Two weeks ago, in the first part of this article, we discussed how classic natural laws may be used to guide our strategic thinking in business. In the pool of thirty natural laws that we designed into our proprietary THINKERGY I-Tool Unblinded with Science, we’ve also included a number of “modern laws”, i.e., non-scientific heuristics and observations that describe important modern phenomena and trends. Today, let’s close this article by having a look at five modern laws with deep relevance for strategic business thinkers.
6. Moore’s Law
In 1965, Gordon Moore (co-founder of Intel) outlined his idea that based on empirical observation, the complexity of integrated circuits doubles every 24 months. In the decades following his comment, the computer chip industry turned what became known as Moore’s Law into a self-fulfilling prophecy: “Almost every index of computer performance (e.g., size of circuits, number of circuits, speed of processing, memory) improves by a factor of two every two years.” When Moore was asked on the 40th anniversary of Moore’s Law to comment on its future validity, he predicted that “his law” will continue to hold true for another 20 years, implying a future with superfast, powerful and microscopically small microchips that might be linked to the human body and brain.
Questions for businessmen: How will the continued validity of Moore’s Law affect your business and industry? How can you benefit from Moore’s Law — and use it to create differentiation from your peers?
7. Metcalfe’s Law
Framed by Robert Metcalfe (founder of 3Com) in the development phase of the Ethernet, this modern law states: “The value of a system grows as approximately the square of the number of users of the system.” In other words, the more people join and use a particular communication system or network platform, the more valuable and useful it will be. Metcalfe’s Law explains many of the network effects of communication technologies (like the fax, e-mail) and networks such as the Internet and related social networking solutions like Facebook, LinkedIn or Twitter. An expansion of Metcalfe’s Law is Reed’s Law, which is an assertion by David P. Reed that “the utility of large networks, particularly social networks, can scale exponentially with the size of the network”.
Questions: What communication systems and network platforms do you actively use in your business? What emerging systems and (social) networks might be of value for you? How can you connect to more users on a system that you actively utilize for business? How can you connect to and reach out to new (social) networks and systems to push your business?
8. Law of Mobility
Russ McGuire, a leading strategist and visionary in the telecom industry, formulated the modern Law of Mobility: “The value of adding mobility to any product outweighs that increased cost. Mobility is beginning to be built into every product.” McGuire argues that the cost of making any product available all the time is plummeting. This especially applies to products involving information. Cost reductions related to Moore’s Law, increased scalability as the result of Metcalfe’s Law, convergence and miniaturization of electronic devices and increasing availability of 3G wireless networks all play into the law of mobility. As such, McGuire asserts that just as computing power and the Internet have been built into virtually every product, mobility is beginning to be designed into every product.
Questions: How mobile are your current products and other value propositions? How does the modern Law of Mobility affect your industry and your business? How can you make your products and other value propositions more mobile? How can you play on the concept of mobility? How can you become more mobile in all that you’re doing?
9. Complex Adaptive Systems Theory
Given the rising complexity of our environment, let’s also consider a key insight from the Theory on Complex Adaptive Systems: “In complex adaptive systems, unexpected properties may appear. These properties are, at present, very difficult to predict.” Stated more plainly, there comes a point in a complex adaptive system where “more” becomes “different”.
A sand pile may serve as a simple example of a complex adaptive system. When you add a sand grain to the pile, it adds more forces to all other grains in the pile without changing the overall properties of the pile. However, once you add the millionth (or however many it may take) grain to the pile, you get an avalanche and a change of the properties of the sand pile. It is important that this state change doesn’t build gradually, but happens at a certain point (“the millionth grain”) where more becomes different.
Stock markets are an example of a complex adaptive system in business. Buyers and sellers of equities change their behaviors in response to those of others. Here, a sudden unexpected property may be the burst of a speculative bubble (like the dot-com bubble).
Questions: What complex adaptive systems is your business confronted with? What might be unexpected behaviors (“the millionth grain”) related to each of those systems? How can you prepare for such unexpected behaviors? How can you reduce the complexity of a complex adaptive system that you’re exposed to?
10. Peter Principle
Let’s end this article with an entertaining modern law suggested by Laurence J. Peter. The so-called Peter Principle states, “In a hierarchy, every employee tends to rise to his level of incompetence.”
Peter asserts that in an organizational hierarchy, employees get promoted as long as they work competently. Sooner or later they reach a position at which they are no longer competent (their ‘level of incompetence’); the employees get stuck on that level, being unable to earn further promotions. This surprising principle has been modeled and proven to be theoretically valid. Peter concludes that “in time, every post tends to be occupied by an employee who is incompetent to carry out his duties” and that “work is accomplished by those employees who have not yet reached their level of incompetence”.
Questions: Your turn to ask the appropriate questions related to the Peter Principle.
© Dr. Detlef Reis 2010. This article was published in parallel in the Bangkok Post under the title “Unblinded by science: Modern natural laws for business” on 1 April 2010.