The Ideas Era
Part 1, over the threshold
Context drivers
I don’t follow Formula 1 auto racing though I admire the precision teamwork of pitstops. But even I paid attention when, on October 11, 2020, Lewis Hamilton equaled Michael Schumacher’s 91 career F1 victories. Predictably a debate ensued over which of the two was the greatest of all time. The answer is Juan Manuel Fangio. Schumacher and Hamilton placed fifth and sixth respectively and unaccustomedly, at least according to a mathematical model devised by The Economist.
Of course, I said, it’s the Ideas Era at it again!
This post is the first in a series of about the Ideas Era. I apologize in advance for the chronology you’ll get to in a bit. But I want to demonstrate that in the last 40 years we have, like the bride of tradition, been carried across the threshold into a new über context.
We’ve all noticed changes, either because we lived through them, or we’ve lived through dinners with grandparents. But we grapple with them – not your gran, the changes - without grasping what’s behind them because context rolls on, unbidden, unwonted, probably unnoticed, and certainly unnamed. (Until today as I step boldly into history’s spotlight with a modest proposal. But that can wait. Back to F1 helping me demonstrate the change.)
Crucially the Economist’s mathematical model “splits credit between drivers and their vehicles” to allow for improvements in cars since 1950 when F1 racing and Fangio started. (He raced until 1958.)
The model demonstrates how surreptitious even dramatic contextual change can be. The drivers still top the bill in the public’s mind but:
…the impact of cars relative to drivers has grown over time. On average, it (the mathematical model) assigns drivers in the 1950s 58% of their teams’ points; today, that share is 19%. Fangio, who was a mechanic by training and won titles using cars from four different firms, was known as “the master”. The masters of modern F1 are engineers who sit behind laptops, not steering wheels.1
In the space of one lifetime F1’s competitive edge shifted from the driver to the team of specialists needed to produce and service the car.
In this regard F1 is not unique. In fact it’s universal. As I mentioned in Elon, Run Your Business Like a Government :
In the industrial era great managers knew what they wanted and how to get it. In the Ideas Era they get what they will want when someone shows them. They follow leaders. That’s the best they can do because of the 3Vs of information, the first two – volume and velocity - in particular.
A time whose idea has come
The first green shoots of the Ideas Era are already evident in the 1990s.
In 1980, a company called Create Surveys asked managers to identify the top 5 skills of managers in order of descending importance. They said:
problem solving
flair
originality
entrepreneurial talent
strategic thinking
These are the skills of the manager with a firm grip.
In 1996 Create asked managers the same question and they responded:
ability to inspire trust
visioning
listening abilities
strategic thinking
communication abilities.
These are all collaborative skills. The most revealing is listening. The bosses of the 80’s expected employees to be the good listeners. Somewhere on the way to 1996 communication’s polarity reversed and the ideal boss went from the firm hand at the helm of a tightly drilled organization to the conductor of an orchestra.
I have no idea how rigorous Create Survey’s technique is, so I won’t say the results are definitive, but they are indicative. They furnish a before and after picture of a contextual change so obvious even we managers noticed - like lizards warming in the sun - because we saw what worked not because we understood why.
I don’t suggest the survey represents what managers were actually doing in 1980 and 1996.2 They represent what mangers thought they ought to be doing.
Drucker calls the toss
Ten years later, in 2006, The Economist would describe the effect the new era had on staff:
Organization man…was cautious about networking…knowledge was power…Networked person…takes decisions all the time, guided by the knowledge base she has access to, the corporate culture she has embraced, and the colleagues with whom she is constantly communicating.
Of course, management and staff were changing because firms were changing. Peter Drucker had already put his finger on it in a 2001 essay entitled “Will the Corporation Survive?”
He listed five characteristics of the traditional firm, including:
The corporation owns the means of production, so it is the “master”, the employee is the “servant”.
Vertical integration is the most efficient way to produce anything.
Any particular technology pertains to one industry only. For example, all technology needed to make steel is peculiar to the steel industry.
Drucker then says:
Every one of these assumptions… has been turned upside down,
The means of production is knowledge, which is owned by knowledge workers and is highly portable…
…the traditional axiom that an enterprise should aim for maximum integration has become almost entirely invalidated. One reason is that the knowledge needed for any activity has become highly specialised …(and) communications costs have come down so fast as to become insignificant.
Peter Drucker’s answer to his rhetorical question, “will the firm survive?”, was yes, by outsourcing down to core expertise and forming “confederations” with other expert firms. Or, as he’d been saying all along, “Do what you do best and outsource the rest.”
Outsorcery
We’re now familiar with the perils of outsourcing as supply chain problems shifted manufacturers from “just in time” to “just in case”. Outsourcing became a fad corporate diet. Immoderation, not the diet per se, was the problem.
But supply anxiety wasn’t the only factor rewinding outsourcing. It is a child of the Information Era and the forces Drucker cited for outsourcing are now requiring outsourcers to be more selective.
In 2009, when he was still minding the Apple stand for an ailing Steve Jobs, Tim Cook enunciated what has since become known as The Cook Doctrine.
Three of the key things Apple needed to do, according to Cook, were:
“own and control the primary technologies behind (its) products...”,
“(say) no to thousands of projects so that we can really focus on the few that are truly important and meaningful to us” and
“cross-pollinate” in order to innovate.
Though cross pollination in corporate setting would mystify industrial era tycoons, they would immediately recognize Cook’s determination to “own and control” as vertical integration and command and control.
Why would the head of one of the World’s most advanced companies spout such unfashionable notions?
Or was Drucker wrong? No, for one thing, much of what Drucker said was prescient and, for another, outsourcing thrives.
More importantly for our purposes, Drucker was writing the obituary of the Information Age and Cook the birth announcement of the Ideas Era.
The Ideas Era
In the Ideas Era, building and controlling core technologies and relationships has increased in value more than buying components and services have lowered costs. There are more instances where many minds exchanging expertise and ideas produce more competitive results than one mind. If proof is required, compare the contribution to value made by the lunchroom of a 21st century office with the cafeteria in a 1930s auto plant.
This is because the Ideas Era has three core characteristics:
More is available in the market, more readily, for less and more of it is intangible.
Collective knowledge is expanding, probably exponentially, and so each person and organization’s share of it is shrinking proportionally.
Information is widely and unevenly distributed horizontally, directly among individuals, so the proportion of available information handed down by accountable authorities such as managers, media outlets, and political leaders is declining.
The first is common to the Industrial, Information, and Ideas Eras. The difference between them, though substantial, is purely volumetric. Similarly, the first two characteristics are common to both the Industrial and Information Eras. Only the third is new and that is the how and why Drucker’s advice to outsource down to your core and Cook’s advice to own and control still fit nicely together.
The Ideas Era demands a bigger core.
To be continued…
The Ideas Era 2 explains why organizations are outsourcing and girthing up at the same time because the Ideas Era has affected how we organize, lead, and manage. Suffice to say for now that our problem is that very little of the advice on what to do is connected to why to do it.
But in The Ideas Era 2 I’ll pause to explain why I’m calling it the Ideas Era.
The Economist Oct 17th, 2020, Engineers, Not Racers, Are the True Drivers Of Success In Motor Sport https://www.economist.com/graphic-detail/2020/10/17/engineers-not-racers-are-the-true-drivers-of-success-in-motor-sport
Even in the Dark Ages of 1980 people who studied managers knew there was more to the job than shouting orders. In 1973 Henry Mintzberg The Nature of Managerial Work identified ten roles played by managers: figurehead, leader, liaison, monitor, disseminator, spokesman, entrepreneur, disturbance handler, resource allocator, and negotiator.