“We face an unusual historic opportunity, right now, to see these pieces brought together in a new kind of constellation, in a new kind of enterprise logic, to reconnect with the needs of our times and create those activities uniquely suited to create wealth in our episode of capitalism” – Shoshana Zuboff
Shoshana Zuboff is one of the premiere thought leaders on what is happening with individual customers and business logic at the moment – based on a historical understanding of business, capitalism and customers.
Find more here http://www.shoshanazuboff.com
This article is not my thinking. The entire post is sections of transcript from Zuboff’s talk at the Fundación de la innovación, Bankinter in 2008. One of the most content rich and valuable talks I’ve come across on this subject. I’ve decided to publish the transcript to make the content of the talk even more accessible as it provides valuable insight into understanding problems a lot of companies are finding it hard to get on top of. Enjoy!
The numbers are a reference to where in the video the quote can be found.
3.58 “In the history of capitalism the winding down of one cycle of accumulation is typically overlapped with the emergence of a new kind of cycle. Now historically these cycles have been driven by scale and scope. we went from the Italian city states to the Dutch union of provinces to the British empire, and ultimately to the American continent. And in every one of these economic revolutions the preeminence of capitalism shifted to these new regions or nation states.”
“I think it [the financial crisis of 07/08] represents a part of a larger denouement [last act, finish, ending, culmination]. Of what has been the dominant model of capitalism in the 20th century. Drawn from the American scene, American business models and practices. Practices and models that were invented about a century ago to serve a very different kind of society with a very different set of needs.”
THE CONTENT OF CAPITALISM
4.40 “…these cycles of capitalism have also been driven, not just by scale and scope, but by content, by the changing nature of the content of capitalism.”
05.03: “What do I mean by content. I mean the specific kinds of business models and practices that create wealth in any given era.
05.30: “We are talking about how capitalism moves as it develops a new understanding of the unmet needs within the populations of each era. And how it finds the new practices and the new models that are going to realize untapped economic value in these needs of the populations of this era.”
06.00: “So if you think about it from the point of view of the content. Not only has the preeminence shifted around the world over the last several centuries. But we’ve shifted from the mercantile capitalism of the Venetian merchants and the Genoise traders. To the Dutch and their trading, through the proprietary capitalism, the early factory owners and workshop owners [of the British empire]. And ultimately to the mass production, mass consumption managerial capitalism of the American continent which has dominated the 20th century”
THE PREMIUM PUZZLE
14.44: “Solving the premium puzzle is one of the things that have driven capitalism for centuries. In every generation what used to be a luxury becomes a necessity – a necessity is anything that a person feels that they need for social participation. But no one has enough money to afford it. So the way we brake through is by solving that premium puzzle, by figuring out how to give people the new stuff they want at a prize they can afford.”
30.25: “The chasm is where we live today. We are living at a moment in economic history where people have changed more than the business organisations they must depend upon for consumption and for employment. A hundred years ago there was an emerging society of mass consumers. People who had basically no stuff, a little more than discretionary income and they wanted a lot more stuff. And breaking through the premium puzzle a hundred years ago ment inventing new ways to get people stuff at a prize they could afford. Thus was born mass production. Mass production was an economic logic that had never been discovered. And the one who finally put together the pieces of the premium puzzle was Henry Ford. Now a lot of the pieces were out there. But there was a day, in 1913 in the life of the 3rd incarnation of the Ford Motor Company when the engineers and the tinkerers and Ford himself looked up at each other at the end of the day that they had broken through to a completely virgin economic territory. And the economic logic in that territory was high throughput low unit cost.”
16.05: “A lot of people talk about creative destruction. But creative destruction is easy, we don’t have to do anything for creative destruction, history does that for us. The much bigger and more important part of Schumpeter’s theory of capitalist development and model of economic revolution has to do with the creative response. That’s what we do as human agents. The creative response is when we recombine new and existing resources in wholly new ways to better meet societies need. And this is what he felt was the watershed between epics, between eras, between chapters of capitalism.”
17.58: “What happens now, if we can take the logic of those lifeboats [lifeboat here is used as an analogy for the ipod and and ipad] and asset migration, and realignment and institutional bypass and realizing cash and hidden economic value. And if we can apply that logic to the stuff that is absolutely essential for our daily life as individuals in modern society. I’m talking about health care, I’m talking about education, insurance, bank, financial services, transportation, travel, housing. In every single one of these industries, in just about every region of the world people are hurting because they are not being served in a way that they need and the way they are yearning for. So what happens if we can release the untapped economic value in those unserved needs?”
