Prospects for American Renewal: Will the 2012 Elections Turn the Tide?

The decline of the US is pretty well-accepted now by all but the most fervent believers in American exceptionalism, with books and articles on the decline appearing regularly. The Foreign Policy magazine’s website features a “Decline Watch” column reporting the latest grim statistics, while Steve Pearlstein, The Washington Post business editor, asks “Can we Save American Capitalism?”

True, the US remains a global superpower, with the world’s most lethal military, the biggest economy, best college system, and some of the globe’s most innovative industries, like Silicon Valley. And with the recent new oil and gas discoveries, we are now a net energy exporter – albeit of carbon fuels that add to global warming.

The flip side, however, is that we also lead the developed world in poverty, homicides, incarceration, bankruptcies, CO2 emissions, low life spans, obesity, and mental illness. With only six percent off the world’s population, we control 90 percent of the world’s wealth and produce half of all pollution. The concentration of American wealth and the decline in social mobility is roughly comparable to the Gilded Age that preceded the Great Crash of 1929, and it only persists in a few developing nations.

What’s the cause of this decline? Pick your choice of the following supposed weaknesses, depending on your personal values and beliefs.

Gridlock between Republicans and Democrats demonstrates a deep conflict over the values of capitalism versus community. Democrats claim the wealthy now own most of the nation’s assets and have a quasi-corrupt lock on politics, while Republicans are convinced government bungles everything and is taking over our lives. Elegant solutions are available, as I have argued in a concept of “Democratic Enterprise,” but prospects look dim. Absent some resolution of this crucial stalemate, it’s hard to see how the US can move ahead.

Among industrialized nations, the US places near bottom on the indicators deemed crucial to competitiveness:   K-12 education, health care, infrastructure, social mobility, and income inequality. During past years, the top one percent of earners gained about 90% of all national income.

Polls show that many Americans are woefully ignorant. Sixty percent can’t name the three branches of our government. About half do not believe in climate change or evolution. Sixty percent of adults have never read a book since leaving school.

This growing tension between American ideals and reality cannot continue without entering a state of apathy somewhat like the Japanese meltdown of 1990 that drags on today.  The stakes are especially high with the threat of “going off a fiscal cliff ” when trillions of tax cuts take hold in early 2013. And the big challenges of our time gather disruptive powers as we fail to address climate change, alternative energy, tax reform, decaying infrastructure, research and innovation, and endless other crises

As a futurist (www.BillHalal.com) and forecaster (www.TechCast.org), I suspect the national elections in 2012 could prove decisive. I think Obama will be re-elected as it becomes clear that Romney’s pledge to reduce benefits to the middle class while giving tax breaks to the wealthy no longer makes sense. Obama’s slump will not help, so It would be more accurate to say that Romney will lose rather than Obama will win.

A serious Romney loss could end the era of “Capitalism Triumphant” that started with Reagan and Thatcher in 1980, restoring a balance between the complementary poles of self-interested individualism versus collective social community.  Even leading Republicans say a Romney loss would be “The end of the Republican Party,” although it would merely mean the end of the “Revolt of the Rich Against the Poor.”

With Obama’s strong political support for being likeable, it’s possible a more balanced political environment could unleash his considerable skills at collaboration and uniting Americans in common purpose. We also forecast the US stock market will reach new highs about 2014 in anticipation of the next economic upcycle starting about 2015, driven by an explosion of e-commerce around the globe and other major innovations. Things could look very different in a few years as Americans find new sources of renewal and vitality.

At the Eye of the Storm: Advice From the Future

        The “Crisis of Capitalism” has entered a more quiescent phase, leaving massive threats looming overhead like swords of Damocles. After being rocked by financial crises, climate change, political gridlock, and the Middle East in flames, the world seems to have entered an eerie calm reminiscent of the eye of a hurricane. This is a calmness we know cannot last  — the eye of a storm always gives way to renewed terror. The only question is, how bad will it get and what happens next? Here are the trends:

FINANCIAL CRISIS   The imminent implosion of the EU is being held at bay – but an eventual collapse is considered quite likely. Astute observers claim the default of Greece is almost certain and would have the same effect that the fall of Lehman Brothers had on the 2008 financial crisis in the US. George Soros thinks riots are “inevitable” in the streets of America.

ENVIRONMENT    The threat of climate change mounts along with the growing ranks of deniers – even as seasons are changing, the weather becomes weird, and animals are migrating north. For those who continue to trust science, 98% of climatologists expect a rise of 4o-10o F in global temperature and 3-6 ft in sea levels.

