Once Around the Sun

You simply can't bank on things being as predictable, or even as manageable as before. What this tells us about our enterprises is that responsiveness and adaptiveness is increasingly critical. If you created an organization whose structure was designed to take advantage of scale and perpetuate positions in markets there's a good chance that it has become less responsive than it needs to be. Changing this takes more than good leadership at the top. You have to get people across the baseline of your organization to be adaptive and responsive as well as aligned and focused. The government, for example,  now plans to create a homeland security organization that is bigger, larger, and more pervasive — but this is not  likely to be more responsive.

Another change that I have observed since 9/11 is in the attitude of people. Maybe this existed before, but I know from observing our own people that community service work has become very important to them. Rather than just being a successful consultant, they want to make a difference outside the firm more so than I can recall, but 9/11 brought this forward and people are seeking to make room in their lives for a broader purpose.
There is of course, an increased emphasis on security, safety and perhaps a stronger resistance to travel. But most important in my mind, more leaders are recognizing that truly great organizations care — really care — more about people than money.
— Jon Katzenbach is a founder and senior partner of Katzenbach Partners LLC, and the author of Peak Performance: Aligning the Hearts and Minds of Your Employees.

John P. Kotter

We've been seeing for some time how the volatility of our world and the rate of change have both been steadily going up, and this has had all kinds of effects. And the horror of last September in a way just punctuates this and puts an exclamation point or two behind this thought.
Anyone who thinks that this came out of the blue just doesn't get it. We have been economically, socially, and politically changing more and everyone is struggling to keep up. We as individuals and certainly as organizations of all sorts are struggling.

Now, I happen to think that we are handling change better than we did 10 or 20 years ago without question, but if you are going from 30 to 40 miles an hour — when the world is moving from 50 to 100 miles an hour — even though you're getting faster, you're losing relative ground and you worry about that.
What we may want to be concerned about is that while we're getting better, we're not getting better fast enough with respect to dealing not only with change but also with those changes that are hard to predict. It's very hard to predict what might happen where, but I don't see that as isolated from the same sort of dynamic that you see happening in industry and in the social realm of our lives. It's just a huge, ugly, dramatic, eye-catching reminder about the fact that we have to get a lot better at figuring out what is really going on out there and at being less inwardly focused.
Too inwardly focused, too hierarchical, too arrogant — this is just a dramatic example of saying yes, we have to be more externally focused, and a stubborn bureaucracy in Washington that exists in silos and moves slowly is going to serve us very poorly in the world of terrorism just as it is serving corporations poorly.

If there were a misperception held by many of us, it was that the march toward a global economy would be a steady one. What we should have known is that this not the way the world has ever worked — it's never just a steady thing. It's more like you go two steps forward and one back, and then a little bit to the left or right and then you stop for a minute.
But the trend is there, and we've known for some time that the single biggest factors that were likely to get in the way of the march toward a global economy were not economic but political and social. The most obvious factors we have been seeing are things such as labor unions, who hated the idea for a variety of totally understandable reasons, or — well, there are a variety of groups — and inasmuch as they have political muscle, they try to slow things down or stop things.

Historical perspective helps enormously in life, and it does here, too. And I don't meant 10 years. A few centuries works nicely; 10,000 years is even better. One of the biggest trends in the last three centuries has been the march away from the various forms of centralized, accountable power — monarchies and dictatorships — toward democracies.
Now, we've had some countries going toward democracy and then slipping back into some nonrepublic form, but that's been just kind of moving along and there are other things that have been happening. The urbanization of the world has been steadily increasing for centuries. The movement from an agricultural society, now on to a knowledge society — these are huge forces that don't happen at the same rate every year and they sometimes are very slow — but globalization is like this, and can we imagine a series of terrorist acts that could reverse for a while the move toward a more global economy? Yes. Do I think this will change the long-term trend? Not a chance.
Just like I think the possibility that all of a sudden we are going to abandon a knowledge economy and go back on the farm is zero. Just as the trend toward more education is going to stop and we are going to go in the other direction is not going to happen. And there are people in this world who would like to turn around that trend and who think that colleges and universities as they are created by the modern world corrupt our minds and make us less of something.
So globalization will go on, and while we can imagine any number of situations that will slow it down or in some places take it backwards for a while, now we're back to volatility that's hard to predict. Without question, the best thing for everyone is to get better at adapting to change and just don't get too up tight about it.
—John P. Kotter is the Konosuke Matsushita Professor of Leadership at the Harvard Business School, and author of the best-selling book Leading Change and the recently published The Heart of Change.

