Long distance vision

Dr. Terry Cutler

Originally published: Business Review Weekly Feburary 2002

In psychology and in art people talk about something called "figure:ground" reversal. This phenomenon involves the flips and interplay between the wider landscape or big picture and the myriad points of detail in the foreground. Linking broad strategic insights with the minutae of tactical operational detail is the art of perspective, the art of leadership, and the art of innovation and business development.

Currently we are at a break point, a point of discontinuity in many of the structures and frameworks which shape our economy and the community. Shaping the 21st century landscape is a world wide web of forces. My working checklist consists of eight key forces.

1. Globalisation
There have been many waves of globalisation throughout history. What is different today is the scope and intensity of what is happening. We are seeing new levels of global interdependency being embedded through new trades, particularly in skills and knowledge, trade in services and people, and now the emergence of global electronic commerce. The devil of globalisation is in the detail.
2. The collapse of the Second World.
The second key global trend is the progressive impact of the collapse of the Second World order. The pivotal development in recent times is China's entry into the World Trade Organisation framework. Now Russia is lobbying to join the WTO. This represents a massive shift towards the integration and internationalisation of the global economy to an extent that we have never seen before in history. With the collapse of the Second World and the triumph of free markets we hear euphoric statements about a new borderless market. This is nonsense. We might be changing market boundaries from political and geographic borders, but all markets have boundaries and the key to thinking about the shape of new markets is to identify the new boundary markers in an online world. In my view those markers are going to be things like cultural boundaries, language boundaries and boundaries around generic virtual communities.
3. Digital technology
The third key force is the radical discontinuities introduced by digital technology and the emergence of the digital economy. Information and communications technology continues to develop and will become even more pervasive in its impact There is much more to come, which will profoundly affect the ways we organise economic activity.
4. Industrial restructuring
Industrial and firm restructuring looms large in my world wide web of forces reshaping the 21st century. The underlying point here is that the nature of the firm as a way of organising market activity has always revolved around the nature and the quantum of transaction costs. Transactions, of course, are fundamentally affected by communications networking and information processing power, which is at the heart of the information and communications technology revolution.
5. Labour market restructuring
The flipside of micoeconomic restructuring is labour market restructuring. A decade after Robert Reich's insightful work in the early 1990s into the restructuring of labour markets, and his focus on the growing divergence between location-specific employment and globally mobile and footloose employment, it amazes me how little we have thought through the implications in for both labour market policies and practice.
6. 21st century corporate governance
Over the last decade a quiet revolution has been going on in the area of corporate governance and the nature of the corporation. The cultural shifts associated with the democratisation of stock markets, the new primacy of intellectual capital, and the emergence of stock options and employee participation in the ownership of firms all starts to change the fundamentals about careers, employment and the nature of labour in organised economic activity.
7. The internationalisation of business regulation
This trend relates to the progressive internationalisation of the key frameworks for the governance of economic activity - the role of the World Trade Organisation and the OECD, and a growing proliferation of international, inter-government or supra-government global organisations, defining key parameters to business functions. This is irreversible and it has happened without a lot of governments and a lot of people really being aware of the actual extent of the transfer and the alienation of effective control. This leads to increasingly complex power-sharing arrangements at the international level between government, business and non-government organisations. This raises the question as to what levers of influence national governments can exercise. The degrees of freedom are contracting and national governments are likely to focus increasingly on the competitiveness of factor inputs and areas of market failure within a global environment.
8. New value drivers
What creates value in the emerging industrial landscape? One of the problems is that we are struggling to find useful ways to quantify or calibrate the new drivers as we move increasingly from tangible to intangible assets and the valuing of intellectual capital. Identifying and understanding the new value drivers is essential in readying ourselves for the shock of the new.

It is not so much the individual trends in themselves that matter; it is the interconnection, the linkages, the interdependencies that make the difference. The important thing for us to grasp is the nature of these interdependencies and their impact in changing the frameworks within which we operate - in other words, to understand the context of innovation.

In future columns I will home in on the detail of these defining characteristics of the changing landscape of the information economy.

© Dr Terry Cutler 2002