Cross Purposes

Short term prescription for disaster…


What is very interesting is that America with all of its emphasis on making big profits is doing everything it can to maximize profits over the short term only to burn out over the longer term..

The reason: Most big companies are not the source of their own innovation; they depend on others to move them to the next plateau. Innovation is always people inspired and it always comes from outside.

Let me explain via analogy: New York in the 60’s was the home of over two hundred Fortune 500 companies until a few of them decided that perhaps they could move to their own beautiful campus in a lush surburban landscape (usually within 10 minutes of the Chairman’s home).

It sounded great! The campuses were beautiful.

So, why didn’t it work?

First off, these companies lost their advantage: They were cut off from the kind of information that flashed around Manhattan; they lost their top level contacts and sub-contractors who didn’t want to travel an hour away from their home offices so they sent their underlings. In the end, many of these companies realized the error of their ways. They had failed to take into account what they might lose in terms of high level human contacts who had been responsible for helping to keep their companies moving forward and on top of the latest trends and technology.

A similar challenge faces these giant super companies who think that they are invulnerable from challenge and that they can keep their momentum going indefinitely.

But here’s the reality: Despite the fact that America is known for all its big businesses with mighty tentacles all over the world...the fact that virtually all innovation does not come from the big those big monolithic companies but those associated with the industry either at the University level or as a sub-contractor, a supplier, or others who understand or work in the same or similar technologies or who have a peripheral interest in making the technology better.

Change oftentimes evolves out of a witch’s brew of ingenuity and people who share a similar chemistry and interest. Take it away and the chances are that that company may continue on its merry way making things smaller, lighter and cheaper but they have whether willingly or otherwise severed the connections that precipitate real change that keeps an industry alive and burgeoning. In the end, change is legitimately the product of smart people exchanging ideas with smart people producing those synaptic connections that result in ideation that produces change and allows a company to move to the next plateau..

When a company becomes too big, it becomes too committed to maintaining the status quo and loses those maverick qualities that engender and precipitate change. The cultures evolve in different ways encouraging homogeneity over innovation and thinking outside the box.

For the most part, the so-called “big company” recognizes that to move forward it needs employees who are grounded in the company’s philosophy and culture; it does not know how to integrate Young Turks!...

Check it out you will see that all major innovations of the kind that explode the technology onto another level come from outside the industry per se. For example,the hybrid was not developed at GM; the pc was not the brainchild of the futurists at IBM.

Why is that?

Aside from being too close to their own businesses, for the most part, giant companies tend to become obsessed with their own ingenuity, brillance and hence become solipsistic unwilling to admit that perhaps somebody else can have a better idea.

At GM, the unwritten rule was “no surprises.” Each person on the Board saw all new ideas three times it was rumored. First, the idea had to be submitted; than a presentation was left with the members of the Board and, eventually, the members were again subjected to the idea which after three exposures, found most of them asleep.

GM was notorious for not listening to anyone who came to them with new ideas; they were so inbred, they couldn't see technology even if it was plunked down in front of their faces. They all went to the same Detroit design schools and all they knew was the automotive industry from the Detroit perspective.

Therefore, “no surprises,” translated into little innovation.

On the other hand, the Japanese, who had been laughed at for their little tin cars, came here with little to lose and listened to consumer. That was the difference.

Consider IBM.

When I was in the computer field, IBM was God, therefore, they thought ideas like pc's and graphical interfaces as soft minded and unworthy of the profundity of the 1401...

They also didn’t think they needed to take control of the Operating System or control the manufacture of the integrated chips that they depended upon.

About that time, came along a young man with no product. IBM went to him and said that they were interested in buying an Operating System.

Bill Gates was smart enough to say, “yes,” find a San Francisco manufacturer of an existing system and negotiate a contract to sell to IBM something it didn’t make and barely owned.

The rest was history.

About the same time, IBM found a small company that was interested in building their chip. This company turned out to be Intel.

At the time, IBM did not realize that not only had it failed to see the potential of the pc, it had given away technology that would in the short term prove to be huge profit centers that would each individually dwarf IBM, itself.

But it doesn’t end there.

It took Xerox Palo Alto, the research arm of the giant Xerox Company to develop the graphical interface which was ignored by “the suits” in Rochester; the founder of Apple, Steve Jobs, however, saw the possibilities and he along with Bill Gates rushed into production.

Today, Steve Jobs no longer talks about Apple Computer but thinks in terms of a radically new technology that is changing everything, the I-Pod, which has now been integrated with the cell phone, palm pilot, Internet. Certainly, Mr. Jobs paid attention when the gurus gave the class on “convergence.”

IBM still thought that the PC was a toy!

So much for the prescience of the Big Company.

I don’t mean to single out IBM, Xerox, or GM for their inability to see the future; it’s built-in to all of the giant companies because in the process of becoming big, they develop cultures specific to what they consider their priorities and lose their innovativeness for the most part unless they have amazingly astute managements. Andy Grove Steve Jobs and Bill Gates for example worried about becoming obsolete almost from Day One…but were all innovators and understood that they could become obsolete in the blink of an eye…

The fact of the matter is that the Silicon Revolution never would have happened without the connections between the University, the people, the interface and the willingness to try something new... and government money. This created the kind of alchemy that resulted in ground-breaking progress that up until that time was unimagined thanks to the catalyst, government money.

Will business and industry orchestrate similar breakthroughs today? Unlikely, if they continue to operate with the present mind-set.

Here’s why:

We have broken up the combinations of people so that they can’t interface as before in casual ways exchanging ideas and building better mousetraps. Now, they are scattered through-out the manufacturing process in order to realize the short term goals of maximum profits over the short term.

There is very little opportunity, today, for innovators to get together, rub off each other, exchange ideas and make magic.

We now separate everything for profitability.

We have manufacturing managements in New York and the product made in China. In becoming a world culture, we have separated those who have the most to gain from each other and we have destroyed the components of true innovation.

We have effectively ended the Silicon Valley miracle that encouraged all of those California companies who exchanged ideas, made mistakes, kept trying and encouraged each other to achieve success…

This author predicts that that period in history is over and that eventually we will face a long period of growing mediocrity and as a result, sluggish growth in technology until someone gets the message and we start over again, if we can.

But such changes are not automatic; someone must see the forest for the trees; someone must realize that to kick start a old and tired industry, you need to get back to those fundamentals that built the company in the first place. Until then, look to the smaller companies, the companies with less to lose and most to gain for all future innovation and don’t be surprised if they continue to be home grown in America.

It seems so ironic because we were the country more committed to pushing the envelope than cutting costs. We were technology driven; not fixated on cutting labor costs to boost profits. But it is hard to argue against sky-rocketing profits that come from reducing the cost of manufacturing and overhead.

Les Aaron
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