POLITICS   The US seems stuck in gridlock mode, with no hope of resolution until the elections in late 2012 – if then.  Polarization is so intense that Fidel Castro got off his deathbed to call the Republican presidential debates “the greatest stupidity ever.”   

STOCKS  Reflecting all this uncertainty, stock market averages have recovered to their former highs – but the trading volume is extraordinarily feeble because most investors are baffled. Some breakthrough could send stocks soaring or a new calamity could plunge us back into depression.            

TECHNOLOGY     The pace quickens as the Information Technology (IT) Revolution unites the world into a great web of shared knowledge exploding before us. The Collapse of Communism, the Arab Spring, Russia’s challenge to Putin, the Tea Party, and Occupy Wall Street showcased how IT is relentlessly challenging power. People around the globe are now connected by almost 6 billion cellphones (80% of world pop’n.) – all becoming smart little computers using the web for almost anything.

           These growing tensions are like howling winds in the eye of a storm that must somehow be released, and one wonders what will trigger the next set of shocking events in this saga of evolutionary transition? Is the world approaching an inevitable turning point? Will the 2012 elections allow Americans to reconcile left and right in a 21st Century vision? Can the EU survive and resume sustainable economic growth? Is China likely to steer the globe into an era of state capitalism?  Or will events drive the world into spiraling disaster? 

          Without being overly dramatic, this seems to be a moment of truth. Warnings about market failures and limits to growth have been batted away for decades, and now the problem can no longer be ignored. Mike Marien and I have been studying the “Global MegaCrisis” formed by this constellation of threats (The Futurist May/June 2011). We find that people think there is a 60 percent probability of severe disasters, or even a catastrophic loss of civilization in major parts of the globe.

          Futurists like myself have long tried to understand today’s state of affairs by comparing social evolution to human maturity.  John Renesch recently shared survey results showing that most people consider society’s present state of maturity roughly akin to the adolescence of the typical teenager – bursting with physical power but hopelessly limited by a lack of awareness and a sense of responsibility. George Soros thinks we have moved into an “Age of Fallibility.”

          Whether a teen or an entire globe, the message in these crises remains much the same – grow up or die.  As any adult who has raised a child through the crisis of maturity understands, help is badly needed. People today generally do not see a way out of this MegaCrisis. They may know what’s wrong and what should be done in an intuitive sense, but they lack the vision and will for change.

          I suggest that we futurists pool our best insights to advise the world on how to surmount this mess. To get started, here’s my 5-point summary of strong advice that good foresight can offer. No mincing words because the situation is critical. Just tough love from futurists.

STOP FIGHTING AND START COOPERATING   Cooperation is crucial in today’s knowledge economy because knowledge increases when shared. That’s why business managers have longed practiced “coopetition” – cooperating even with competitors to produce better results for all. Today’s battles in the US Congress, between labor vs management, the US and Iran, Israel and Arabs, etc. are outmoded relics of a brutal past. Conflict is unfit for a complex world facing enormous challenges. Yes, there may times calling for real-politics, but drop the macho attitude.  Articles in the Harvard Business Review claim a shift is underway from competition to cooperation, and IBM is defining the global corporation in collaborative terms.

REFORM INSTITUTIONS   Big Business and Big Government badly need to be transformed for a new world. Because collaboration is now seen as productive, the rise of corporate ethics, social responsibility, the triple bottom line, strategic alliances, women entering management, Internet transparency, and other trends are coalescing into a broader model of business – “Democratic  Enterprise.” At the World Economic Forum in Davos, Henry Blodget of Business Insider proposed a “’shift to a more balanced focus on profit, employees, and customers.” Among the Millennial youth, 92% think business should help serve social needs as well as profit.   Ironically, the solution to government bloat is to instill a healthy dose of free enterprise into the public sector, as many have argued.

GREEN EVERYTHING  Please stop delaying the inevitable and embrace the “Greening of America” as the great opportunity it really is. Blocking carbon taxes, pushing oil exploration, fighting the EPA, and denying the science behind climate change are doomed. The world is in a historic shift away from carbon fuels, and an industrializing world is drowning in pollutants. China, Germany, and much of Europe illustrate how renewable energy, conservation, green taxes, ecological design, better cars and buildings, and smart grids offer huge opportunities for sustainable growth.

PLAN AHEAD   The belief that an invisible hand will magically find market solutions to complex problems is dying (thankfully) with the continuing crisis of capitalism. In contrast, China is thriving precisely because the state insists on planning for a difficult future. Americans should yield their fear of government control to invite federal and state agencies to engage business, labor, academia, and other stakeholders in constructive planning to reach their collective goals. “Bottom-up strategy” could realize the promise of democracy by bringing it into everyday life.   

