Permanent Innovation
Karl Marx was right,” says Dr. Kjell A. Nordstrom, somewhat controversially. He is no stranger to controversy, of course—as co-author of two of the most talked-about business books of the past decade (“Funky Business” and “Karaoke Capitalism”, with Jonas Ridderstrale), he’s used to his statements provoking a reaction. “In ‘Das Kapital’, he argued that the workers should own the critical resources of production.
If you look at the modern economy, most of what we do in business is intellectual – meetings, emails, discussions, concepts—and we call it work. But our minds are not the property of the shareholders. So Marx was, in fact, right—we are all self-owned.
No going back
“Neither economics nor business administration is made for this. The models, tools and theories we use in the West were developed decades ago for an industrial society. They were useful at the time, but many are not as powerful today, because the underlying assumptions—about ownership, employment and so on—are just not true any more.
“This introduces a number of problems. First, in a corporation, when you do not own and control the production resources the way you did historically, the principles of leadership are different. People who are no longer dependent on you will require somewhat different leadership. Command and control, the traditional way of doing things, is not applicable.
“Second, there are more copycat players in the world economy. We call it ‘Karaoke Capitalism’—a caricature of a competitive landscape, diversity characterized by sameness. For business, this introduces enormous pressure and there is only one way out: innovation,” Nordstrom explains. “Business must surprise the market with a product or service, or with a way of solving a problem, that is perceived to be unique.
“The trouble is, business is designed primarily for exploitation, not creation—to sell the things that exist, rather than create something new. Most companies only have a little group of people called the R&D department that is supposed to take care of creation. But you can’t come out with completely innovative product or service every few years and then exploit it for five or ten years. That’s the way of the past. Today, it’s about permanent innovation everywhere.
“If we want to defend our lifestyles—by which I mean industrial world lifestyles, with a public sector, high wages, limited working hours per week—then we’re going to have to be innovative. We can’t work harder or longer either because that won’t fix it. We have to do things that others cannot do.
Learn to live with failure
“Just consider any successful business firm—it will be the result of a ‘temporary monopoly’, a moment in time, or space or both, when it was perceived to be completely unique. This is the Holy Grail of the market economy: to create temporary monopolies and keep them going for as long as you can.
“If temporary monopolies—which are by definition a product of innovation—are at the heart of the market economy, then you cannot have one without innovation and that means experimentation, which involves mistakes. But in most companies, we reward success, not failure. That’s a great way to organize an exploitation machine, but not a creation machine.
“A creation machine understands that failure is a natural part of the process. If we are not able to create organizations that can handle failure, there is no way we can be innovative.
Flexibility is key
“There are some fundamental mechanisms at play here. We don’t train people to work this way, we don’t reward people for this—how can people to work in this environment?” asks Dr. Nordstrom. “We have to go back to the atom of the market economy. We have to understand the role of failure and redundancy in the creation process. Then we have to ask ourselves what kind of business and organizational structure can handle it.
Then there are questions about intellectual property and rewards—who owns the creations?
“All of this opens loads of doors—especially the legal side. The legal framework in most developed countries is very sophisticated but this situation is something that most law books can’t help with. The law was made for a different time. We haven’t developed it. We are changing faster than the law.
For example, we’re grappling with the issue of stem cell research—but can there be private property at the level of the genetic code?
These are tricky questions. “We need to describe and define the problem, and then experiment to figure out what comes next. If we want innovation, we have to find people willing to experiment and they’re going to create a mess around them. And our systems have to be elastic enough to handle that one way or another.”
* Nordstrom holds an economic licentiate degree and a doctoral degree from the Stockholm School of Economics. He is an associate professor at the Institute of International Business (IIB) at the Stockholm School of Economics. A recent speaker at CSC’s Leading Edge Forum, Nordstrom is also participating at this year’s Leaders in London, sponsored by CSC.
This article and photograph appeared in Smart Business, the business publication of CSC in the UK. Reproduced with permission.
