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Ted G. Lewis, Ph. D. HarperBusiness, 1997 The Age of Revolution (1775 - 1814) was barely a spark of flint in 1776
when Adam Smith published the Wealth of Nations. His best-seller started
a conflagration no less important than the American Revolution which ignited
that same year. Now the intellectual grandfather of today's bean-counting
economic planners, Smith was a keen observer of his time - a kind of Alan
Greenspan without an adoring press. The Age of Revolution was the cauldron
of capitalism. The Wealth of Nations was its user's manual.
The stuff of revolution was all over the place. Borrowing on a good idea from Newcomen, James Watt cobbled together the first practical steam engine,
and in 1775 he formed a partnership with Boulton to manufacture and sell
the popular item. Watt may have been credited with scientific invention,
but his major contribution was to invent the engine of capitalism. So, there
is was - science and technology joining hand-in-hand with economics to forge
a new system - a new economic system which defined society for the next
200 years.
Capitalism was the theory, and steam provided the practical application.
In fact, the second half of the 1700's were fast times. Too fast for some
royalty. Not fast enough for the masses who, like Smith and Watt, were
impatient
to get on with it - the Industrial Revolution, that is. But, as Peter F.
Drucker says in Post Capitalism, even revolutions take time. In fact, according
to Drucker, they take about 50 years. And, nobody knows what is going on
until the revolution is over.
The second half of the 20th century is a lot like the late 1700s. There
is revolution everywhere and not much comprehension anywhere. The economics
of Adam Smith are gone. The economics of Maynard Keynes is going. The economics
of the software economy is coming. It is resetting economic theory for hi-tech
companies like Intel and IBM, and low-tech businesses like restaurants and
used car dealers, alike.
Drucker's Law still applies: the people in the midst of the revolution don't
know what is hitting them. And they won't know until after the IPO1 is over.
Like passengers in a speeding boat, spectators in the software age know
the river's current is swift, but they don't know where the raging falls
lie.
It may be too fast for royalty, but the software economy is on its way.
It may be a mystery to the establishment, but it is well understood by the
Netheads2 in Wired World3 . It may violate the doctrine handed down by
classical
economists, but it does follow a set of laws. It may be just in time.
The late 20th century marks the beginning of the end. Within the next 20
years we will discover the new laws of the software economy. We have early
warning signs - Netscape Communications Corp. parleyed 16 months of software
development work into an IPO valuation of $3 billion. Companies like Microsoft
and Adobe Systems which were unknown a decade ago are now the darlings of
the stock market, and the nouveau riche telecommunications industries like
3COM, Cisco Systems, and Bay Networks have turned from small-cap industries
into powerhouses of the new century.
There is something afoot. A new order is building which obeys a different set of rules. It forces FutureBusinesses to dance to a different tune. I
will hum a few bars for the inquiring reader:
Civilization is hooked on speed: Living in real time means things happen fast. Things like new industries and new ideas circle the globe in record time. Computer performance doubles every 18 months, products get cheaper and better, and people's jobs go away. The personal car, the personal computer, the VCR, and cellular telephones become like hoola hoops and pet rocks. In fact, the rise and fall of products, within a very short time becomes a requirement in the software age. The principles of the software economy depart from the past: Mainstreaming, Davidow's Law, the Market-of-One, the formation of joint ventures and partnerships among enemies, and a return to tribal agrarianism mark the new age. The tools of Futurebusinesses have changed: Learning curves, marketing models, targeting, product space disintegration, mergers and acquisitions, and business-as-war. The consequences are non-intuitive: Inverse economics in place of diminishing returns, volume pricing in place of premium pricing, narrowcasting in place of broadcasting, value-chain integration, and a return to a kind of retro agrarian tribalism which superimposes a 1700's social structure onto a 21st century technology.
In this new era, marketing is a game of strategy: a New Lanchester
Strategy that FutureBusinesses have copied.4 The New Lanchester Strategy
says that the game ends as soon as someone gets 74% market share. Leaders
emerge at 41%, and players are counted in when they achieve 27%. With less
than 27%, you don't count!
Ted Lewis, Ph. D. |
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