CELEBRATE LIFE  That sense of solidarity one feels during the Olympic Games is essential for a functioning society, and it would help enormously if the world could unite occasionally in celebrating the gifts we all share.  If nothing else, the Search for Extraterrestrial Life has shown how alone the Earth is in the great scheme of things, so we bear responsibility to make the most of our special place in the universe.

          These are just my rough ideas, and I know they may seem optimistic. Advice is always treated with suspicion – even though it may be exactly what’s needed – yet sound advice is often heard at a deeper level. I invite you to add your thoughts in comments below or at Halal@GWU.edu. I’ll do my best to integrate into an improved statement. To have an impact, I think our ideas have to be condensed into a few highly salient and incisive points – the TEN Commandments, Covey’s SEVEN Principles, or possibly our “FIVE Bits of Advice From the Future,” or “Five Strategies for the Future,” etc.

          Futurists can claim a special authority to speak for the future because we represent a unique intellectual resource on how to avoid disaster and invite success. We are the reporters, scholars, consultants, advocates, and general constituents of the world ahead, so we have an especially valuable perspective. Let’s offer our best advice at this crucial moment in the eye of the storm.

If Great Corporations Could Lead: How to Unite Right and Left and Save the World

What if our great corporations could direct their enormous capabilities to solving the global mess we have all created – financial crises, depressed economies, political gridlock, climate change, and endless conflict? Yes, business is the engine driving economic progress, but American firms outsource work abroad while jobs are scarce at home. They sit on $ 2 trillion in cash while the economy remains depressed. And they give billions to sway votes. The Occupy Wall Street Movement has a point  – many common business practices do little to help the nation, and they may do serious harm.

Our economy was once powered by the belief that “What’s good for General Motors is good for the USA.” In addition to making money, suppose Apple, IBM, GE, Google, Microsoft, Exxon, and other corporate icons could expand their vision to hit this problem head on? What would a 21st Century version of progressive corporate management look like? The following “Vision for General Motors” was produced in my Executive MBA class to illustrate a way out of this mess.


A Vision for General Motors

GM plans to regain global leadership by reinventing the modern corporation for the 21st Century. We hope to accomplish for auto making what Apple did for computers and electronics, and thereby help move the world to a sustainable economic system.

Our first goal is to invite the world’s most creative car designers to offer their best ideas for hybrids, electrics, fuel cells, and internal combustion engines in competitive forums.  This will include other breakthrough technologies in self-driving cars, lightweight bodies, solar panels, mass transportation, and anything else that will make a difference. GM will use these ideas to develop a variety of advanced models that compete internally for further development, and the most promising will be produced.

We will work with the UAW to automate routine tasks, moving employees into advanced positions that are challenging and more productive. Our workers, office staffs, engineers, and managers will be encouraged to form self-managed teams that are responsible for performance, rewarded accordingly, and given wide latitude. Teams that succeed will receive attractive bonuses and recognition, while those that fail will be coached and moved to other applications. Employees will also be offered GM stock at preferred prices to make them partners in the enterprise. Wethink this structure of “internal enterprises” working in a “self-organizing system” will encourage innovation, ensure accountability, and drive economic growth.

Our dealers, car buyers, suppliers, local and federal governments, energy companies, environmentalists, and others concerned parties will be consulted for advice, and they will also be offered GM stock at preferred rates. We intend to involve all constituencies in GM life, creating a community serving all interests  – fulfilling work, customer value, public service, and attractive financial rewards. This strategy is guided in part by the innovative work of our Saturn division, which pioneered in collaborative stakeholder relations years ago with good success.

For example, we will work with car dealers to transform the showroom into an exciting display of great cars and sound advice at fixed prices, rather than bargaining with manipulative sales persons. Like Apple stores, “GM Stores” will offer useful information, help buyers find solutions (even if it’s not GM), show how various features work, help you test drive, and answer questions. Refreshments will be offered and special events held to make GM Stores inviting and profitable.

These partnerships will broaden GM ownership, and thereby avoid the stock market’s demand for immediate gains. We think this may lessen the risk of financial markets, and help make GM stock a more stable as well as an attractive investment for all holders. We will accordingly expand our management systems to include representatives of all stakeholders on the Board of Directors, making GM the first “democratic” corporation in the world.

