Conference keynote speakers and innovation videos elevate heart rates with statistics about the rate of change. One common stat references the number of companies falling off the S&P 500, with headlines such as, “Why Half of the S&P 500 Companies Will Be Replaced in the Next Decade” and “2018 Corporate Longevity Forecast: Creative Destruction Is Accelerating.”
Given how young such businesses are, historically speaking, I find this angle interesting.
Corporations — the basic economic unit on which today’s major markets operate — appeared only in the last two hundred years or so.1 Management as a developed function that reaches beyond accounting into strategy, organizational theory, and new fields of innovation didn’t begin to develop until the mid 1900s, under the influence of GM’s Alfred Sloan.
Running a sophisticated business is a new undertaking in the scope of human history. It’s as though fire were discovered just last year, and we’re now figuring out all its applications. We’re new to learning how to organize massive amounts of human creativity into aligned entities called corporations. And that’s great news: We’re doing so much. And yet we can do much more.
Think of it this way: Why wouldn’t the makeup of the S&P 500 change faster as we learn to work together more effectively? When it comes to the mechanics of running a business, change should be the status quo — not just in our markets or our products but in our processes, our technological makeup, our ability to learn, and in how we organize.
What will the business of the future look like? Forward-looking leaders ask broad questions about the social, market, and technological implications:
- What’s the role of a business in society?
- In what novel ways, powered by new technology, will people organize into workforces?
- How will humans interact with artificial intelligence and robots?
- How will government and regulators adapt to these new organizing and technological forces?
Change cycles are a constant
Whatever the businesses of 2050 will look like, we know how we’ll get there. Change occurs through cycles of evolution. Creative destruction pulls things apart, and then aggregators reassemble the parts in new ways.
There’s a law of nature at work here: Disassembly leads to new forms of creation. The beautiful aspect of this law is humans don’t keep things disassembled. We seem driven to create, to rebuild organizations and refashion industries in improved forms.
What if everything is a small “bit” — an item beckoning to be reorganized?
In this context of creative destruction and reassembly, new technologies empower us to break down any organized “thing” into ever-smaller pieces, and reorganize the result.
Mobile phones enable us to transform into individual car drivers or grocery deliverers. Fractional mortgage models mean a house can be broken into rooms for ownership. Reorganized data networks mean I can rent part of my computer storage to crypto miners, and rent the unused portion of my home IoT devices to transfer someone else’s data.
Everything is a bit waiting to be reorganized in inventive ways. And to every new bit we create, we can attach data and assign financial value. What does this fractionalization of everything mean for businesses?
As much as technology enables disassembly, it’s integral to aggregation. Regardless of how small things are, or how much we can decentralize, we can expect there will always be aggregators. One reason is people like simplicity and will popularize a few market leaders. Certainly another is the existence of market forces such as the network effect.
I believe another reason the model of large organizations endures is that when humans come together, our combined, organized creativity is powerful. I suspect technology will continue to help us evolve so we work in nimble, learning organizations in ways that founders of the original S&P 500 never could have imagined.
Understanding that everything is a bit enables countless possibilities. Pulling things apart and bringing them back together in new formulations lets a business reimagine the customer experience, reinvent itself, and redefine its industry. Every business in every sector has an opportunity to initiate this cycle.
Examine your business for what is ripe for new ways to provide value. If you understand the market factors, customer needs, and emerging technologies, you can pull things apart and reassemble them — better than ever before.
1. “What the Founding Fathers Really Thought About Corporations,” by Justin Fox, April 1, 2010, hbr.org.