"The paradox of falling ROA alongside growing productivity is explained at least in part by the rising total compensation of knowledge workers and other talented employees"
?????!!!!!!!!
you've forgot the blood sucking employees i.e CEO and other execs
CEO's now make 50 times (very conservative number) the avg. salary of an employee.
The really talented at blood sucking make 500 times the salary of an averge employee.
The super talented at blood sucking make over 5000 times the salary of an average employee.
About Employees compensation
Considering inflation, the income has dropped.
In 1965 one earning member could support a family (including buying home, ....)
Now you need two earning members to do the same.
The above CNBC video of John Hagel (Deloitte Center for the Edge) discusses the huge problem of applying old business thinking when adopting new technology, and the scary new realities around global business competitiveness.
‘Measuring the forces of long term change - the 2009 shift index‘, an important new report, addresses a major gap between the relatively short term trends executives track - unemployment, currency rates for example - and the longer term trends which play out over decades and have a much more fundamental effect on business performance.
Consisting of three indices - foundation, flow and impact, plus 25 metrics that together quantify the stock, pace and implications - the ‘Shift index’ provides a sense of the nature and pace of change.
All pretty arcane stuff, until you look at some of John Hagel, John Seeley Brown and Lang Davidsons’ findings: competition is intensifying on a global scale, with US return on assets dropping over 40 years consistently across fifteen different industries:
From their current Harvard Business Review article, The Shift Index
…reveals a dramatic increase in performance pressure on U.S. companies. Their average return on assets (ROA) has steadily fallen to almost one quarter of what it was in 1965, despite the fact that labor productivity has improved. Worse yet, even the highest-performing companies are struggling to maintain their ROA levels and losing their leadership positions at an ever-faster rate. The paradox of falling ROA alongside growing productivity is explained at least in part by the rising total compensation of knowledge workers and other talented employees, and by consumers’ growing power over vendors that end up “competing away” their cost savings. An even closer look at the situation shows a fundamental mismatch between the mind-set of today’s companies and the environment in which they compete….
….Twentieth-century institutions built and protected knowledge stocks—proprietary resources that no one else could access. The more the business environment changes, however, the faster the value of what you know at any point in time diminishes. In this world, success hinges on the ability to participate in a growing array of knowledge flows in order to rapidly refresh your knowledge stocks.
As Hagel clearly says in the above video, there is no back to normal after the current economic crisis, and those reverting back to the old knowledge fortress paradigm will cease to be competitive and fail.
Technology plays a key role in succeeding in the new business environment, but how do you organize your business differently to take advantage of the capabilities of that technology?
The Deloitte Edge team believe the biggest opportunity is fundamentally rethinking business around technology to tap into knowledge flows to develop relationships that are very scalable, that connect you to lots of people and companies, and allow you to get better, faster.
These ideas will resonate with those around the Enterprise 2.0 movement, but the reality is that most uptake of those technologies are point, departmental solutions: what Hagel speaks of here is a fundamental realignment of core business processes to take advantage of the new agility.
Trying to teach an old dog new tricks
The bankrupting of General Motors - and sadly presumably of many of their supplier and support ecosphere - and their subsequent rebirth as a new leaner organization is a good conceptual example of the morning after. Will it be business as usual: the command and control, waterfall development models and so on that ultimately failed, or will new concepts and ideas be allowed to prevail?
Less extreme examples are companies with ever increasing labor productivity chasing ever greater global competitive intensity, to refer to the chart above. Will the success differentiator be in the efficiency and speed of knowledge flow, a first past the post race for markets by ultra connected teams?
I think it will be, and as I’ve said many times before on this blog, addressing the people in a company and mapping to their business processes comes before technology implementation decisions.
…the segment of the industry I’ve moved in has moved from being “plumbers.” And I’m proud to be a plumber. First, it’s a very honorable profession. Secondly, you make a lot of money doing plumbing on the Internet.
But the future’s about, how do you add intelligence to that plumbing? And how do you do it architecturally from a technology point of view, going from any device to any content over any combination of networks and data, voice, video? Sounds simple; really complex with security and predictability. But how do you change the business process?
…..Now, the challenge is, you couldn’t do that without different organization structures.
And I’m a command-and-control guy. It clearly has worked well for me. I say, turn right, 66,600 people turn right. But that’s not the future. The future’s going to be all around collaboration and teamwork, with a structured process behind it. And that’s the key. You can’t move fast without a replicable process. So it’s about speed, combined with technology enablement, combined with a replicable process.
Cisco are arguably going to ultimately move up the value chain having re engineered the way they are structured internally, to become a business offering global intellectual consulting and technology advice that takes advantage of their foundational plumbing.
The ‘Glocal‘ digital infrastructure, with low barriers to entry and movement, is rapidly changing the world’s business playing field. Broadband ubiquity and a generation born into the internet as a utility are reaping huge changes on humanity, and yet archaic business practices endure in many large ‘to big to fail’ corporate entities.
A CEO recently said to me that the challenge going forward was finding strong honest leaders: hire ‘C’ grade C suite execs and you’ll quickly find a pyramid of submissive silo protecting followers more interested in infighting and sucking up to their superiors than thinking about how to make the company more competitive.
The challenge is how to broaden these sycophantic minds so they see the bigger picture and realize the knowledge island they are protecting is in fact a rapidly melting iceberg.
