case.

Report of "The adaptive corporation" by Ohmae

Answer.

1. Title, Journal, year

2. Introduction

3. Synopsis

4. Evaluation

5. Directions for future research

Reference,

Technological change prices averaging $280. At the end of 2004, the digital For the corporate world, technology creates both opportuni- camera population was 150 million units, or one for every four ties and fears. The rise and fall of commercial enterprises consumer PCs in the world. Digital cameras had to wait until - once vibrant, dynamic, and even dominant, but brought to users became ready to plug them into their PCs, mostly via the brink of bankruptcy and beyond in just a few decades - is conventional USB ports, to achieve mainstream popularity. a fact of business life. This has a number of implications. First, the traditional We have seen whole sections of industries wiped out by camera industry no longer exists. Cameras have become a technological progress. We need only think of the impact that peripheral to the PC, or one of the input/output devices to a the automobile had, not only on the carriage industry, but also PC. Second, because of the explosive shift to digital cameras, on saddle makers and the providers of feed and stables for the entire value chain for the analogue camera industry is in horses. Each new technological wave usually has its victims, trouble. This includes films, labs, silver bromide papers, and it tends to be those who were unable to change in time. albums and lab-equipment companies. But time has now been compressed. In the past, there was The most significant casualty has been the photographic usually some time lag between the discovery of new processes developing laboratory, but companies such as Kodak and Fuji or products and their complete victory over their predeces are faced with a restructuring challenge throughout the entire sors. New products might have been far better but they were spectrum of their business systems. After a century-long seldom cheaper. It took a long time, perhaps a generation or global battle, they, along with a number of other lesser com- more, for novel inventions to percolate downward as their petitors, such as Konica and Agfa, had established dominance price declined. Think, in the recent past, how long it took in the photographic industry. Well entrenched and with attrac- video cameras to move from being an expensive luxury to an tive profit margins, it has been difficult for them to realign in affordable mass-market product. the wake of the sudden shift into the digital age. No company In the world of the interconnected global economy, such can cope with a restructuring demand of 15 per cent per time lags are very rare. A technology may become dominant annum for four consecutive years, when they do not know around the world while its successor is already snapping at its how much further they have to go. heels. Consider the camera industry. Canon is now the world's But even the digital camera industry may not flourish. In number one producer of digital cameras. It introduced sophis- Japan, the real reason for the explosive growth of digital cam- ticated digital cameras in 1995. Nothing much happened, so era sales was that J-Phone (now taken over by Vodafone) Canon waited until 2000 to make a major investment into the introduced a built-in camera in its year 2000 model (J-S1104). digital camera market. It broadened its product range and This camera had only 110,000 pixels, but it became very popu- lowered prices. In 2000, the average digital camera cost $450, lar because of its "pet name" of Sha-Meiru, meaning "picture and the global industry size was ten million shipments. By messages". Young girls and couples exchanged not only text 2004, the market had expanded to 60 million shipments, with mail, but accompanying pictures. All the mobile operators rushed into this promising market, and by the end of 2004, the leading model IN BRIEF had a CCD lens with a resolution exceed- ing two million pixels, comparable with Change in the business environment is happening that of stand-alone digital cameras. At on many dimensions at once. Managers need to master this stage, the digital camera industry all of these to survive. felt the pressure and started to realise Every new technological wave has the ability to wipe that it could become a "component" out entire industries in just a few years. industry to mobile phones. It is even . Success in the new global economy will depend on foreseeable that the digital camera will bold, flexible leaders with a clear vision. Managers become an adjunct to other portable must learn to "think big". equipment, such as PDAs or digital Traditional corporate structures and marketing ballpoint pens, or even become part of a methods will be swept away. Only the most innovative, credit card. customer-focused corporations will survive. The message is clear: technology's onward march makes every industry 26 issue 24, spring 2006 CBFsusceptible; even new industries are at risk. It is an "A company must have furiously old story, though the pace of the plot is accelerat- E ing. Another example can be found in the rise of twitching antennae, sorting out VolP (voice over internet protocol) and its impact W potential trends in its product area" on telecoms, especially mobile phone companies. Traditionally, mobile phone calls have been more technology that has made the global economy possi- expensive than calls using traditional land lines, but ble. But it should not see technology as the only source this price difference will be negated with the use of the VolP of productivity improvements or competitive gains. platform. For organisations, the set-up costs of providing a server, software and IP-capable telephones are lower, com- Personal change pared to the cost of establishing a traditional phone system No matter where they are, individuals will have to learn to based on switching equipment and phone sets. Call costs may adapt. It will naturally be easier for younger people to do this then be as much as 50 to 75 per cent lower. Large corporations than those in their middle ages or those facing imminent such as Mitsubishi Heavy Industry, Hitachi and UFJ Bank have retirement. A number of sacred cows may have to be already moved over to VolP, while others are adopting a sacrificed. One of them will be the notion of a job or a career staged approach. Research company IDC has estimated that for life. Such a set path may not be possible in the global VolP telephony was worth $422m in 2003 but that this will economy of the future. climb by a factor of more than 17 by 2008. Another change will be the accepted norm that life The adoption of this new platform has the potential to always gets better and that workers, no matter what their revolutionise the