At the Peter Drucker Forum 2013 John Hagel III argued that our business environment is becoming more complex. This complexity is increasing over time and demands very different approaches in order to sustain success.
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Due to the constant increase in complexity in recent times, it is necessary for executives to expand their focus on innovation and in particular need to include institutional innovation into their thinking. This includes re-thinking our fundamental rationale and the rationale of our institutions as well as investigating the architecture of relationships required to support this evolving rationale.
Research on this matter was conducted at the Edge in Deloitte which asked the question of how the US was doing.
According to the research, the measure of performance between 1965 to today has been the return on assets, which declined by 70% during this period. There is currently no evidence that this constant decline will come to an end. On the contrary the economic development appears to be increasingly struggling to keep up, therefore we need to find a solution.
One level of innovation which is not talked about sufficiently is institutional innovation. We need to ask why we have institutions. According to Coase our institutions are due to scalable efficiency. This was a compelling and accurate description 60 years ago but this is disappearing today. Some argue that we are becoming a society of independent contractors.
John Hagel III did not believe this, but thinks that we will work together in an increasingly free manner. In his opinion scalability and efficiencies take away the possibility to innovate. However, scalable learning should become the top priority in order to redesign the way we work for greater efficiencies. He further reminded the audience that however smart you may be in your company there are many far smarter people outside the organization. Li and Fung for example leverage the use of 15 000 business partners to develop their business. The rationale in the company is that thereby they learn faster.
And the need for Passion?
If we take scalable learning seriously, we need to develop a strong passion. Only 11% of the workforce in the US has developed this and 89% have not. This should be seen as a success, even though scalability crushes passion. In this sense we should remind ourselves that small moves, smartly made, can have a big impact.
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