Chris Meyer

It's ironic that, for all the business talk about networked organizations, the people who may have taken the idea most seriously is al-Qaeda. You see them not only using networks, but also being very adaptive in constantly responding to the environment they find themselves in and being able to harness the independent energies of people toward a shared goal. And it's something a lot of businesses aspire to, but the approach that they've taken is worth analyzing.

… We've done work with people in the military who've been talking about the asymmetric threat for three or four years, but it was news to me that the asymmetric threat was here now. I understood it at the level of scenario planning and thriller novels. To see it done was certainly a wake-up call.
And therefore, if you say there's a certain amount of power in the world, and less of it belongs to nations, then the changes we can anticipate have to do with the role of nations. There's no question, we have to take the idea of asymmetric threat as "right here right now."  We have the powers of physical coercion devolving to smaller and smaller groups. The guy who recently synthesized the polio virus, using publicly available information and materials, shows that you can transform information code to molecular code now, and there's so much information about gene sequences and molecular binding sites out there, it's almost as if you could dial something into your printer, and your printer, instead of printing inks could print molecules, which an advanced laboratory can do now.

It seems to me that the firewall approach is what most of defense has been based on historically. We build a wall that nothing can get through. But that's not the right model for the threat that's coming. What you want is an immune system, so that when some indication of hostility is observable, it gets observed, reported, and responded to.
The model of the firewall is giving way to the model of an immune system in many different domains. Clearly in biology, we don't raise people in a bubble because they have immune systems that learn from experience what's their friend and what's their foe and how to deal with the foe. That's what they're designed to do. IBM and the University of Michigan have done work on digital immune systems that detect problems and come up with a "vaccine" and inoculate every computer on the network with it, just the way your immune system inoculates all parts of your body.
The other thing that 9/11 did for me was to reinstate, amplify, the role of value systems that our society tends to be relatively cynical about. When things get tough, we. and particulalry business often sacrifice our value system.
Here we have, in 9/11, evidence of a couple of things. One is how the value systems of two cultures can be so incompatible with one another. How western values can be the fulcrum for the kind of powerful movement that Islamic extremists have gotten going. Equally, our own value systems, when our need for oil trumps our belief in democracy so that we prop up regimes that don't share our values. It turns out that this has consequences. Of course, the power of values to the suicide bomber is that his values are more important than the will to live. I guess a renewed belief, on my part, in values and behaving consistently with them, has power.
— Chris Meyer is the director of CGE&Y's Center for Business Innovation in Cambridge, MA, and the co-author of Blur and Future Wealth.

Adrian Slywotz

The economic impact of the terrorist attacks was profound, directly hitting air travel, hospitality, and insurance, and indirectly touching dozens of other industries. Obviously, the attacks in themselves shook the confidence of many business leaders and investors. But they also were coincident with a fundamental change in the economy, namely the maturity of the product-centric business model across many industries. … The inescapable fact is that most companies are running up against the limits of growth based on products alone, whether they are manufactured goods or the products of a service business such as credit cards.

Why is product-centric growth running out of steam? For one thing, many markets are saturated. In the United States and most other developed countries, consumers have all the appliances, tires, and credit cards they need, and businesses are awash in copiers and chemicals and machinery.
A second problem is that innovation has slowed for many traditional products. In many industries, products are largely undifferentiated in performance and technology advantages between competitors are virtually nonexistent. Think of Boeing and Airbus, Ford and General Motors, or John Deere. In other industries, back-and-forth jockeying occurs, as first one competitor and then another introduces slightly better performance. Think of Nintendo and Sony or Intel and AMD. In neither case is product innovation a source of long-term growth. Product innovation is still extremely important, but its role is primarily to replace profit lost to commoditization rather than to drive new profit growth.
Moreover, in recent years the development of entirely new products has proven an unreliable source of long-term growth. Innovation continues in high-technology industries, to be sure. But sustained growth is rare. Even the leading high-tech companies have been "bottle rockets" that experience three to four years of spectacular market value growth followed by equally spectacular collapse. As a result of all these factors, most companies cannot offer investors a compelling vision of a robust, five-year runway for growth.

