Are we all upside down?

This is one of those ‘rants’ occasionally I feel a real need to express. Forgive me, normal service will be resumed after this ‘break’.

Coffee in hand, soap box set up, let me begin.

Today, we are all struggling to transform ourselves in our businesses, even just within ourselves, to adjust to the current economic difficulties we all seem presently to be facing. We are not only confronted with the toughest downturn in modern times but with all the pressures with the speed of decision-making, technological advances that seem to just simply ‘suck up’ more of our daily lives instead of helping to resolve it. We have the pressures of global competitiveness and calls that constantly are urging us to never stand still because others aren’t.

We often become overwhelmed by the merging, acquiring, rethinking that is going on constantly around us, the changes in processes, new alliances and the sudden emergence of a ‘new kid on the block’ who sees a weakness and rapidly fills that gap overnight. Oh yes, and we still are not very good at being more innovative!

Lots more hot fixes or a more radical redesign?

These pressures compel us to focus on a host of ‘quick fixes’ but what we are failing to recognize is where all these changes fit within our longer term plans. Just finding the opportunity to take out precious ‘thinking’ time to synthesise and reorganize ourselves seems impossible, we are just getting caught up in the flotsam of live, just bobbing along.

We need to not only re-imagine but we need actually breakthroughs in our thinking, some of that bunker busting stuff to give us all a ‘concentrated’ focus on what is important to our business, to our lives and what is important to us as individuals. Where do we grow, where do we go and how do we achieve this? We can’t continue down towards the rapids that lie ahead of us, just around the next ‘economic crisis’ corner.

Where innovation and invention needs to combine

Innovation has an important part to play in this future, far more than in the past. We must try to reflect on the effect of too much cost cutting that is going on at the very fabric of our lives, the communities we live in. Nothing is replacing it, we just seem intent on knocking down what we have presently got and not offer alternative solutions, accept more ‘self-sufficiency’. This will eventually have the very opposite effect of destroying more than creating, it will extract more out of it than we will be able to replace.

Today the rush to cut budgets, to have ‘fiscal consolidation’ will not give a more flexible environment, actually it will be the very opposite. The expediency of the measures to slash and burn is not healthy. Our world has been turned upside down on us, but we must strike the balance between cutting back and building up.

Who is going to allow us the necessary time for rebalancing this mood for cost cutting and provide the leadership and eventually the stimulus for the necessary innovative thinking, so as to enable us to think about how we can rebuild, regroup. We need to seek out new opportunities, we need growth but I think it needs to be from a very different type of economic model. Politicians and mainstream economists all advocate a return to ‘normal’, which I certainly feel is doomed as ‘normal’ can’t be based on the past economic approaches or ways we have organized ourselves.

The task ahead is to do the opposite of what we used to do: we do need to save resources, improve the environment, create jobs, shift to another model for consumption, and restore confidence in the economic system – all at the same time.

Use innovation for resource saving.

Now the time has come for resource saving innovation. to extend what we already have. We need a clear political shift to the new courses that will gear us to to do that. Instead of market economy pricing favouring individuals and corporations we have to shift to ones based more on society. As painful as it is for some, we need to increase the premium onto those short-sighted people who are still insisting and  managing our economies and businesses for the short-term extracting costs. They simply cannot ignoring the need to invest, build and promote more onto the longer term potential for containing consumption as we know it today, and finding new ways of adding different lasting value. We need to invest in the future, we just can’t keep cutting and reducing.

We do need to shift our thinking onto a new type of consumption model; we must practice a more frugal type of innovation that still offers plenty of opportunity if we can break the ‘throw away’ attitudes of society and business design. We need to go back to repairing not just throwing stuff away. To do this the redundancy deliberately built to our products so one part that always seems to break before others and you can’t obtain a replacement, or you find it far more expensive to have repaired than replacing it has to be designed out from the existing product design.

Current material consumption actually is not fulfilling

Did you know that the current material consumption actually is not as fulfilling as we expected, according to work that has been undertaken by researchers, psychologists, and anthropologists. They conclude that less materialistic consumption gives a better and longer lasting feeling of ‘happiness’ than material consumption. They also are suggesting that we have hard-wired into us, that basically human beings still are inclined to want to work together, help each other, and do something for others and with others.

So the good news is that this nagging fear I’ve had that we are just shifting to islands of individuals just connected through our computers remotely seems like we really don’t want that, I do hope so. If we don’t think society really wants this then it can’t afford these billions of islands of individuals, it needs to find new ways to deepen the emerging global connecting model that works more for societies good, than the individual as it seems at present. We lose far too much of that deeper happiness factor it might seem, we become increasingly disconnected, inward and remote and that surely is not healthy for us as human beings that thrive on ‘human’ interactions.

