect and the "good enough" is not really worth it.
  • Much more important are the constant technological improvements - the never-ending unstoppable progress of science and technology. This is what makes our lives today so much better than 100 years ago, not competition between global oligopolies. This change benefits not the competition, but from cooperation. Incidentally, this is what will bring us the Singularity and other transhumanist goodness. It doesn't really matter who makes the mobile phone handsets - Nokia or one of its new Chinese rivals, what matters is that overall tehcnologies improve and make better products possible, regardless of who is in charge.
The potential of business innovations isn't zero, but it is often overestimated. Yes, you probably can shave off a few percentage points from your costs using outsourcing, an ISO 9001 quality program, new staff motivation technique, management training in change management or some other snake oil of the day. This may even help you beat your archrival (or, more likely, maintain the status quo). But it will all be forgotten in a decade. The real, long lasting changes and qualitative orders-of-magnitude improvements come from changes in underlying technologies, not business techniques.

2 comments:

Matthew Cornell said...

I think the constant growth that capitalism seems to require drives the need for constant change - e.g., your 'new' old product. What a waste! I suppose that it works, because most of us seem to be impressed with sparkly baubles - "Ooh - this bottle of shampoo is purple so it must be better!" This also manifests in the form of the material possessions trap, which we don't hear much of anymore - 1) feel unhappy/dissattisfied/etc., 2) go shopping to satisfy 1), 3) buy something (advertising says it will cure your ills), 4) be diverted for a short time, 5) repeat. Possibly related is the fact that much of this consuption cycle is enabled by cheap oil, and the resulting availability of inexpensive products from far away...

matt

Danila said...

You are absolutely right. What is weird is that some people seriously believe that this sort of innovation is important and valuable. I tried reading Funky Business yesterday (fortunately I got it off P2P and didn't pay for it) and the authors make a sincere claim that the prevalence of McDonald's, Starbucks and Nice is an indicator of them being very innovative and something to be copied and emulated by others.