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#thinkdifferent
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Dear <<First Name>>
It's been awhile since you have heard from us. I hope the wait has been worth it, because this little essay contains some important and scary truths. Enjoy...
THE TRAGEDY OF THE COMMONS
(Or: the reason why 'free' is your enemy)
A long time ago (in 1968!) Garrett Hardin described in a compelling article (click that link to read) something called the tragedy of the commons. His context was the population explosion, but it should come as no surprise that his prophetic insights are coming to pass because of technological trends.
The tragedy of the commons is about how society is structured in a way that does not reward us for looking after our common property.
When things are free, the tragedy of the commons apply.
For instance: This applies in Agriculture (e.g. grazing), to societal issues (e.g. birth control) and the air we breathe (pollution.) If people don’t pay for something, they screw it up. It is still true today:
- The internet > over-run by porn
- Email system > effectively free, over-run by spam
- The Google Economy > attention deficit
Hardin bemoans the same thing (four decades earlier):
“In a still more embryonic state is our recognition of the evils of the commons in matters of pleasure. There is almost no restriction on the propagation of sound waves in the public medium. The shopping public is assaulted with mindless music, without its consent. Our government is paying out billions of dollars to create supersonic transport which will disturb 50,000 people for every one person who is whisked from coast to coast 3 hours faster. Advertisers muddy the airwaves of radio and television and pollute the view of travellers. We are a long way from outlawing the commons in matters of pleasure.”
The whole system of Capitalism is tending to free. But free is not sustainable, so there is a big implosion coming.
This challenge is articulated well by Economic theorist and author Jeremy Rifkin He explains it in his book The Internet of Things. Rifkin's latest book is The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism. He explains it in this short (must watch) video:
“There's a paradox deeply embedded in the very heart of the capitalist market system previously really undisclosed. This paradox has been responsible for the tremendous success of capitalism over the last two centuries. But here's the irony, the very success of this paradox is now leading to an end game and a new paradigm emerging out of capitalism is collaborative commons.”
And:
“So business people are always looking for ways to increase productivity and reduce their marginal cost, they simply never expected in their wildest dreams that there would be a technology revolution so powerful in its productivity that it might reduce those margins of cost to near zero making goods and services essentially free, priceless and beyond the market exchange economy.”
Of course free is theoretically sustainable – if every single person was willing to work as productively as they do now, with the only reward being that we all share in the spoils as needed, equitably. That is not very likely to happen given what I know about the human condition.
How to respond?
1. We need to learn to manage in economies where population growth is zero (as unchecked immigration to buy population growth is likely to become increasingly politically unsustainable).
2. We need to learn how to coerce people to comply with a greater good when individuals are inherently selfish.
3. We need to develop business models that are ‘antifragile’ (i.e. become more robust the closer we get to zero marginal cost).
Antifragility is not to be confused with resilience. Just like the strain that exercise puts on the muscle makes the muscle stronger (not weaker), antifragile businesses improve
I don’t have the answers to the first challenge. I suspect it may be more about the cultural adaption of working in a world where productivity and growth ceases to become never-ending upward curves.
About the need to coerce populace, Hardin says this:
“To say that we mutually agree to coercion is not to say that we are required to enjoy it, or even to pretend we enjoy it. Who enjoys taxes? We all grumble about them. But we accept compulsory taxes because we recognize that voluntary taxes would favor the conscienceless. We institute and (grumblingly) support taxes and other coercive devices to escape the horror of the commons.”
Whilst I am decidedly in favour of ‘small’ and limited government, the advantage of tax as a coercive force is that it actually introduces more cost into the system, potentially stalling the race to ‘free’.
But eventually every industry and every business will have to find a unique response to the challenge, which is beyond the scope of this essay.
It is worth highlighting how not to respond, and that is to develop a ‘business plan.’
Even the venerable Harvard Business Review has proclaimed that business plans waste time. (They have come around to my way of thinking eventually.)
Their research has shown that over 70% of entrepreneurs who had successful IPOs or sales, did not start with a business plan. Roger Martin, writes in HBR about the big lie of strategic planning.
“The natural reaction is to make the challenge less daunting by turning it into a problem that can be solved with tried and tested tools. That nearly always means spending weeks or even months preparing a comprehensive plan for how the company will invest in existing and new assets and capabilities in order to achieve a target—an increased share of the market, say, or a share in some new one. The plan is typically supported with detailed spreadsheets that project costs and revenue quite far into the future. By the end of the process, everyone feels a lot less scared.”
