Replace Fear of the Unknown With Curiousity

The Shift Index 2011 is out now, and as with the previous two editions, it is a must-read.

I am always skeptical of “everything is different now” type arguments, but in this series of reports, John Hagel, John Seeley Brown and a number of other contributors have done a fantastic job of documenting exactly what is changing. It might not be everything, but it’s a fair bit.

Here are the four key points that they make in the summary of this year’s report:

  • ROA (Return on Assets) performance continues its long-term decline due to deteriorating firm performance
  • Layoffs and other short-term measures taken by firms are not a sustainable solution to improving long-term firm performance
  • Connected individuals, not companies, are the ones harnessing flows and have more power because of it
  • Firms have untapped opportunities to reverse their declining performance by embracing pull

Hagel and Seeley Brown have a number of recommendations about how to deal with this in their book The Power of Pull
(discussed here and here). It’s one of the best books of the past couple of years, and I recommend it.

Another book that deals with these issues is Futuretainment: Yesterday the World Changed, Now It’s Your Turnby Mike Walsh.

Replace Fear

The book is interesting. Here is one of the key points that Walsh makes in it:

Sometimes the best way to win a game is to question why you are even playing it. The rules that govern industries are rarely made in advance – they evolve in periods of rapid change until eventually they themselves become restraints on innovation. But there is one thing you can be sure of: when consumer behavior changes, sooner or later business behavior must follow. The future is already here, you just need to know where to look.

The book itself is a great example of trying to invent the future. Walsh has deliberately made a book that only works as a physical thing. It has a gorgeous set of photos taken by Walsh (including the one above) as the background on each page. Then it has series of insightful chapters discussing the implications of the big shift. Here is how he describes the approach:

The first question my publisher asked me was why a book and not a blog? Three years ago when I started working on Futuretainment, that was already a tough question to answer. With eBooks now on the crest of critical mass, it hasn’t got any easier. Last week, my book hit the shelves. Although you can buy it on Amazon, you can’t read it on a Kindle. In fact, with 300 pages of illustrations, original photographs and custom designed typography – it is about as Kindle friendly as a bathtub. That was a deliberate decision on my part, but it comes at a time when the very concept of a book is changing.

There are two aspects to any book. First, there is the book as an informational construct. Put simply – an arrangement of words, sentences, paragraphs and chapters. However in our attention drained world of 140 characters, this construct increasingly boils down to a simple image – the long tail, the tipping point or the black swan. Despite fervent claims to the contrary, the vast majority of people don’t actually read books. They consume metaphors and debate in status updates.

Fortunately, there is also a second aspect of books – ‘thingness’. Whether a Sumerian stone tablet, an Egyptian papyrus, an illuminated Medieval manuscript or just a pulp paperback – there is a physical side of books which has its own life.

Because, as much as I love my Kindle, it is a marriage of convenience. My true mistress will always be books. The smell of print, and the sensual touch of high quality paper will never fail to seduce me. And I can only hope that my book might elicit the same response in you.

Unlike Jonathan Franzen, who recently discussed why books need to be physical without offering much more of a reason than “because I like them”, Walsh has made a book that demands to be instantiated physically.

eBooks are a great response to the informational side of books that Walsh discusses. Seth Godin wrote a great post yesterday about how to deal with this.

But to deal with the ‘thingness’ of books, you need a new business model. You need to create value not just in the words, but in the physical object as well. Walsh has succeeded in both aspects of his book.

What should the rest of us do? Maybe it’s time to heed Jorge Barba’s advice and get an MBA in curiousity.

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

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3 thoughts on “Replace Fear of the Unknown With Curiousity

  1. Tim,

    I’m still skeptical of the ROA thing, because it can be explained in another way. Cost of capital has lowered so the use of capital has expanded, decreasing return.

    Return on equity (the money owners of businesses invest) has not fallen, so it’s a very flimsy premise for the argument that business has gotten less efficient (although the conclusion may still be true – I don’t know).

    If you ran a business and someone offered you a bunch of money at very low rates to expand, wouldn’t you accept a lower rate of return? Of course you would! The return on your investment (ROE), which is what you really care about, would increase.

    Greg

  2. According to them, ROE has fallen as well, though not as dramatically. This is what they say about it:

    “In last year’s edition of the Shift Index, we addressed several questions surrounding the decline in ROA for the overall economy. We began by analyzing two other measures closely related to ROA — Return on Invested Capital (ROIC) and Return on Equity (ROE). For each of these proxies, we found a similar downward trend, further bolstering our argument for declining firm performance. The downward trend of ROE was not as dramatic as that of ROIC or ROA. But, as stated in the 2010 Shift Index, ROE may vary depending on a firm’s capital structure. In short, it does not provide the same comprehensive picture of a firm’s fundamental performance as ROA does.”

    They also discuss the impact of improving labour productivity and they address interest rates (Cost of Capital!) for a couple of pages too.

    It’s worth checking out the full report, not just the summary, I think.