Interestingly this is where the emerging of new connected communities gets exciting. What we have to do, is redesign these dispersed ‘connected’ societies into better economic blocks and find different ways to work together that will give us back a new economic value plus lasting pleasure, satisfaction and identification. We need to reverse where we are seemingly heading and that requires some radical redesign of how we want to collaborate for economic value within these new communities.

Collecting money and taxes becomes a growing problem

I’m just not sure where it leaves national boundaries or who will pay for the entire infrastructure if there is no attribution and way to make sure this happens. Presently we learnt from a recent report that the major banks and the financial global elite, as well as a number of developing nations are now confirmed to have as much as $20 plus trillion in hidden assets stashed away in offshore accounts that are subject to little or no taxation. As a result, around $280 billion is estimated to be lost in tax revenues.

In other words, the multi-trillion dollar banks and wealthy elites are combining in novel ways for avoiding any taxation, while forcing the vast majority of tax paying citizens to foot their tax avoidance bill. Amazingly, the $20-odd trillion stashed away it is suggested represents the overall GDP of the United States and Japan combined. The “scale” of the numbers is staggering and are these huge sums actually being employed for different innovation or just accumulating more the present model of consumptive. So much off shore wealth and financial mischief is ‘killing us’ all off.

I also wrote a blog on this destructive creation https://paul4innovating.com/2012/03/01/the-innovating-era-creative-destruction-or-destructive-creation/ and along with this latest report on hidden assets that is actually putting some hard numbers on this tax avoidance just adds more to this growing concern of a really messed up world that is closing its moral compass.

The time has come to restructure and rebalance production, consumption, and corporate governance and how they work together, in short in a more connected global world is the overwhelming need to invent a new economic model.

So where does innovation fit in any new model?

It sounds actually a little bit of “more of the same but better” as our starting point. We understand that innovation grows our businesses, it can certainly grow our equity, it shows it does grows our economies.  It is one of the best platforms around that can provide you greater economic returns (growth, utilization, new activity) if you set about doing this thoughtfully and right. Innovation should always replace something we have with something better (often today that is not the case) but in different ways than encouraging us to not throw away what we have but to utilize it in better, lasting ways. We can begin to change that right away with some ‘ground swell of push back if we wanted too.

Of course the complexity we are facing today does need a far greater recognition of its ‘multiple’ parts that must somehow fit together in new innovative and novel ways. We still need to offer and entice people to change their existing ways and habits. We need to find better models that will give real new returns that provides more lasting value and identification than what is on present as offered.

Innovation has to be central to our future, it needs a more systematic and integrated approach that has a ‘heart’ that beats on a continuous repeating basis. One that scales accordingly to the challenges we are facing and these are growing in challenges, not declining at present.

It needs a ‘fitness’ that knows where it has to focus and why so you can meet these constant challenges in a flexible, coordinated, well-balanced way with speed and combined strength…..the art of building  increasing agility into your innovation thinking and approaches.

We all need to work on the answers to fixing our current problems; otherwise we face a protracted, maybe bleak future. We certainly do have to turn everything upside down. Innovation and invention need to combine in new powerful ways and we need to search for different business and economic models that put together human ingenuity for changing the consumptive model and perhaps put to use some of the trillions stashed away needing to be put to better use than just sitting in offshore funds.

I wish I had some decent answers but my first need was to write about my increasing concerns here. I hope this ‘rant’ prompts your thinking to stop and think a little more.  There are answers; we just need to find them faster than you think, I feel. There are enough burning platforms already around us.

Well let me get off my soap box, my coffee is cold and I need to warm it up, certainly I’m not going to throw it away!

The Innovating Era: Creative Destruction or Destructive Creation?

Creative Destruction

We have been entering some perilous times recently and I can’t imagine when Joseph Schrumpeter outlined his groundbreaking efforts for explaining “creative destruction” he or anyone else, could image this being flipped around to what we are facing more today, that of “destructive creation”.

Schrumpter saw “creative destruction” as the renewing, through new innovation, society’s dynamics that would lead into higher levels of economic development and welfare. At the same time recognizing that this destroyed a few of the incumbents to the benefits of many more newcomers and increasing value creation for broader society.

Today it seems we are caught in the reverse of this- the process of “destructive creation”- where it benefits a few rather than the many. This sets out often to destroy or greatly diminish the usage value of existing products and services before it is optimal to actually do so, and in the process incurring often significant costs not taken into account at the time. These unforeseen issues have consequences that negatively affect parts of society not foreseen or contemplated at the time.

