I followed Peter Drucker’s work for over ten years – both as his student at the management school named after him and as an entrepreneur thereafter. 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 defined roles of management in a way that benefited the whole organization. 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 course. 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 compared to other parts in 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.
(note: I wrote this piece when Goldman Sachs and Lehman Brothers were going through crisis.)
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 bring entrepreneurship and business courses.
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.