telecoms industry. Just as the advent of the education level, can look forward to an incrementally motor car had a disastrous impact on saddle makers, VolP improving lifestyle, leading eventually to a post-retirement promises testing times for manufacturers of traditional switch- soft landing, in which all or most of their needs are provided ing equipment. In Japan, NEC, which has more than a third of for, People will have to learn to be lifestyle managers. Let us the Japanese market for switching equipment, has not waited put this another way: people will have to take more respons to be swept away, but has actively sought to ride the VolP sibility upon themselves if they wish to reap the benefits of wave. In April 2004, it set up a separate division, and its sales- globalisation. There are many opportunities for personal people now promote its IP-capable equipment, at the expense development within the global economy, but these will not be of older equipment, to existing customers. delivered on a plate. When an industry is faced with eventual oblivion but Success in the new global economy will also depend on execution of the final sentence is delayed, what can it do? good leadership. And a good leader, like a good government, Does it have any realistic alternatives to throwing its hands needs a vision. A vision will help to set the direction in which up into the air in surrender? This depends on the industry, of to go and the speed at which the goal can be reached. In the course, but for some, such as the telecoms industry, a good jungle or in the fog, a leader with a clear vision helps others beginning for companies is to try to insinuate themselves to move forward with less fear and confusion. into the forward march of the new technology. A telephone This involves bravery, too. He or she must have the company can try to become a content distributor. In other courage to look into the future, to act according to times- words, it can seek to sell and distribute the products and cales longer than the current accounting period or the next services that are pulling the rug of security from underneath elections. Vision may not be valued in the short term; it may its feet. even attract ridicule and scorn. There may be calls to "fix the To repeat a cliche, forewarned is forearmed. No company problems of the present". A good leader has the courage to should ever become complacent and introspective. It must have pursue his or her vision, regardless of this. The more people furiously twitching antennae, sorting out potential trends in its who are dependent on that leader, the more expansive his or product area. Once a potential threat has been isolated, certain her vision has to be. things can be done, but they are seldom painless. The success- Good leaders must not be timid. The global economy is a ful company of the global economy has to be adaptable. It may new phenomenon. It does not have the certainties of the past, not be able to invent solutions to all its problems, so it should the mental and psychological crutches upon which leaders in be able to copy and adapt answers from elsewhere. Such a the old economy supported themselves. To paraphrase company must be alive to technological developments, for it is Shakespeare, present fears in the global economy are less EBF issue 24, spring 2006 27than horrible imagining s. Uncertainty. like fear, breeds more uncertainty. In such an environment. the need for a strong. decisive and brave leadershia'iI figure is overwhelming. Leaders must be truly fearless. It is also clear that the role of the leader is changing. In the old economy. in which the corporate structure resembled a pyramid. the role of the leader was self-defining. The leader was the person who sat or stood on the pryramid's apex. He or she directed those below from on high. Everyone knew where the leader stood in relation to their own position. It was a neat. geometric and insulated world. But company structures are changing. What is the role of the leader in an organisation such as Cisco Systems. where the organisation is amorphous. web-like and virtual. and where there are more than a hundred \"other" companies within the matrix of the virtual single compa ny? Leaders must throw away rigid. Preconceived attitudes about their role. They must be flexible and intuitive. and able to tune Into change. |iirialanlsatltlnaI clients The global economy means uncertainty. It also spells giant opportunities for those brave and supple enough to adapt. The global economy really is new. There is no rulebook. Nobody knows what will work. The only solution Is to try and. if at first you fail. then try again. The successful company in the global economy will be - indeed. must be - a new phenomenon. owing little to the precedents of the past. If we were to compare it to a living being. it must largely turn its back on its parentage and ancestry. It must be genetically different from them. The new company will need to have a different set of chromosomes. This difference can be exhibited in many forms. but it is all- embracing. It requires. for example. a root-and-branch rethink of marketing methods. A traditional approach to markets was to see them as self-contained units that could be entered sequentially. This must be discarded in favour of simultaneous penetration of all markets at once. combined with a commitment to "insiderisation". Corporations will also be compelled to do business in new ways. Notions that were once popular about dealing with cus- tomers must be reevaluated in the light of a changing world. The customer must be reborn as the most important agent in the business world. Whatever business structure is followed must inform customers that they are in control. its far as pos- sible, their involvement must be sought and accommodated. It 2B is a paradox that. in a world that is stretching towards farther and less clear horizons. one of the secrets to business success may involve greater attention to personal details in customer relationships. The traditional company seemed insep- S arable from the nation state. Even when its operations covered different time zones and continents. the reiatlonship with the old nation state survived. even when the company was deemed a multina- tional. All commercial enterprises can be traced back to a source. When that source grew into a thriving business. it was identified with its nation state. even though it might earn much - even the majority - of its income from expert or from business conducted by subsidiaries in other countries. The homeland was the location for the "head office". from which the compa ny's diverse operations were directed and to which regional managers sometimes had to gravitate with near-religious devotion. The global economy. however. is inherently