By bringing these various groups into GM ownership and management, we intend to harness the ideas, resources, and support of our entire corporate community to form a more productive whole. With the world facing unprecedented challenges of globalization, growing needs for good transportation, severe environmental threats, a transition in energy, and mounting dissatisfaction with the economic status-quo, the time has come for a broader definition of corporate management. As before, General Motors intends to lead the way.

 Only Requires Leadership

This type of collaboration requires skills most CEOs lack today, and it may take convincing to get past decades of distrust. But many great companies now practice elements of this basic idea, illustrating how creative thought could change this situation we seem to be stuck in. Wells Fargo, Google, Johnson & Johnson, Nucor Steel, Whole Foods, and a host of other creative firms have been developing this “democratic” form of enterprise for years. The rise of corporate ethics, social responsibility, the triple bottom line, strategic alliances, women entering management, and other trends are coalescing into a broader model of business based on stakeholder collaboration. Speaking at the World Economic Forum in Davos, Henry Blodget of Business Insider proposed we “’shift to a more balanced focus on profit, employees, and customers.”

This idea of uniting the business firm – bedrock of all economies – into a collaborative socio-economic system would change everything. Social interests could be integrated into business in a productive way. Firms would compete by collaborating to serve social needs as well as making money. Those that excel would make MORE money while also serving society better. And we would need less government as the corporation becomes self-regulating.

A key feature is that this vision unifies right- and left-wing ideals – free enterprise and social community –  so it could help resolve political gridlock. If Americans could realize the potential of this economic breakthrough, we could reinvent business and government, turn the economy around, and possibly even lead the world again. It all starts with strong leadership, and that could emerge anywhere.

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William E. Halal is a business professor at George Washington University, Washington, DC., and president of TechCast LLC (www.TechCast.org) His most recent book is Technology’s Promise: Expert Knowledge on the Transformation of Business and Society (London: Palgrave Macmillan)

Could Americans Outgrow Capitalism?

           Yes, I know it sounds loony, hyper-liberal, Marxist, and unrealistic to think that true-blue Americans could actually revolt against the system we all grew up with. Capitalism is cherished in America, the source of economic creativity, an abundant life-style, the freedom for anybody to make it, and countless other blessings. Then why are Americans of all types – young, old, public interest groups, unions – flocking to Occupy Wall Street protests that could grow far bigger?

          And, sure, it’s only the left-half of the country, but conservatives insisted that Wall Street should be allowed to fail, or at least broken up, during the 2008 economic crisis. Why shouldn’t the right join in? A recent flood of news articles and blogs has made it clear that the present system in doing a great job for the top 1% of Americans – but a terrible job for the other 99%.  As Bill Maher asks on his TV show, “Somebody has to explain to me why the other 99% support this system?”

          The alternatives are not just Socialism, which has largely failed, or the State Capitalism of China, with its loss of freedom fomenting their own incipient revolt. Nations around the world practice a wide variety of market systems, and some – like the Nordic countries – perform far better than ours in many ways. Americans have a great opportunity to invent a distinctively different economic system that unifies our two central ideals — Free Enterprise and Democracy.

          Google, Johnson & Johnson, Nucor Steel, GM Saturn, Whole Foods and a host of other creative firms have been developing a “democratic” form of enterprise for years, although the profound implications go unnoticed. The rise of corporate ethics, social responsibility, the triple bottom line, strategic alliances, women entering management, and other trends are coalescing into a new form of business based on collaboration, Lots of variation, of course, but this central idea could unify workers, customers, the public and other stakeholders into a productive whole. You could call it a “democratic corporation,” “collaborative enterprise,” “economic democracy,” and many other terms. *

           If Americans could realize the potential of this economic breakthrough, we could lead the world again. The concept of uniting the business firm – bedrock of all economies – into a collaborative system would change everything. Social interests become integrated into the economy in a productive way. Firms would compete by collaborating to serve social needs as well as making money. Those that excel would make MORE money, while serving society. We would need less government as the corporation becomes self-regulating.  And Wall Street could shed its fling running an economic casino to resume its rightful service role providing secure capital.

          Obviously, nobody knows how such an economic system would really work on a national scale, and it may be that Americans don’t have the stomach for such a challenge. But our present way of life is likely to change under the pressure of economic recession, world-wide competition, climate change, an energy crisis, and other yet unknown threats as globalization runs its course. This is the time to think about transforming our economic system, and the key is to resolve the nagging conflict between the self-interest of capital versus our Democratic heritage.
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*  Halal., “Business Collaboration Could Transform the Economy,” Christian Science Monitor (Oct 6, 2009)

Wildfires, Brush, and Biofuel

With all the depressing news of raging wildfires and killer tornadoes in the Southwest USA, the threat of climate change is now real, but where are the solutions?  After all, this can only get worse.  The IPCC warns that, even if action is taken to reduce greenhouse gases right now, the enormous momentum of the Earth is almost certain to raise global temperatures another 2-3 degrees, which would be calamitous.

