Welcome to the New Normal
Wednesday, November 4, 2009 at 9:16AM | 2 Comments | Email Article | Share Article | Print Article | Permalink 
Conventional wisdom holds that the economic crisis that began just over a year ago occurred because an overheated economy’s bubble finally burst. Because most of us associate the crisis with burgeoning mortgage foreclosure rates that rippled through worldwide credit markets–drying up available capital–we assume that the bubble may have been only three to five years long.
What if that fundamental assumption is incorrect? What if the bubble began before many of us and many of our organizations were born? What does this mean in terms of how we understand the present and manage into the future?
According to a study of economic history accomplished by Jim Collins and Morten Hansen, “...It turns out that 1952 to 2000 was an aberration. We had a combination of tremendous stability brought on by two monolithic superpowers - danger, yes, but stability, combined with unprecedented prosperity. Very rarely in human history - maybe the Egyptian empire or 200 A.D. in Rome - only a few times you can go back and find those. So my own view is that the possibility of seeing this again in our lifetimes is very, very low. What we're experiencing now, get used to it! It's life, and it's the normal life.” (Fortune Magazine, January 22, 2009)
In short, Jim Collins is welcoming us to the new normal. If Collins and Hansen are correct, those organizations that are waiting for a return to the good old days before they unfreeze to re-engineer and re-think their organizational futures may wait a very long time, perhaps centuries or even longer.
Collins’ insight has vast implications. Most organizations and most of us came into being and grew into our present incarnation since 1952. While everything we know has not suddenly become wrong, many of our core assumptions need serious reconsideration. What is perhaps more troubling is that our conventionally most successful organizations may be the most vulnerable.
In The Quest for Resilience by Gary Hamel & Liisa Välikangas (Harvard Business Review), the authors observe that successful organizations resist change and falter. They deny warning signals. Their very success has taught them that they have good judgment, that their models of reality are coherent and accurate, and that their strategic “gut” is superior. What they know obscures what they need to learn.
We all face different dynamics now. Previous economic downturns favored category leadership incumbents, but greater competition and sea changes in consumer demographics and lifestyles demand different behavior from both leaders and followers.
This is a time when leaders must step forward to help their people and organizations prepare for a future that is likely much different from the past. It is a time to challenge strategic orthodoxy, beginning with some very basic assumptions about what is desirable.
Is bigger really better? Are we entitled to growth? What are the real building blocks of capacity? Does the whole notion of competition need re-framing?
Reader Comments (2)
I've thought about this idea often myself. Anyone who's interested in world history knows the rise and fall of various economic and military superpowers through history. Circumstances always converge to create a perfect storm of sorts that creates these.
It's a very interesting thing to consider that America may have enjoyed an unrealistic, or at least unsustainable, time of prosperity and power. What's most interesting to think about is what it will do to our culture or our 'brand', if it slips.
I was raised in a conservative Christian home, where we were constantly told America was blessed because God favored us for our founding principles and worship and so forth. My parents still really believe this, and I think many do. The sense of privilege or rights that go with being the self-perceived 'chosen ones' have such a huge impact on politics, as we've all seen again quite recently. While much is true about our greatness, our generosity, our belief in freedom, etc. there's also an arrogance and a sense of entitlement that may likely evaporate in the coming years. it will be interesting to see how we deal with it as a culture.
But have we had the same sense of entitlement as organizations/businesses? Are those of us in white collar professions about to suffer the same kick in the ass that the American automobile industry got from the Japanese in the 60s and 70s and 80s?
Just this morning, I was reading about the TED conference in India, and thinking about the huge potential and creative capacity there. Even fields like mine -- design -- are under fire from our Indian brothers and sisters. Even as a leader of a small and mostly regional to national design firm, I have to think about the implications of this for our future. What will we do to remain desirable, as you put it? I recommend Daniel Pink's 'A Whole New Mind' as one place to begin exploring this for those interested.
I believe we have to look at this as opportunity rather than threat, and find ways to take advantage. Emerging economies will be looking for experienced partners in all sorts of fields. My small firm has even managed to be considered for brand identity work for a small African nation, for instance.
Things are definitely not going to be the same as they were in the latter half of the 20th century. The exciting part is the potential for what it might be. I agree with you, Neill, that bigger is not necessarily better. I think quality will make a huge comeback. I think craftsmanship with make a huge comeback. Things are going to be interesting.
In 'The Second World' Parag Khanna does a stunning job of showing how America's dominance has been replaced by European and Chinese empires creating a new world order. This book is a must read for anyone interested in getting a comprehensive overview of the post cold war geo-political dynamics taking place today.
Great article, Neill. I hope all Americans (most of all our political leaders) are reading and thinking seriously about the paradigm shift that has taken place, not just in terms of our national economy, but globally. All politics are not local anymore!