38.35: “So what we are really talking about here is the fact the a hundred years ago we had a creative response: … The new thing, assets taken out of the old model, reorganized to do new things for new people and new needs. Creative destruction in the early 20th century led to a creative response which was the rise of mass production to meet the need of the new mass consumer. So the question becomes; what is the creative response for our times? I believe that we are looking at an entirely new definition of commerce. A commerce who’s purpose is to enable individuals to take their lives in their own hands and live their lives as they choose. ”
55.30: “Ultimately when we are talking about the creative response that is needed to fully jump start the next cycle of accumulation and move into the uncolonized white space and reconnect with todays unmet needs. we are talking about asset migration”
WEALTH – DESIGNING COMPANIES TO KEEP CUSTOMERS OUT
32.10: “So the deal for high throughput low unit cost was [externalizing the] customer; you are now an exogenous [outside] variable to the business process, you’re on the outside of the business model. The only thing we owe you is efficiency. Because efficiency is what is going to make it possible for us to standardize and give you a low cost [product]. Now that model was extremely successful; concentrated assets, commmand and control, managerial hierarchy, standardization, interchangeability, consumer as an external variable. Very successful, created massive wealth, unprecedented wealth.”
33.00: “The big economic story of the 20th century is wealth. That wealth had an unintended consequence; it created new kinds of people. People who are more educated, connected, travelled, informed, opinionated than any human beings that have ever walked the earth.”
THE NEW SOCIETY OF INDIVIDUALS – SANCTUARY, VOICE AND COMMITMENT
34.00: “This is what I call the new society of individuals. The hallmark is a sense of psychological uniqueness … my destiny is not born in my blood. I am the origin of my meanings, I am the origin of my destiny. I think of this with thee headlines: sanctuary, voice and commitment. Sanctuary: I want to have control over my life, I want to be the origin of my choices. Voice: I want to have influence unmediated, and I want it to matter. Connection: I want to be connected to other people, but not with the conformity demand of the old feudal system, still characteristic of our large organizations.”
37.00: “What does this mean for capitalism, what does it mean for wealth creation? One of the biggest most unstoppable forces in the modern history is consumption. Consumption is here to stay, that we can feel confident about. The thing is though, consumption change. The underlying structure, nature of consumption changes fundamentally over the centuries. And what I’m suggesting is that this new society of individuals has now fundamentally altered the structure of consumption, the dominant structure of consumption. To what I call an individuated consumption. And where as the low cost product and services of the 20th century, met the needs of the old mass consumer, they no longer meet the needs of the new individuated consumer. We need new kinds of entities operating on a new enterprise logic, that are going to break through the premium puzzle. And provide the new individual with the kind of individualized dignity, advocacy and support that they are looking for to live their lives as they choose to live them.”
CHASM – SUBJUGATED – STILL THE OLD BUSINESS MODELS
39.50: “What has changed is that today we are living in the context of a technological infrastructure of digital technology that gives us the means for infinite connection, infinite reach and infinite individualization. In my view the revolutionary potential of our digital infrastructure is still subjugated by and large to the old business model. Still by and large subjugated to the means and purposes of the 20th century business model. But if we can migrate that to a new context, a new social framework, a new productive framework, a new commercial framework we have the means in which to cross this chasm, to realign essential assets with the new individual, in the ways that they need, in the ways that they want.
42.40: “That shows people rushing to colonize those little pieces of light that are going to provide the bypass, the re-alignment, of assets that they have been waiting for. And meeting those needs that are full of hidden economic value”.
THE SOCIAL PRODUCTION OF COMMERCE
47.30: “The idea that we are going from concentration to a distributed capitalism. Distributing assets, configuring them around individuals and their communities, so that there is intimacy, there is dialogue. We are leveraging technologies, we are leveraging social networks. We are actually now creating the social production of commerce. We are shifting from economies of scale to economies of trust. We are shifting from the consumer as an exogenous variable to a we, to advocacy. To guess what: If I serve your needs, if I align with your interests, I get rich.”
FROM VERTICAL SUPPLY CHAIN TO THE FEDERATED SUPPORT NETWORK
50.00: “What are the new entities? We are talking about a new type of enterprise logic, that is global in scope if it wants to be. That is speaking to the new society of individuals. Which as we have seen is already a global phenomenon. I call this new entity a federated support network. Why federated? In the end of the 19th century, before this big concentrated thing came along, how did companies coordinate amongst themselves? They formed federations [each doing their own part of a value chain]. We only form these big concentrations, these big vertically integrated conglomerations as a coordination mechanism… Managerial capitalism was named after the coordination mechanism for the business model. We don’t need that coordination anymore. It was the solution. We’ve got the coordination mechanisms now, that if we had had them in 1913 we wouldn’t have formed these great big concentrated behemoths. We would have remained federated.”
54.10: “think about the federated support network as branded constellations of enterprises. United in a shared commitment to provide particular qualities of support to heir communities of constituents. Who’s unmet need are now holding the keys to realizing unmet economic value. We are talking about the asset migration. We are not talking about spending the next umpteen years trying to change business as usual. We are going to look for those institutional bypasses. We are going to send out the life boats, we are going to migrate the assets, we are going to reconnect and when we do this the new system draws profit to itself. It draws cash out of people like a magnet draws magnet filings. And it draws more assets out of the old models where it is currently trapped, like a magnet draws magnet filings.”
CONCLUSION – SUMMARY
57.35 “We face an unusual historic opportunity, right now, to see these pieces brought together in a new kind of constellation, in a new kind of enterprise logic, to reconnect with the needs of our times and create those activities uniquely suited to create wealth in our episode of capitalism”