The Challenges for Leaders in the New Economy
Woods, Bob, Chief Executive (U.S.)
An interview with James E. Copeland, Jr. Chief Executive Officer Deloitte Touche Tohmatsu
What is the most important thing for Old Economy CEOs to know about the New Economy?
There really is no "New Economy" or "Old Economy." There are just companies that are able to incorporate change, to reinvent themselves, to take advantage of technological improvements, and those that can't. Those that can't will not be able to compete, and those that can will be successful.
What makes it feel like it's so new is the pace of the change. Every technology cycle we go through seems to happen more quickly than the last. The compression of those change cycles makes it feel like you've got an Old Economy and a New Economy, but really what you have is companies rapidly moving to new technologies to give themselves competitive advantage in some way, whether through cost reduction or better access to markets through the Internet. We're already beginning to see it with big companies forming purchasing consortiums-- they're starting to take control of the use of that new technology. Companies are reinventing themselves, or they're becoming prey to companies that develop a new formula for doing what they do, using this technology and threatening their existence.
One of the biggest changes is that the Internet gives any company global reach. How should CEOs grapple with the challenges of globalization?
They need to recognize that they're in a globally competitive market. That means they are now at risk of having their business taken away from them by a competitor from another country. How do you deal with that? You begin by thinking of ways that, if you were starting a competing business today, you could put your own company out of business. Then you do it before somebody else can. You quickly make the transition from being the old company to the new company that is a better competitor, more efficient and more productive.
My best counsel to CEOs is not to kid themselves. They may believe that there's no other way to do business in their particular niche than the way they do it now, but somewhere there's a 25-year-old in a garage who doesn't understand that, and they'd better be aware of the risk of complacency in this marketplace.
Many companies have been conducting business internationally for years. Do they have an advantage, or does a preexisting structure slow change?
Both. There are experiences that are invaluable in doing business globally, and the advantages of scale are still there. Nothing has changed the fundamental economics of business. It's still good to have a lot of capital. It's still good to be big. The problem is when you let your bigness also make you slow, or when you let your experience lead you to believe there's no other way to do something, or that it can't be done in a better way. The established companies that will prosper are those that have that experience but don't let it make them hidebound in the way they do things, and have scale but don't let that lull them to sleep in terms of their need for nimbleness and quickness in the marketplace. I'd rather be big and quick than small and quick.
Globalization creates complexity, and complexity invariably slows process. How do you stay nimble while getting larger? I think that is probably the single biggest challenge in this economy. Change is happening so rapidly that if you're bound and determined to be in a command and control structure, you're just not going to be able to move quickly enough. The marketplace and the opportunities reshape themselves in a matter of months. You have to be responsive to that, and you can't do that if you're insisting on a bottom-up decision-making process where you have loads of research done around each issue and you're absolutely sure of the right thing to do when you pull the trigger. That's a model that just won't work in this economy. You have to be quicker than that. …