I accept that most business organisations have been drinking this Kool-Aid for a long time and the very idea proposed here seems like sacrilege. I suspect many readers may think that it is naïve to think that business plans are passé. Even worse, some may even say or think ‘we are different’ or ‘our process works fine’. Does ‘deckchairs’ and ‘Titanic’ ring any bells?
Organisations still need a strategy. You just don’t arrive at it by following the ‘business planning’ approach.
This article does a good job of explaining what needs to happen instead. Flower and O’Donovan describes it as follows:
“… create a roadmap of the terrain that lies before an organization and develop a set of navigational tools, realizing that there will be many different options for reaching the destination. If necessary, the destination itself may shift based on what we learn along the way.”
The critical success factor TO SURVIVE as a business is not a better plan, it is the ability to change and adapt whilst staying true to a core business model.
For almost a decade now, we have advised clients that is not about (for instance) whether you choose Facebook or Instagram, but it is about developing the ability to switch to the next thing. There will always be a next thing and your ability to switch is more important than picking the right thing.
You will make the wrong decision. You will fail. Therefore it is about recovery and adaptation an resilience and prospering in adversity.
Little failures that you recover from will improve your strategic immunity.
The implications for organisations are challenging:
- You need different kinds of people with new skills sets and new attitudes (e.g. ability to tolerate ambiguity)
- You need to (quickly) evolve your culture
- Changes to limits of authority, decision making processes and accountabilities are required
- New structures, reward systems and even KPIs must be formulated
- And everybody has to get on board…
That is to name a few. But those alone should be enough to scare us for the size of the challenge.
But, I save the most important for last:
(If you have watched the video and read the books and articles referenced, the scale of the pending calamity will be much clearer and more frightening than I have described.)
The rescue operation has to start with someone who understands it, believes it and is willing to commit to tackle the challenge. The very survival of your organisation depends on it.
At this moment, YOU may well be the only person who knows about this insidious threat to your survival. What are you going to do about it?
ON A PERSONAL NOTE: A CASE STUDY IN ANTIFRAGILITY
The last few years have seen a lot of change and Ganador has been adapting. (Practice what we preach, right?)
From our initial focus on retail and property, we have sought to broaden our expertise to cover other sectors, and managed to grow into publishing, hospitality and technology to mention a few.
At the same time, we have narrowed or specialisation. Initially we offered a full range of 'solutions' (strategy, consulting, training, business development, marketing etc) to a narrow segment (retail). Now we offer a very specific solution, to a wide range industries.
We now offer a single product: CUSTOMER EDUCATION.
We offer this product to any B2B Business in any sector - but that is all we do: we help organisations educate their customers. We believe that all marketing will eventually end in customer education. In the future, it will become IMPOSSIBLE to sell to customers.Technology will enable people to set up barriers in such a way and there will be so many channels that companies will not be able to sell to customers.
The funnel has flipped and in the near future customers will have complete control over what and when and from whom they buy. Their decision will be based (as now) on the price/value proposition.
And the key to getting customers to buy more stuff, is to provide more value. That is, to improve your value proposition.
In the retail environment, value is provided through improving the experience. But how do you add value in a B2B environment? We know the answer is customer education. This can be a wide range of different strategies and tactics, from the apparently mundane to complete culture-change projects:
- Re-design your invoice, so that it is easier to read and understand
- Re-think the manual that is sold with your product
- Re-train your sales team to help (existing) customers solve problems rather than sell
- Run seminars for customer groups to empower them to perform better in their business
- Re-develop your customer on-boarding process
- Train your customers how to display, fix, and sell your products to their customers
- Equip your customer with a system that will help them manage returns more efficiently
All these solutions add value to your customer's business AS WELL AS your own.
You may for instance never have thought about how difficult your invoice is to read and understand. But making sure that it is, and that customers understand, will be a win-win because they can administer efficiently and you will get fewer queries and requests.
Can you think of how you might benefit from your customers being more educated about your product or service?
We have already built a nice portfolio of solutions in this space. But of course there is always room for more.
Just ask, and we will answer. No obligation. Just value.
Hope you enjoyed this issue of #thinkdifferent, <<First Name>>?
Stay tuned and keep hustling...
DENNIS & MOONYEEN
ganador.com.au
PS: Website has been refreshed too. Have a look.
PPS: I expect many expired emails given how long this has been. It will be really nice if you could forward this to someone you think may find this of value.
PPPS: And if you have read this far, you really should write back (just hit reply button) and tell me what you think, like, dislike or would like to see more or less of... thanks.
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