This means we need workable solutions that can be implemented at the grassroots. For instance, wildfires are propagated by dry brush  – but brush is cellulose and it can be converted into biofuels.  In an ideal solution, we would develop “brush sweepers” that operate like giant leaf sweeping machines, only designed to sweep up dry brush.  They would be driven by operators, and would be assisted by ground crews who break up large limbs and shrubs into smaller hunks able to be captured. The collected brush could then be dumped into nearby vats, where specially designed bacteria being developed now can convert this cellulose into ethanol and other biofuels.

It would also be good to bound homes, offices, and other valuable real estate within a ring of roads that separate the protected brush-free areas from the rough environment. The land within the roads would be protected by brush sweepers, while the land outside could be left free to allow wildfires to run their course. A distance of 100-200 yards between the road and any buildings would probably be enough to keep fires at bay.  The circle of roads would allow maintenance crews operating brush sweepers easier access, and they might prove a convenient asset to communities. 

This may not be feasible for various reasons, but it illustrates the potential for finding good solutions to tough environmental problems that are likely as climate change continues.  Neighborhoods in threatened areas could avoid the dangers of wildfire and simultaneously create a supply of biofuel. Given the horrible scenarios for extreme weather being flashed about today, we are going to need lots of creative solutions.

What’s Next? Will Emerging Technologies Help?

This is a confusing time, with the US in gridlock, the Great Recession rolling on, killer tornadoes and forest fires dealing a bitter dose of climate change, post-Bin Laden terrorism possibly spreading to Yemen and other failed states, and more surprises sure to come.

It’s tempting to wait it through, but indecision is suffocating us in a dark cloud of fearful anticipation – like being caught in the eye of a hurricane waiting for the other half of the destruction. Something has to break in the US soon – either Republicans and Democrats strike an historic budget deal to move ahead – or an American financial crisis could trigger another global crash. And how long can Americans ignore the threats of climate and energy while others lead the Green Revolution?

Our work on emerging technologies at TechCast offers a more penetrating grasp of what’s likely.  Economics, politics, and social values may swing madly, but technology forms the foundation of society and the force driving all this change. Today, the continuing explosion of sophisticated IT devices, websites, services, videos, blogs, and social networks is connecting the world in a noosphere of virtual life that is becoming increasingly intelligent. Lots of dumb behavior, of course, but the intellectual capabilities are vast. Take a quick look at our Forecasts sorted by Mostly Likely Year and you will get the message – a huge cluster of IT and E-Commerce breakthroughs is likely around 2015. As one small example, about 6-7 billion people will soon use cell phones with internet access.

No forecast of emerging technologies is perfect (ours certainly are not), but this data provides a fairly solid basis for thinking about the big changes that are coming.  I think it means we should expect a heightened level of global interaction in all aspects of life – international business and economics, social relations, political speech and action, intellectual work, and everything else. I know it’s been said before – but the best metaphor for what’s coming is the emergence of a global central nervous system, a global brain with its own laws of knowledge, behavior, intelligence, and even consciousness.

Just as the Arab Spring shocked us, I think we can expect to see more political upheaval as these forces spread transparency and raise aspirations around the globe, spurred on by the mounting Global MegaCrisis. The path from the collapse of Communism, to the empowerment of women, and now to the Arab Spring forms a well-defined trajectory to some type of new global order we do not yet understand, and I suspect we are not half way there yet. Will China fall next? Will corporations and governments be forced to make the structural changes in governance that are badly needed? What big changes are likely to shock us?

What are the Keys to Apple’s Success in Emerging Technologies?

Apple did not come by its present success easily. Before the iPod, iPhone, and iPad became profitable icons of high-tech fashion, Steve Jobs suffered a long series of failures. Apple’s Pippin game player, the Next computer, Apple TV, the Lisa computer, the Newton PDA, and the Apple mouse are among the many products that are barely known because they were dismal flops. For many years, there were serious doubts if Apple could survive the battles it was losing to competitors like Microsoft.

