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Published: August 25, 2004

 
 

Post-capitalism's Drop-out Prophet

The vision may seem farfetched, but The Support Economy’s ideas have gained a following among people at the forefront of understanding how businesses should operate in a knowledge economy. In particular, the book’s critique of managerial capitalism and the new principles it proposes has special resonance in the information technology industry, where there are strong views that the best place to develop world-class technology is not within the conventional hierarchical firm.

Development of highly advanced technologies, such as those that have sprung from the open-source software movement, requires collaboration in the “transorganizational space that goes across firms,” says John Maloney, a knowledge management expert based in San Francisco who has served as a consultant to high-technology firms, including Cisco and Hewlett-Packard. “That’s where all innovation comes from — with customers or with suppliers. A lot of firms don’t really understand that yet.”

George Fisher, the former CEO of Motorola and Kodak, has sent The Support Economy to 20 business and political leaders. “I don’t do this, typically. But it was enough of a significant idea that I thought it would be good to shake the mental status quo of some smart people,” says Mr. Fisher, who got to know Professor Zuboff when she was doing research on Motorola in the early 1990s, and whose daughter, Barcy, served as her research assistant.

Erosion of Trust
This is not the first time that advances in technology and changes in consumption behavior and consumer lifestyles have altered business models and the progression of capitalism. A century ago, proprietary companies were caught up in rapid urbanization, which boosted demand for manufactured consumer goods on a grand scale. The invention of the assembly line enabled companies to meet that pent-up demand. Out of this convergence of new consumer demand and technological innovation were born markets unforeseen a decade earlier — new companies with new operating principles, for example, made automobiles affordable for farmers and shopkeepers; others made fashionable clothes for secretaries and housewives on limited incomes.

In The Support Economy, Professor Zuboff marshals an array of economic, social, and behavioral evidence to argue that there is today, in one industry after another, a similar change afoot. And just as industrialization created dislocation as well as opportunity, today’s growing gap between consumer desires and the ability of corporations to meet consumer needs has a downside as well as an upside: an “epidemic” of consumer mistrust in business that’s becoming increasingly hazardous to corporate health. Citing an April 2003 Harris Poll, she notes that only 4 percent of Americans say they trust their HMO; 7 percent trust their life insurance company; 12 percent trust their phone company. The highest vote of confidence goes to supermarkets — and they garner only a 40 percent trust rating. Consequently, consumers increasingly are opting out of standard business models, a phenomenon that results in staggering losses of economic opportunity for companies.

The breakdown of trust between companies and individuals, and the gulf growing between consumer expectations and available choices, are nowhere as stark as in the health-care industry. Increasingly, disaffected American consumers are choosing to self-diagnose illnesses over the Internet, to seek out alternative treatments, to purchase drugs from Canada, and to care for ailing relatives themselves. Professor Zuboff estimates that the loss in economic activity from disenchanted consumers who do not have adequate and affordable options for geriatric home care is equal to between $196 billion and $288 billion annually.

Airlines are another vivid example she offers of industry dysfunction. She contends cost-cutting and race-to-the-bottom pricing leaves the consumer out of luck when he wants a few frills at an affordable price. Although there will always be customers who want lowest-price bare-bones services, Professor Zuboff believes that many people would pay more or even a premium for individually tailored integrated solutions to travel. She envisions door-to-door transport as well as a message system that would apprise family and business associates when a flight is delayed.

 
 
 
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Resources

  1. Art Kleiner, “The World’s Most Exciting Accountant,” s+b, Summer 2004; Click here. 
  2. “New Pact to Ease Hassles of eBay,” Wall Street Journal, June 17, 2004
  3. “Laura Ashley and Federal Express Strategic Alliance,” Harvard Business School, December 4, 1996. Case Number 9-693-050; Click here. 
  4. C.K. Prahalad and Venkatram Ramaswamy, The Future of Competition: Co-Creating Unique Value with Customers (Harvard Business School Press, 2004)
  5. Thomas W. Malone, The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life (Harvard Business School Press, 2004)