The shift has placed the emphasis on the role of destruction rather than creation in driving innovation activity. This is getting uncomfortable, innovation then becomes not so good for you perhaps? This is becoming the game for a few to make money, to corner markets, to dominate and wanting to achieve monopolistic positions and not so worried over the wealth creation aspects of creating jobs, building communities, cherishing certain values.

We need to be on guard in understanding the fundamentals within innovation as it should advance for the good of society, not be actually working to its detriment. Actually who is benefiting from the distribution of new wealth? The developed world is seeking desperately ways to regain growth but it needs to be more equitable, not in the hands of a few that determine our choices but increasingly seem unaccountable for their actions.

Firstly a couple of examples of “creative destruction”

A really good one was the arrival of the personal computer, the economy significantly profited without significant economic upheaval. It raised productivity and ushered in significant value for many.  The typewriter of course quickly became obsolete for this “creative destruction” and certainly the organizations investing in this lost out.

Another one has been the general advancement of technology. For example within the telecom sector where we were able to benefit from massive increases in managing data, calls and volumes around the world to connect us all up into a global economy. Old switch boards, chunky mainframes and old communicating technology were thrown out and this advancement in technology allowed the scarce resource of people to be employed differently and more productively. Technology has provided huge advancements but it also has its downsides.

The problem both of these examples have though is they are technology lead. Technology has been racing ahead. With the active encouragement of “policy innovation” and its stimulus we have been building more complexity as technology became more powerful. Complexity is everywhere. You add in scientific advances it has been a powerful combination effect of promoting social change- often radical social change. All positive, or has it been?

Today, we are dependent on complex technological systems to manage much, often incomprehensible to most if not all of us. Let me give you a couple of examples of the growing downsides we are seeing.

Let me provide some examples of “destructive creation”

Destruction form of creation

Derivatives- that dirty word that we have been struggling with over the past few years, that has been causing much within our current global downturn. At its heart was a system no one quite understood that created mortgage leverages, financial convertibles and it was in this proliferation of complexity and uncertainly these highly leveraged investments had become totally incoherent to us. The “destructive creation” part then kicks in often in unexpected ways with tragic consequences for many in lost jobs, lost homes, lost lives and lost investment money for  many, while a few made massive gains.

Asia was another example; its lightening speed in its growth had lead to a recent financial crisis simply triggered by capital account converting that shifting into a myriad of different financial instruments. The downside of that had not been anticipated in policy intervention and we had a significant scale of financial destruction that was not creative but destructive in its effect to the economies for some time. Again many people lost out, for some, recovery from this effect never occurred -it changed their lives, often to start again.

Although we are told there are sound risk models in place to assess and antiscipate, we certainly can’t look upon the promise from these with the same naivety in the future after a number of recent events. Much seems unpredictable in hidden consequences. But I would ask “have we lost the plot a little here”, perhaps we can’t really predict and control anymore, when the complexities we have built still continue and add even more layers. We need to accept more ‘destructive creation’ will occur.

The destructive effects presently going on in Europe

Let’s take Greece and its ‘melt down’ of the past twelve months. Could we have predicted the massive social unrest and serious economic decline in the approaches taken by the parties responsible for managing an orderly recovery?  How many times are we hearing “structural adjustment” to cover massive upheaval and watching a civil collapse happening on front of our eyes. Thousands of previously healthy businesses in Greece are being starved of finances, of demand and caught up in such social upheaval. This is destructive creation for the many who have got caught up in the ‘collective adjustment’ applied.

How will the Euro shake out in the coming months when our leaders just seem unable to get their heads around its complexity? This is a proliferation of complexity fuelling uncertainty. Is this because we have been great inventors and innovators or poor at working through all the consequences as analytics alone can’t explain these things in coherent ways, we just watch “destructive forces” being applied in the name of social and structural adjustment sweep away whole swaths of creative good as well.

The pursuit of growth and wealth is fine but are we balancing the conflicting values, consequences and upheavals well enough in the equation, otherwise it tips from this “creative destruction” over into “destructive creation” and that is not a healthy place for innovation to be.

The obsession with innovation- myself included!

Presently our Governments are obsessed with innovation- it sometimes feels it is the only game in town for future growth. Let’s just keep adding novelty and ever increasing value to get our economies going seems to be the mantra.  The problem is we seem to be destroying more than we can build at present, yet a ‘few’ gain from these seeds of “destructive creation” while a majority don’t. We need to flip this back to “creative destruction”.

How much of a society cost are we prepared to pay? Should all this be laid at the door of innovation? We need to inquire about, to explain and understand these forces, both the positive and negative far more. You can get to a certain point where you hit innovation saturation and we will begin to reject it unless we see its value invested within our community, not in others far away.