In contrast, Apple is now expected to sell 30 million iPads in 2011 — two-thirds of all tablet computers sold globally. Although the iPhone is fighting off 90 different smart phones, Apple’s sales are up 60% and could reach 100 million iPhones in 2011. The source of this staying power is seen in the fact that the Apple iPhone has the highest consumer satisfaction scores ever recorded. Apple’s profits exceed those of IBM, and it is considered one of the most Innovative and valuable companies in the world, Such stunning success always raises questions over its origins.

How did a struggling company run by a charismatic but somewhat erratic CEO learn to excel in the brutal battle among emerging technologies? Can the factors of this success be identified and used to guide others?

The most striking conclusion about Apple’s rise is that Steve Jobs learned bitter but crucial lessons from failure. After years of autocratic leadership, dismal sales, and temperamental behavior demoralized the company, John Sculley became CEO in 1985 and Jobs was sent into the computing wilderness. For 12 years, he suffered losses such as the Next computer, which was overpriced and sold only 50,000 units in seven years. When Jobs returned to head Apple, he had learned to focus on good design, to treat people well, and to develop winning strategy. Tim Bajarin, president of a consulting firm, said “[Steve Jobs] would not have been successful if he hadn’t gone through his wilderness experience.”

The main lesson from Apple’s success, however, is the central importance of focusing on strong products that are well-designed for the market. Jobs is a genius at minimalist designs that integrate technology breakthroughs to fill a newly emerging need with unusual style. He thinks success requires “listening to the technology” in order to “discover” the potential products waiting to be invented. The result can be seen in the way Jobs describes the attraction of the iPad – “It’s like holding the Internet in your hands,” he told a crowd. “It’s so much more intimate than a laptop and more capable than an iPhone. It’s truly magical.”

This keen sense of anticipating where emerging technologies are leading comprises the central talent that allowed Jobs to create revolutionary breakthroughs like the first personal computer (Apple 1), the first graphical interface (Mac), the first Unix PC (Next), the first successor to Sony’s Walkman (iPod), the first online music store (iTunes), the first widely used smart phone (iPhone), and the first successful tablet (iPad). Serious processes are needed to closely follow advances in technologies that will impact your organization and to find creative new solutions for the market. That’s why Apple does far less conventional product research than other companies, and focuses instead on product discovery. Here’s how Jobs described his approach: If I had asked someone who only used a calculator what a Mac should be like, they couldn’t have told me. There’s no way to do consumer research so I had to go and create it, and then show it to them.”

Behind such great products, Apple thrives because it has been described as a “well-oiled machine.” Jobs learned to delegate, so his COO, Tim Cook, now runs a tight ship, and a cadre of managers and designers have learned to “think like Steve.” The company has outsourced its manufacturing operations, while 317 Apple stores are wildly popular and profitable. The Apple music store – iTunes – has expanded into a powerful vehicle for trading videos, movies, and possibly other information products.

Even with these stunning achievements, Apple faces enormous new challenges as competition among other smart phones and tablets heats up. There are at least 20 versions of Android phones alone, slowly taking Apple’s market share. In 2011, Americans will buy more Androids than iPhones.

The main issue, of course, is what happens when Jobs’ illness requires a successor? Despite claims that Apple has institutionalized practices that foster creativity, innovation, good design, and other legacies of Steve Jobs, it is really impossible to replace true genius. When Jobs returned from the wilderness to save Apple, John Sculley acknowledged “I’m convinced that if Steve hadn’t come back when he did… Apple would have been history.”

References:  See my article at Government CIO Magazine.

How NetFlix Beat Blockbuster: An Exemplar of Emerging Technologies

CEO Reed Hastings Announces Streaming Movies

Just a decade ago, Blockbuster ruled the movie rental business about the way its name implies. With 25,500 employees at 8,000 stores dispensing movie rentals and a parallel distribution system of 6,000 DVD public vending machines, it had $500 million in annual cash flow and was valued at $ 3 billion.  About 2005 it was valued at $ 8 billion. [1]

Meanwhile, Netflix was using the postal service to distribute DVDs, and it didn’t seem to have a chance.  Founded in 1997 by Reed Hastings, its prospects of surviving battles against Blockbuster, Wal-Mart, Amazon, Google, Microsoft, and other competitors looked so poor that a Wall Street analyst labeled its stock “a worthless piece of crap.”  

