Jay Maharjan

Role of management and executives in the conceptual economy

 I was a student of Peter Drucker at Drucker School of management. I followed Drucker’s work for over ten years. As the legendary management guru often said that one could  not manage change, whether it was a  change in  market demand, political climate or a change in socio-economic dynamics, but one could and must  sense the change and prepare to stay ahead of the curve. With the current changing climate of the global socio-political landscape, this statement has never been more relevant.Before Peter Drucker literally  introduced formal management to mega corporations of the likes of GM and GE, corporations had run on an industrial, labor driven model instead of a knowledge based structure. The knowledge economy that Drucker significantly contributed has survived and operated effectively to this day. Well run companies learned to value knowledge workers and define roles of management in a way that benefited the whole organization and the national economy. As much as I commend and look up to Drucker’s economic and management model based on ‘knowledge workers’ – the term he famously coined, the time has come to rethink the roles of management and administrators both in the private and government sectors.
 
For the last 50 years, the current management model survived in spite of critics who complained that executive pay and the power they possessed were beyond rational comprehension… and the market stayed steadfast stating that only time would correct the coarse. That time is now. It is becoming  apparent that this structure is not going to last very long. It will become increasingly  harder to justify large executive pay and benefits in the middle of the crisis brewing on the wall street. This combination  of old fashioned executives, mixed with the governance formed to tackle the issues of the last century,  has failed to understand the desperate need to address the urgency to develop the conceptual economy.
 
It is becoming clearer that America needs to regain its competitive advantage by increasing innovation at the grass roots level. Venture Capital model has worked extremely well here compared to Europe and Asia – where generating large  capital from investors had been traditionally extremely difficult. Venture Capital model fosters entrepreneurial spirit and encourages innovation – in return it creates strong economy by producing jobs. Even though the venture capital model is fundamentally sound, it is not the ultimate answer. In this new economy, the regions that generate new breed of workforce – conceptual workers/entrepreneurs – will take the lead in steering the financial stronghold. 
 
What happened to Lehman Brothers, Morgan Stanley and the world renowned investment firm, Goldman Sachs is a strong indication that the new economy will demand a strong shift in the entrepreneurial level instead of just managing assets, making high flying deals, brokering and waiting for IPOs to shine  on the Wall Street. Countries are emerging as business leaders and creating niches in different fields. China, with the help of the socialistic governance and an endless supply of cheap workforce is emerging as a global leader in manufacturing and industrial jobs. India, the world’s largest democracy and the population full of  entrepreneurs are flexing their muscle in marking their territory in the knowledge niche. In an ideal, fixed world, America still holds the key to managing and governing service industry, leading innovation, and keeping the nerve center of innovation and finance onshore. But, the conceptual economy will demand both the government and business leaders to rethink, act promptly by offering more tools and education to the new wave of entrepreneurs, by introducing strong science and math courses in high school as well as by  drastically increasing the measure to train entrepreneurship and business courses.
 
The first line of reform needs to come on the college level. I have yet to see a great entrepreneurship program at a reputable business college. Professors who run these programs are out of touch with what’s going on in the market, and lacks the very essential entrepreneurial tools to pass them on to students they teach. Courses of entrepreneurship in the Conceptual economy is going to be different from merely starting  businesses with a loan ( SBA in most cases – the process is highly cumbersome and leaves entrepreneurs with more frustration and discouragement) and going after Venture Capital funds – and entrepreneurs know that it is not an easy choice. Colleges need to reform by starting entrepreneurial programs not focused around the professors, but truly around the students, who must be entrepreneurs to start with. In an ideal University entrepreneurial program, a student must have successful venture/winning entrepreneurial spirit even to qualify to get into the program. And, this program would truly act as a facilitator in advancing the existing businesses that the students already possess. These programs should be subsidized by the government so that the tuition fees would stay minimal and the programs would be available abundantly like community colleges – except with regular advancement of better tools and technology. This initiative should gradually translate into high school programs and vocational colleges.
 
Automation and turnkey solutions will emerge in an exponential pace, replacing highly paid managers and executives who make time consuming, ineffective decisions in a committee format. In the conceptual economy, old fashioned managers and executives will be out of touch with the emerging models based on social networks and bottom up business models.  From the strategic point of view, you will still need a small percentage of managers and executives to make strategic and key decisions, but the executive number and payroll will drop drastically and the roles will change significantly.  The economic model that we have been enjoying  is being tested in this election year. We all hope that the outcome of this havoc will end up in a positive note. Whatever the outcome might be, the one thing is for sure that the roles of old fashioned investment firms, brokerage firms and banks are going to change drastically and a new model of governance must emerge. The extent that the government would consider to rescue the crisis is irrelevant to the topic that I am covering. The fundamental economic model mustl remain sound – and this will happen only if the power, the reach and the tools get trickled down to – conceptual entrepreneurs – the new foundation of capitalism – just like the way it did in the ‘60s when the knowledge workers were recognized and the new  economy emerged. The knowledge economy was the envy of the world and allowed America to maintain sustainable competitive advantage. Countries like Japan and China benefited heavily. As the rest of the world is catching up to the knowledge economy, it is time to rethink and prepare for  the economy that once again will lead the rest of the world.

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