The replacement rate is speeding up

The other part of “destructive creation” is the attention we are all paying to the replacement rate. The way we discard our mobile phones, cars, household goods and creative increasing ‘toxic’ waste has its destructive creation part. These were foreseen, even have been actively encouraged to promote our economic well being but are they?

I know Steve Jobs and what he built at Apple is regarded as a beacon of success but there is a darker side to this. High rates of innovation, often not truly needed, can be disruptive to the larger society as a whole. A few jobs, many outsourced into low cost environments is leading to a jobless growth in the rest of the industry, it is destroying the usage value (useful life left) of existing products to the benefit of the few, rather than the many.  Some might call this a “shutdown game” establishing conditions that negatively affect values of other products, or is that still called offensive marketing, knowing exactly what the customer needs? I’m not 100% convinced.

Shareholder value is our focus point but what about the shut downs, those old, empty, rusty building that seem to be increasing not decreasing. We are faced more with de-industrialization issues than seeing re-industrialization coming from the present ‘destruction’ forces unleashed upon us all today. What is the cost of disruption and destruction of whole communities in social costs, in our investments for the future when we can’t ‘feel’ or see the benefits of “creative destruction” emerging?

There are many industries that start out thinking they are on the path to “creative destruction” but somewhere along the road got flipped into “destructive creation”. Often this was not the intended path but it became the consequence. Adding more just reinforced the greater destruction leaving it less creative, except in pockets of expertise.

Pressures suddenly built. Competition fell away, they went into troughs of uninspiring innovation for some time. Consumer software upgrades come to mind here, killing off perfectly good software to force us into upgrading but actually pushing us to search for alternatives, killing off useful gained knowledge and continued utility. Where is the cross over point in “creative” and “destruction”?

The quicker we adapt, the sharper we suffer declines somewhere else- technological choices and social consequences- new gadgets vs. decline in privacy for example. Yet the total industry consequence of one party dominating in “destructive creation” is only seen that much later on when the total decline cannot be stopped. It is often not one parties fault unless they are deliberate in their design but we are losing the ability to understand all the consequences of decisions, with unforeseen knock-on consequences .

For instance, if our banks don’t change as society is perceiving they should, and the policy makers seem unable to work through the complexity of this level of change, then society has two choices: remain with the present system where a few seem to gain over the majority, or seek out a change in the financial lending system so society again puts back “creative” at the front of “destruction” to benefit the broader community.

Let’s be honest, the banking industry has not been so innovative in many ways, besides enhancing wealth creation by the use of financial instruments or just to constantly sustain the existing ‘world order’. Will an alternative to our existing financial system evolve and or disrupt, but at what destructive cost?

Disconnects are all around.

There is, when you look around, a lot of seemingly partial and disconnected aspects to our advancement. Where are we in our debates on climate change, stem cell research, toxic chemicals, landfills and plenty more.

How will we manage the feeding of the world in years to come? How will we manage the old and sick. How will society re-integrate growing groups who are getting disenfranchised? All of these can be destructive or built on constructive ways that ‘create’ orderly change. Yet, they seem bogged down in complexity, opposing forces and we are not breaking through these in new order ways. We somehow must.

There are always it seems contesting sides and consistent daily arguments from all sides in complex arguments about how the world would work and why their solution provides the answer. The problem is we simply don’t know. We seem to be losing comprehension of the bigger picture. I’m not sure when you try to describe the big picture it really is so coherent and that is one of our big problems.

Issues are just far too complex.

We are facing more uncertainly and incoherence than ever. Should we call a moratorium on innovation or is it just invention? Can we afford too?

It is interesting observation, we do seem to have moved back to enjoy narratives, myths and cult stories more than in the past, is that a yearning for something from the past in our  lives where one person tells a story that just made sense as it seemed full of wisdom and real good for many?

I think we, as humans, have been reduced down and until we can regain mastery over the complex, needing a structural and societal adjustment or we otherwise will continue to suffer the consequences of “destructive creation.” I think we might start yearning for the good old days of just “creative destruction.” Is technology leading and we are lagging? Can we regain control?

So some commentators have suggested that we have to reawaken our imaginations and really think deeply about our values. Then innovation can perhaps return to being context-specific working in positive enhancing ways to improve society as a whole and not be used for a selected few. All I hope is it will let us ensure we put the emphais back far more on the “creative” innovation part and not the ‘destructive’ nature we have been moving towards recently.

Certainly inspired and some points drawn from a paper “Destructive Creation and the New World Order” by Paul Harris & Daniel Sarewitz