Managing in the Next Society 8

Part IV The Next Society
Chapter 15 The Next Society
- …
- The Manufacturing Paradox
- Will the Corporation Survive?
- The Future of Top Management
- The Way Ahead

Manufacturing was gaining its success during the last century. The economy of the world boosted very significantly because of it. Information and IT are less important than the new theories used in manufacturing. The success, however, has led to significantly decreasing value per manufactured unit. This is because the new theories and practices have enabled factories an extreme widespread efficiency resulting in fierce competitions. Only because the productivity has increase sharply at the same time does the total value enjoyed by its labor remain preserved. The manufacturing successful cycle is really similar to that of farming. Like farming, today's manufacturing is only supported by a small fraction of the world's workforce.

Together with the phenomenon of aging population, the manufacturing's previous success in developed and new economies will have serious difficulty to repeat its tremendous success in developing countries. Big economies like China, Brazil, and India probably will be able to count on their domestic markets, but small ones like Paraguay and Thailand probably will face serious barrier to enter export markets. Discussing about barriers, Drucker forecasts that the trend of regional economic blocks, like European Union and NAFTA, will be more and more dominant. For developing countries like Mexico, economically it is most rational to integrate with North America's two developed economies albeit politically unthinkable. The regional economic unions promote free trade among members, but implement barriers for others outside to enter, despite the lip service of the world free trade, especially from the developed world. Barriers of export-import trade are becoming likeable tools for many countries in order to survive their own industries. This is also very similar to barriers imposed to farming produce previously.

The shift from manufacturing-based economies to knowledge-based economies and societies, according to Drucker, will also impact corporations. A few principles, among others, used in manufacturing-based economies are (1) labors need corporations more than corporations need workers, (2) maximum integration puts corporations in the edge, and (3) corporations have more information than do customers. In the knowledge economy, the principles change drastically. Now knowledge workers are capitalists in two ways. One, all together they have the most scarce production factor, i.e. the knowledge. Two, all together they have investment capital through many institutions, such as pension funds. The fact that knowledge workers are significantly more powerful turns the table around. Corporations need knowledge workers more than knowledge workers need corporations. Another important note related to this issue is the trend of short-term, part-time employments as opposed to lifetime ones. Disintegration of businesses is the best strategy, since the cost of coordination, transaction, and information exchange goes down drastically. Moreover, because of information revolution, customers do have more information, therefore more power.

Bribery imposed to knowledge workers always fail. Stock options and high salaries are not the incentive for them, although the absence of dignified money benefits as common payoff is really a disincentive. What puts knowledge workers on fire is the recognition. They are not only workers but also associates or affiliates. The situation of bosses and subordinates is not the norm anymore. Senior and junior situation is more suitable. Knowledge workers also have strong affinities to their specialized expertise colleague, even outside their own organizations. They work at the organizations but do not belong to. The upheaval caused by sudden changes in societies should put countries, including developed countries, in caution. America is again proving itself resilient to it, but what about other countries, especially ones with rigid labor markets, such as Germany, French, and Japan.

Corporations' development and innovation once were the functions of their internal research labs. The technology used in an industry was unique in the particular industry. Nowadays, however, technologies are used across industries. Corning, a glass company, already shifted to high tech product markets. Successful consumer electronic companies like Sony use transistors born from Bell Lab that gave them away because of their little value to Bell. Not based on internal labs anymore, corporations now are more likely to have joint ventures, minority participations, strategic alliances, etc to innovate and develop. A venture is more likely consisting of corporations from various industries since technology developed in a particular industry can be applied across.

Many executives in the world fail as CEO's, although they exceptionally performed in their previous jobs. This shows that current top management practices are becoming unsuitable and will likely be irrelevant in the next society. Drucker argues that if the executives are best people, proven by their previous experiences, their failures as CEO's really a sign of system failures. Many corporations have experimented with new models of corporations and top management practices. There is a case in which a corporation has many CEO's rather than one. Each CEO has a specific, top responsibility like HR and finance, parallel with his or her role as a head of one operation unit. Another new practice is in the case where the CEO plays a role as a human information system, connecting, aligning, and coordinating various parts of the corporation's operating units. Drucker, however, does not give specific, single management practices for the future. He suggests that there should be various models of corporations and top management practices from which we can choose ones suitable for our own businesses. More unprecedented will occur.

So, in the very last of his book, Drucker says that we need new institutions, new theories, new ideology, and new practices in order to survive and thrive in the next society. He concludes his main point using the analogy taken from industrial revolutions. In the age were occurring new theories, new ideology, and new practices in responding to unprecedented phenomena and thoughts.