The economy is just starting to invent and learn new ways to grow. One of the most promising ways to grow is to address customers' higher-order needs. These unmet demands don't involve improvements in product features and functionality. Rather, they reflect customers' need to improve their overall economics in the use of a product.
Few managers are trained to do this sort of thing, and there are as yet few large companies doing it well. But the experience of a number of large companies in tough industries — companies such as Johnson Controls, John Deere, and others — show that this can be done, and that it can be extremely rewarding.
— Adrian Slywotzky is a principal at Mercer Management Consulting, and co-author of the best-selling book The Profit Zone and  the recently published The Art of Profitability.

Michael Wolf

In the media world we saw a tremendous amount of adaptation following 9/11, and the kind of response we saw from most journalistic organizations was unprecedented. The focus on the public good rather than on ratings or profitability was inspiring. The media was able to adapt and mobilize itself for the public good.

Now, if we look at this from the perspective of the consumer, and how has 9/11 changed their perspective, what we see  are some new sentiments and ways that people are looking at their lives. There is a rise in patriotism and the sense of service people now share. People are also feeling greater ties to their homes and families. And this is due partly to a greater sense of protection and the notion that home is a safe place to be. After having read so many stories about people, much like themselves, who went off to work one morning and were never seen again, suddenly the home is very important.
Another sense is that people are being drawn to spirituality and new attachments to those things that go beyond day-to-day lives. Attendance at churches and synagogues and mosques is up. We also see  a great deal of interest around spirituality in the literature people are buying, or even yoga classes.

The consumerism that we saw during most of the '90s is probably going to give way to some degree of austerity, and that may mean a change in what types of businesses succeed and what ones don't.
As far as entertainment is concerned, I'd expect we are going to see much more spending on home entertainment — on movies, video games, and stereo equipment. Even in terms of TV viewership, ultimately you will likely be seeing more interest in programming dealing with cooking and self- andhome-improvement and even spirituality. In general, there is a sense that the road to happiness is not paved just with dollars.
The march toward globalization by entertainment companies continues, and what the executives of entertainment companies now realize is that they can't go global by exporting their TV shows or movies. Media and entertainment companies often become a lightning rod of globalization because they are the purveyor of culture, and there is now a heightened concern among entertainment executives about how much of that culture will be American culture versus local culture. In other words, people in the developing world do not want to view TV shows about rich people in Los Angeles, and more and more the movement is to local content. Now we very often see shows that may have been created in the U.S. being re-created locally.
— Michael Wolf is a director and senior partner of McKinsey & Company's Global Media and entertainment practice. He is the author of The Entertainment Economy: How Mega-Media Forces are Transforming our Lives.

Chris Zook

September 11th has not changed my world view, I have always believed that the world is a dangerous place, and that the history of civilization is a history of conflict, punctuated by brief periods of relative calm. It has, however, signified to me that the world is heading into another period of growing conflict — it is almost as if escalating tension in one area like Afghanistan has a ripple effect that, in turn, increases the odds or intensity of conflict elsewhere. These global linkages signify that we are entering a difficult period globally.
The business environment is beset currently by what I have been calling the "Perfect Storm" scenario of three powerful forces that have never before converged like this.
Number one: higher growth expectations than ever before during a recession (P/E ratios for the S&P 500 of 23 during a recession are unprecedented).
Number two: greater penalties for shortfall than ever before (the average share of common stock was held for 8 years several decades ago; today, it is held for less than a year, creating much greater danger of market reaction).
Number three: Profitable growth is more difficult to achieve than ever before (a Bain statistical analysis of 8,000 companies shows this).
The recent high-profile catastrophes such as Enron can be read as exaggerated responses to these pressures, desperately seeking growth beyond natural limits in unnatural ways.
The events of September 11 have magnified the power of all three of these elements. Greater uncertainty in the environment is already having a significant impact on investment horizons of business and on the requirement for payback period. The September 11 events serve to magnify the already growing level of investment uncertainty triggered by the collapse of the Internet bubble and the disappointing payback results from most large IT projects of the past 5 years.
 — Chris Zook is head of Bain & Company's worldwide strategy practice, and author of  Profit From the Core.