Wall St. and Business Wednesdays: E-Letter To Juan Enriquez, Founder, Life Sciences Project, Harvard Business School; CEO, Biotechonomy Re: Business Standardization and The ‘Old’ and ‘New’ Economy
I had the great fortune of catching you on C Span recently, discussing the tremendous insights contained within your book, As The Future Catches You: How Genomics & Other Forces Are Changing Your Life, Work, Health and Wealth. I decided to pay even closer attention to your presentation when I heard you go into the subject of ‘standardization’ – a topic that crosses disciplines but one that we are dealing with right now at Black Electorate Economics University (BEEU) as it relates to entrepreneurship and business development.
You were speaking of standardization in terms of language – human linguistics, genetic code, and digital technology. Your explanations given that day - which are contained in more detail in a chapter of your book called, "Data Drives Empires" - although pertaining to other disciplines, were so clear that I am sharing them as a point of discussion at BEEU as they relate to business standardization. The analogy helps to support a major part of our thesis at BEEU regarding the differences between those entrepreneurs who are 1)self-employed 2) in practice and 3) those that we would consider to be officially in a business. It is an important distinction that is a major part of what we consider to be part of the science of business – a discipline of which the general public is woefully ignorant of, and of which the Black community, in particular, (for a few additional reasons) is largely unaware.
Although standardization initially appears to be a very simple concept, I am sure that you are aware of how complicated and nuanced it can be, especially when applied to business. The way you explain it as it pertains to language is very similar to how we approach it at BEEU. You clearly explain that what separates human beings from other animals is the manner in which we process and retransmit information, and how language is the key element in that process. You also note that we can transmit any abstract concept through strings of characters and that it seems that the fewer symbols we use, the greater the variety and complexity of our communication. In addition you point out that the more people that share the same language the greater are their chances of uniting. You accurately note that today’s most dominant alphabet is not the 26-lettter English language but the digital language, which consists only of 0s and 1s, strung together. You then make a powerful argument that the digital revolution is going to be replaced by the next dominant language – genetic code.
It is your emphasis on how human societies can form a common medium by which to transfer information across space and time that is so critical for entrepreneurs to grasp. The ability to take what one has as an intention, or idea in their mind or what one does as an individual or small organization and then, make it commonly understood and transferable beyond personality, region and time is the key to the success of today’s small entrepreneur, I believe. It opens the door to a certain class of investors who are largely concerned about the current scale of a business and its growth potential. It also opens the door to the possibility of turning a small operation into a world class company. But most importantly it opens the door to a business producing consistent, reliable and quality results – in its products and services - without depending upon an exceptionally talented charismatic personality.
So what is the language of the business?
It is the way it operates and organizes itself according to its nature – purpose, structure and function. It is the way it plans, produces, serves, manages, spends, takes in and measures, all codified in words – business plans, operational manuals, job descriptions, organizational charts, and policies – that investors, employees, employers, suppliers, and customers thoroughly understand. These ‘codes’ represent the standards of the business, with nothing, if possible, left to chance. A consistent obedience to the codes is what produces innovation and mastery. And when new experiences and unforeseen circumstances and intriguing abstract concepts are encountered, the language of the business responds to incorporate them. This takes place in the form of innovation, refinement, the addition and subtraction of ‘strings’ or ‘characters’ (restructuring and reorganizing), and even through the importation or recombination with other business languages (i.e. mergers and acquisitions).
And as with any community or society, the culture relfects and influences its language.
As we move at accelerating speed in the information-based economy I especially find your thesis regarding the rules of the ‘new’ and ‘old’ economies to be intriguing and related to all of this. Your conclude that:
The rules of an economy based on knowledge and networks are very different from those of a manufacturing-based economy.
In the old economy...if something was scarce...it was valuable.
Those who controlled the mines, owned the exclusive rights to a product, or had the only copy of something could become very wealthy. Today it is just the opposite. (Of course, there are still some fuddy-duddy economists using ever more complex equations to try to convince you that some basic economic "laws" haven’t changed...that there is no new economy.)
...When you are trying to spread, and sell, knowledge...keeping something “exclusive” and “rare” often leads to a loss of value. What matters most is that the purchaser becomes part of a network...and that the network keeps growing.
Mr. Enriquez, I agree with the spirit of your argument, although I think you might go too far in being dismissive of economic ‘laws.’ Clearly it is differentiation that affects the price of a product, and the ‘exclusive’ ability or right to produce a product is an incentive to risk-taking (which is why patents, copyrights, and trademarks are significant). But you are correct in your look at Microsoft. The company clearly followed and embodied the business marketing approach that you refer to. It made its network and platform widespread, not 'scarce' as you write:
...before Microsoft became the behemoth it is today...Apple built a simpler and better operating system...But it did not share...it kept its program "exclusive." Programmers found it easier to work with Microsoft’s "open" system...So today you can buy 70,000 Microsoft-compatible programs...and 12,000 Apple programs...Even though it had a better product...Apple lost.
And Microsoft set the industry standard for the next generations. Through a new language...First DOS...Now Windows...
You are correct about the fact that Microsoft set the industry standard through a new langaugae but while I agree with your point, there is more to a business than the product or service it offers. There is the way the business works, producing the product or service. And if a business uniquely finds a way to operate, and offer and produce what it does, it can capture the law of both economies – old and new - by making its network, products and services widespread, while making the way its business operates scarce or rare. So, instead of having a proprietary product or service, the company – as small business expert Michael E. Gerber says – has a proprietary way of doing business, that it exposes, in part or full, only to a critical mass of investors, employees, employers, and suppliers.
The more the merrier? Not necessarily. The right number of people speaking a business’ language should be the goal, not always a limitless network using its product or service. That may be the path to setting an industry standard, but not to a standardized business.
Every business must seek to speak two languages – one that it wants widely disseminated and another that should be more proprietary in nature (good examples of other organizations that accomplish this are the military and a pro football team.)
By being bilingual a business organization captures the best elements of what you refer to as the ‘old’ and ‘new’ economy.
I do look forward to encountering more of your work, I think it will be increasingly important to the international economy and entrepreneurs as we move further into the dominant digital language and participate in the emergence of the next frontier - the genetic revolution.
But remember, the language that propagates or captures the world's (or an industry's)attention is not the same language that binds a business together, or which makes it most special or valuable.
Wednesday, February 15, 2006