Yet Blockbuster soon filed for bankruptcy, while Netflix gained leadership of the industry. Blockbuster lost $518 billion in 2010, running $ 1 billion in debt, and is closing most outlets. Netflix gained 16 million subscribers by running a well-executed operation and streaming movies online. The company earned $116 million in 2010, and its stock soared from $11 in 2005 to above $200 today, making Netflix worth about $13 billion. [2]

How did an upstart like Netflix succeed in beating an entrenched opponent like Blockbuster? It took good leadership, of course, but fundamentally it was because NetFlix executives understood that an emerging technology was rapidly changing the delivery of movie rentals. Hastings developed a strategy of Internet streaming, convenient customer service, and a virtual organization to deliver it cheaply and flawlessly. John Doerr, a partner at the venture capital firm Kleiner Perkins, said “Reed was ahead of the technology curve, and completely changed the industry.” [3]

Even when only few Americans had broadband in 2000, Hastings knew that renting video cassettes would soon yield to streaming movies over the Internet. Netflix was working on a TV box that would stream movies, but it required 16 hours of download time. Blockbuster also knew it was coming but would not take the plunge. Instead, they tried to beef up sales by expanding their stores into outlets for books, toys, and other merchandise – back to the future. [4]

When faster broadband and better video compression allowed YouTube and other Web 2.0 sites to erupt on the scene about 2005, Hastings realized that the time has come to cannibalize his DVD rental business in favor of streaming video. He also knew that developing a “box” was too limiting, and that an open-source approach would allow Netflix to distribute movies on TVs, DVD players, desk-top computers, mobile phones or almost any device. To help their customers give up DVDs, NetFlix did the unthinkable – they gave away streaming movies and made it easy. [5]

The second part of NetFlix’s technology strategy was to avoid the burden of retail outlets by operating online. With only a few warehouses and offices, the company became a virtual organization with no retail stores and no sales employees. A small staff operates on what Hastings calls their “Freedom and Responsibility Culture.”  Instead of authorized vacations, sick days, and fixed work hours, people work when they choose as long as their job gets done. Titles and even compensation are up to the individual.  

Finally, NetFlix improved on Blockbuster’s lackluster service and outmoded pricing.  Blockbuster charged $5 cost for each movie, and people especially hated the fees for late returns. So Hastings used a monthly subscription that allows unlimited rentals and no late fees.  Instead of renting movies, the focus is on providing a convenient service. To make it inviting to order movies online, NetFlix developed what is possibly the best software in the industry. At a time when most websites are a confusing mess, the website is a model of clean organization and intuitive clarity.  Like most Web 2.0 sites, Netflix uses client responses to recommend movies for individual taste. They even offered a $1 million prize to anyone able to improve the rating system.

For the time being at least, NetFlix has set a new standard for the exploding market in movies and video – much the way Microsoft set the standard for desktops, the way Amazon gained dominance of book sales, and Goggle gets the majority of search. This stunning success propelled Hastings to the top of Fortune’s “2010  Businessperson of the Year” award.

What can be learned from this case? Netflix illustrates the central role that emeerging technology plays in transforming an industry. Because Hastings is a Stanford computer scientist and a Silicon Valley entrepreneur, he knew it would soon be feasible to stream movies, but he also knew the switch had to be timed quite precisely. Taking such a big risk too early would invite a bleeding-edge failure, while a few years later the field would be left to competitors. He also knew that having employees run shops, charging for rentals, late fees, etc. were outmoded relics of the past, while online service delivered by a virtual organization offered unbeatable value.


[1]  Stephen Gandel, “How Blockbuster Failed at Failing,”  Time (October 11, 2010)

[2] Cecilia Kang, “Is Dish Network’s new sidekick it’s secret weapon?” Washington Post (April 24, 2011)

[3] Michael V. Copeland, “Reed Hastings: Leader of the Pack,” Fortune (December 6, 2010)

[4] Copeland, “Reed Hastings”

[5] Cecelia Kang, “Netflix tunes in to competition in its queue,”  Washington Post  (March 6, 2011)

More Emerging Technologies

 Following up my last blog, here are more interesting emerging technologies that are likely to transform life soon:

Thought Power

 

Really Smart Phones: Google, Intel and other companies are leading the way to phones that talk, do intelligent search, and more.

An intelligent world is forming all around us. With continual gains in computer power, bandwidth, and good AI systems like GPS navigation, we are likely see smart phones that listen, talk, and solve problems. Intelligent search that provides precise answers to difficult questions. Intel is working on smart phones that are aware of their surroundings and act as virtual assistants. The company’s CTO, Justin Rattner, said “Within 5 years, smart phones will be aware of the information on your laptop, desktop, and tablet, and they will use that knowledge to help guide you through the day.”

