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A User's Guide to 21st Century Economics - Umair Haque

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Saved by 12 people (0 private), first by anonymouse user on 2009-01-09


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Scary new year? Think again. 2009 may look bleak - but this year, those with the purpose, courage, and vision to get seriously radical will have the opportunity to reconceive and reinvent the global economy.

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Tomorrow will not be like yesterday. This is no mere recession: it's a tectonic global shift in savings, consumption, and investment. Today's macropocalypse is a rupture in the global economic fabric - and the next half-decade will be spent reweaving it. It is not a temporary departure from business as usual, an illness - it is a structural transformation, a lasting change.

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20th century business isn't fit for 21st century economics. Yesterday's businesses were built for a world of overconsumption, artificially cheap production, symmetrical competition, and macroeconomic stability. That was yesterday. Today, the herd of industrial-era dinosaurs is going to be mercilessly culled - unless they can evolve to fit a radically altered economic environment.

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20th century business isn't fit for 21st century economics. Yesterday's businesses were built for a world of overconsumption, artificially cheap production, symmetrical competition, and macroeconomic stability. That was yesterday. Today, the herd of industrial-era dinosaurs is going to be mercilessly culled - unless they can evolve to fit a radically altered economic environment.

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Where do new rules come from? Here are five questions every decision maker should kick off 2009 by asking - and five results summarizing some of the new rules we've learned over the last year at the Lab.

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What is the role of marketing in a world where consumption must slow?

In the 20th century, marketing was the pusher of a consumption addiction

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What is the role of marketing in a world where consumption must slow?

In the 20th century, marketing was the pusher of a consumption addiction: Madison Ave's game was to create perceived value by "differentiating" the same razors, blades, and toothpaste. At the Lab, we've found that companies who create perceived value are significantly less profitable and more vulnerable than companies who are rethinking marketing to create real value. Think (the awesome) Nike Plus.

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companies who create perceived value are significantly less profitable and more vulnerable than companies who are rethinking marketing to create real value

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What is the role of distribution in a world where consumption, savings, and investment will accelerate in volatility?

In the 20th century, advantage was attained by seizing or building distribution channels.

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value chains built on inert channels are significantly less profitable than value chains built on circuits - two-way channels, where context flows in one direction, and goods in the other.

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What is the role of production in a world where consumption becomes savings?

In the 20th century, economies of mass scale led giant, evil corporations to a cost advantage. The flipside was a world of homogeneous, mass-made widgets overflowing from bleak exurban shelves.

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What is the role of production in a world where consumption becomes savings?

In the 20th century, economies of mass scale led giant, evil corporations to a cost advantage. The flipside was a world of homogeneous, mass-made widgets overflowing from bleak exurban shelves. At the Lab, we've found that scarcity pays: companies who can rescale production at the micro-level are disproportionately more profitable and powerful. Think (the industry-reshaping) Zara.

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companies who can rescale production at the micro-level are disproportionately more profitable and powerful.

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What is the role of strategy in a world where the game is no longer about winning more consumption than rivals?

In the 20th century, strategic thinking helped players "win" wars fought against rivals - the most strategic player "won" the greatest relative share of consumption (market share, mind share, etc).

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What is the role of strategy in a world where the game is no longer about winning more consumption than rivals?

In the 20th century, strategic thinking helped players "win" wars fought against rivals - the most strategic player "won" the greatest relative share of consumption (market share, mind share, etc). At the Lab, we've found steeply diminishing returns to orthodox strategy - because, like actual war, it destroys tomorrow for today. The 21st century demands a rethink of what's "strategic" - versus what's merely selfish. Think (the eminently anti-strategic) Google.

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What is the role of innovation in a world where greater investment will flow to reinventing moribund industries?

In the 20th century, innovation was about processes, products, and services:

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higher-order innovation - business model, strategic, and management innovation - is associated with significantly more powerful and durable value creation.

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