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Understanding 21st century capital …. and why Sony doesn't have it….

In light of some recent criticism of criticism I’ve made of media companies, I thought it best to roll this posting from last December forward.

In the 20th century, financial resources were the primary capital of choice, allowing organizations to enter, dominate and evolve in their marketplace over time.

Today, financial depth doesn’t cut it — it’s the abiliy to respond to rapid change that is the primary asset. And sadly, there are many organizations who don’t have a good balance sheet.

Simply look at Sony with the recent “root-kit” debacle, and you realize that while a company can have all the money it needs, it won’t survive if it doesn’t evolve at the fast pace the world demands today. If Sony is guilty of anything, it is the fact that it has seized up with an organizatlonal sclerosis that has clogged it’s ability to respond to change. The customers have moved on to a different world — and Sony just doesn’t seem to understand that.

Sony has been spending money trying to protect old markets, rather than inventing new ones. It’s been busy trying to build on past glories rather than fighting new battles. It has spent its energy in fighting a war with its customers, rather than building them great things. It has sought to grow by buying, rather than expanding through creativity. It has done just about anything wrong that you could ever do.

It is dying.

Will it recover? Can other organizations suffering from similar degrees of corporate clotting survive?

Perhaps — if they refocus their energy by using the only form of capital that is important. Capital that isn’t monetary by nature, but which provides an organization with the resources to focus on change as the key success factor.

What are those attributes? There are ten of them:

  • experiential capital: In a world in which Apple can toss out a $1/2 billion market overnight in order to enter a new one (with the move from the iPod Mini to the iPod Nano) — it’s critically important that an organization constantly enhance the skill, capabilities and insight of their people. They do this by constantly working on projects that might have an uncertain return and payback — but which will provide in-depth experience and insight into change. It’s by understanding change that opportunity is defined, and that’s what experiential capital happens to be. In the future, it is one of the most important assets that you can possess.

  • a strong agility index: Slow paced organizations simply won’t survive. Those organizations that have a high-agility index — that is, the ability to suddenly and dramatically shift course — will be those who will thrive in the years to come.
  • strong skills accessibility capability: Talent, not money, will be the new corporate battlefront. Simply put, there is so much happening that no one person or organization can know everything there is to know. With ongoing rapid knowledge growth, instant market change, fast-paced scientific discovery and constant skills evolution, getting the right people at the right time for the right purpose will be the key to succesful change.
  • massive creativity capability: in my Masters of Business Imagination Manifesto, I suggest that it is the ability to see the world differently, and the skill to imagine how to do things differently, that will be more important than any other career skill. When product lifecycles are disappearing, and market longevity is mattered in weeks, not years, the ability to think, adapt, and imagine will be the foundation to provide for necessary change.
  • generational insight: We are set to see the emergence of the most unique workforce in history, with the longest age-span to have ever occurred. Boomers won’t retire, and kids won’t want to get hired. The result will be a workforce that is transient, temporary, shifting and flexible. And it will be those organizations who can match up the experience and wisdom of the aging baby boomers with the insight, enthusiasm and change-adept younger generation who will find the most powerful force to be found in business — an organization that is fuelled by the pure energy of change-oxygen.
  • collaborative intelligence: Forget the idea of having a strategic planning department, and think collaborative culture instead. Take a look around you, and ask yourself, who is succeeding today? It is those organizations who are plugged in to the global mind that surrounds us. They’ve dropped any pretense that they can create the future, and instead realize that it the future is being developed by everyone all around them. They have come to learn that their role isn’t to plan for that future, but simply to listen to it, plug into it, and plug their growth-engine into it.
  • complexity partnerships: in the 20th century, organizations focused on hiring the skills that they needed to get the job done. You simply can’t do that today — skills are too fragmented and too specialized. That’s why successful organizations have mastered the art of complexity supply and demand. They provide their own unique complex skills to those of their partners who need such skills. And when they are short other skills, they tap into the skills bank of their partners. By selling and buying skills with a broad partnership base, they’ve managed to become complexity partners — organizations that spend most of their time focusing on their core mission, and spend less time worrying about how they are going to do what they need to do.
  • global innovation traps: a recent blog post featured a clip from a keynote where I spoke about the “infinite idea loop.” Companies that understand that all future innovation comes from the ability to tap into the loop will thrive; those that follow traditional innovation models, self-centered and insular, will find that their creativity and uniqueness has been smothered
  • forward oriented intelligence: The key premise of my book, What I Learned from Frogs in Texas, is that too many organizatons have lost their orientation to the future. They are too busy complying, restructuring, administering and reorganizing to realize that their world is dropping out from underneath them. The frogs learned out the hard way that if you don’t have good insight into what comes next, there is going to be a big problem and it’s going to be ugly.

  • depth of mission: We’ve all known for years what has been wrong with Sony — too much inter-company squabbling, turf-wars, and inward focused turmoil. Along the way, Sony lost sight of its mission to build great stuff for people who wanted great stuff. If you can have a company that has a simple mission, a clearly stated goal, and a passion and purpose to achieve it, you’ll be able to put in place the most critically needed asset — a team that is oriented towards success.

It’s clear that Sony does not possess many of these assets. It doesn’t realize that it no longer controls its future — its’customers do. It isn’t plugged into the global innovation loop — instead, its’ efforts are spent on trying to define the future that it would like to have. It’s got a bunch of middle-aged baby boomers in charge who don’t have a clue as to how the world is unfolding. (And I’m a middle-aged baby boomer). And I can only imagine that the recent experience has destroyed any sense of mission among its staff — its people are dispirited, disenthused, angry and full of recrimination for a future that they think has gone wrong. (Well, it has, because it has done all the wrong things.)

I find it really depressing that a company as big and creative as Sony could have lost its way. On the other hand, I continue to encounter too many people and companies who are busy sleepwalking into the future, just like Sony.

Remember — it ain’t the money, it’s the ability to change that is most imporatnt asset for the future.

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