Google is using AI to improve search results. It is using speech recognition to take instructions by voice and respond in kind. They can automatically translate among 57 languages. Google Goggles lets an Android phone recognize an image. Eric Schmidt, Google’s CEO, said: “AI might remind us of appointments and connect us with friends. Imagine a future when you don’t forget anything because the computer remembers. You are never lost. Never lonely.” Well, the latter may be asking too much.

Thought Power: Using brain-computer interfaces, scientists have taught a monkey to “walk” a robot by simply thinking.

Researchers at Duke University trained a monkey (Idoya) to walk on a treadmill, and electrodes were implanted in her brain to capture electronic signals. The signals were translated into computer instructions and sent via high-speed Internet to the lab in Kyoto, Japan, where the robot “Computational Brain” (CB) resides. The monkey could watch the robot on a large monitor and was instructed to control CB through her own walking motion. As Idoya walked, CB also walked at roughly the same pace with minor time delays. The lead scientist, Dr. Migeul Nicolelis, said “We have shown that you can carry brain signals across the planet to control devices in the time scale that a biological system works.”

But that’s just the beginning. The researchers stopped the treadmill, leaving the monkey standing still and continuing to stare at the video of the robot. Whereas before Idoya was merely thinking about its own walking, now it was asked to make the robot walk using its thought alone.  For 3 minutes, Idoya “walked” the robot using sheer thought power. The team plans to demonstrate by the end of 2008 that human thought can operate an exoskeleton (robotic body suit). Intelligent brain-computer interfaces enabling people to communicate mentally with distant objects and people are likely to arrive commercially in about 1 decade.

Space Tourism: First Flight Due Soon

Virgin Galactic, the space tourism venture of Richard Branson, broke ground on their $300 million Spaceport America launch facilty in New Mexico, and also tested the mother ship that will carry the space ship itself to launch. The first space tourism flight is scheduled to launch in 2011, and will take tourists paying $200,000 each into suborbital flight.

For more on  emerging tecchnology, see www.TechCast.org

Striking Emerging Technologies

Through the Technology Revolution

With the Technology Revolution heating up very quickly, I thought a quick summary of some technology breakthroughs we have been following at www.TechCast.org would be interesting. The TechCast Project at George Washington University pools the knowledge of 100 experts globally to produce authoritative technology forecasts of emerging technologies in all fields. Here are a few items that highlight the striking advances that are changing the world:

High Power Batteries: To boldly demonstrate the enormous advances in batteries and efficient aircraft, the world’s first “Solar Aircraft” is planned to fly around the globe nonstop – even through the dark of night.

The Solar Impulse is the world’s first solar-powered aircraft, and it is planned to circle the globe non stop about 2012. Created by Andre Borschberg of Switzerland, the plane’s wings span 208 feet, the size of an Airbus, while its weight is about 3,000 pounds, comparable to a small car. It has 11,629 photovoltaic cells that store energy in 400 kilograms of batteries, which in turn power electric engines. The plane was tested in July of 2010 to demonstrate it’s ability to fly though the night. Bertrand Piccard, the company’s president, said “Flying by night is a stunning manifestation of the potential that clean technologies offer.” (Emerging Technologies Magazine, July 10, 2010)

Fusion Nuclear Energy: Lasers are being used to create net energy gains and look promising for commercial fusion.

The U.S. Lawrence Livermore National Lab has created the most powerful laser ever built, and expects to use 192 of these to ignite a fusion explosion of 3 million degrees Celsius in 2-3 years. If this goes well, this approach could beat the ITER fusion reactor in France to the goal of producing the world’s first net energy gain in a fusion reaction. ITER uses magnetic fields to ignite nuclear plasma, while this approach concentrates laser beams to cause a small pellet of Hydrogen to ignite.  Either way, researchers estimate we could see a commercial fusion reactor operating in about one decade.  

Good Video Conferencing: Lower costs and good quality have allowed companies like Cisco to delivery video conferencing to the masses.

Cisco is leading a host of new entries into videoconferencing now that decent broadband permits good quality images and costs are dropping to affordable levels. This also comes at a difficult  economic time when business is trying to cut travel costs. Preliminary TechCast data show 30% of all communications are likely to include videoconferencing about 2014, producing a market of $450 billion in the U.S. and almost 2 trillion worldwide. Our experts give this forecast high confidence of 72%, so it looks promising.

These are just a few examples of the wide range of emerging technologies forecast by TechCast – possibly the best technology forecasting system in the world.  Collectively, it’s a convincing demonstration that a Technology Revolution is advancing rapidly. To see more, go to www.TechCast.org