borderless. and this "borderlessness" must Inform the thought processes and outlooks of employees in the company of the future. There must no longer be any sentimental attachment with an old nation state in which the company has its headg uarters. Even the notion of at headquarters is giving way to the reality that the market never sleeps. that business is done 24 hours a day. every day of the year. Commitment to the global economy needs to be accompa- nied by commitment to innovation. Companies must make this commitment as never before. This is a simple truth but one that must be absorbed into corporate belief systems. Many companies not directly invoived with technology Day lip service to innovation. It is a good thing. they all agree. They would like to do more of It. but either they do not know how or they are afraid to innovate. Innovation can lead them into uncomfortable zones. But they should look around them. They should learn from Scandinavia. in particular. Sweden's approach to inno- vation is reminiscent of the representations of the Floman god Janus. He was shown with two faces. one looking back- wards and the other gazing intently towards the future. Sweden never tires of proclaiming its own history and contri- butions to scientific innovation. It is the home of the Nobel Prize. and the world of botany and physics owes a fundamental debt of gratitude to Linnaeus and Celsius. But Sweden does not rest on its past successes: it aims to be at the cutting edge of technological innovation. particularly in the areas of global telecommunications platforms {as with Ericssonl and issue Espring suns EBF also in securities markets (as with Did. the stocks and deriva- tives trading system}. This plays a major part in the strategy of the Invest In Sweden Agency. Innovation and competition in the global economy must take place specifically in four areas: o Business systems: Companies must seek to ally with the best and cheapest providers of services across the entire spectrum of corporate functions: esp, manufacturing. sales and after-sales service. back-office activities. systems devel- opment. and maintenance. Companies must look for ways to make the organisation scalable. This way. there is less stress on growing first. They must bring In partners from all corners of the world to work on the com pany's platform. Perhaps the only function you would not let the third party undertake is the customer interface. although a lot of it can also be shifted to the cyberworld. I Products and servioea: The need for innovation in this field ls obvious. But the challenge Is also formidable. What were thought to be technological islands such as audit cards on ll: chips, GPS navigation for cars. mobile phones. PCs. digital cameras. printers. CD players. video games. and leLANi'wI-fl. "Success has a nasty . similarity to mercury. and will .-- a slip very easily from those who ' 3-"-' become too complacent" are all converging to form a huge continent. We can no longer define the battlefield in the traditional sense. Innovation is part of the survival kit in this global marketplace. or Customer interface: Innovation is especially dynamic in this area. The introduction of mobile phones in Japan. for example. opened up entirely new ways of marketing. Using onboard functions such as Save the Screen. advertisements sent to the displays of mobile phones can become an elec- tronic ticket. a discount coupon or a receipt. This is a Iowcost and interactive way of maintaining a communications conduit with a large group at once or narrow-casting to a target segment. Likewise. Google and other search engines are no longer simple guides to the cyberjungle. They are potentially the venues of the lowest-cost promotions. as customers who are interested in your product and services knock on your door rather than the other way around. o Employees. managers and staff: Innovation is needed most in recruiting. training. evaluating and rewarding people in companies. As Jonas Ridderstrale and hjell Nordstrom write in their book Karaoke Capitalism. power is shifting from those EEF issue 2'1. spring Billie who make the rules to those who break them or rewrite them. This means that corporations need to find ways to recruit drop-outs. petty criminals - the unfortunates who have broken time-honoured rules and laws. rather than serious serial offenders - children and retirees. The adaptive corporation To succeed in the global economy, companies must be adaptive. with a keen and sensitive set of antennae for pick- ing up and decoding signals. and capable of responding in an instant. |illhat happens on the other side of the world at this moment can have an Immediate Impact on your business. Without this ability to discern developments in their sector. companies are like blind people waiking forward without a cane or any means of support. until they come to an obstacle that stops them abruptly. Such a company is merely reactive. buffeted by circumstances. The past Is a comfort zone for many successful companies. it is a 'v'lP lounge to which recourse can be made in times of uncertainty. Just because a company has been in a certain line of business for generations. It does not mean that It Is bound. as if by some hereditary element. to remain there and to keep on doing things in ways fashioned in and by the past. Companies must learn to adapt their identities. and occa- sionally to be shocked at where the market is taking them. Success in either the past or the present is good and laudable: it Is what should drive companies and their employees. But success has a nasty similarity to mercury. and will slip very easily from those who become too complacent or who try to hold on to it for too long. Above all. the company of the future must remember that adaptation and evolution are happening on three dimensions: technological. personal and organisational. The company - and the manager - that succeeds will be the company that manages all three dimensions. Managing technological evolu- tion is not enough: it is vital that innovation is supported by the right skills and the right organisation. It is no good trying to manage Elstcentury technology with 20th-century people and structures. Similarly. If people and structures change but the company continues to rely on technologies that are obsolete. the same will happen. Change occu rs in many dimen- sions: all of them must be managed together. Ilenichi {lhmae is one of the world's leading business and corporate strategists He is currently chancel Ior's president ol public policy at UCLA School of Public and Social Research. and holds a number of other academic and advisory posts in Japan. llooea and china. He is the author of over loo books. including raiser: Globe! Stage [Wharton School Publishing. tops}. 29