But there are events, both in nature and in the economy, whose power dwarfs the great natural disasters. These are catastrophes of such stupendous might that they change the course of life itself. After such a cataclysm, there is no going back to the way things were, because that way of life is gone forever.
Consider the meteorite and the microchip. Just months ago, a team of Berkeley scientists finally confirmed that a huge meteorite triggered nature's last great extinction. On one otherwise lovely afternoon 65 million years ago, a hunk of rock about 6 miles wide slammed into the northern tip of Mexico's Yucatan peninsula. The crash, left a crater 110 miles across, spewed debris into the upper atmosphere, and probably set off an episode of volcanic eruptions whose gas and dust blotted out the sun for many months. When the skies finally cleared and daylight returned, the dinosaurs, along with most of the plants and animals they had lived among, were gone. After 125 million years of normalcy, a highly evolved global ecosystem was erased.
Mass extinctions aren't all bad, however. After nature presses her cosmic reset button, clearing the planet of most established competitors, the game of evolution can begin again. And among the survivors of earth's most recent encounter with a giant meteorite, were a few lowly rodent-like mammals, unremarkable but for their relatively large brains. In time, these ancient mammals blossomed into an enormous variety of species that took over niches vacated by the dinosaurs. A drastically different ecosystem, the one we now inhabit, evolved atop the ecological rubble left by that meteorite.
Thanks to the microprocessor, or computer-on-a-chip, that "crashed" in Silicon Valley in 1971, much the same process of mass extinction and rebirth is now underway across the economy. The market value of industrial species, like steel and autos, which dominated the economic landscape of the Machine Age has been overtaken by Information Age species like software and telecommunications. At an ever accelerating pace, the microprocessor's impact is radically and permanently transforming the global economic ecosystem.
But far too many business leaders and policy makers fail to grasp the magnitude of this cataclysm. They assume today's economic turbulence is just another economic "natural disaster," like the OPEC oil embargo, the 1987 stock market crash, or the rise of Japan. Instead of completely reshaping their organizations to survive in a profoundly new economic ecosystem, they assume they can weather the storm, that "normal" economic life, the way things were in the final days of the Machine Age, will return. But there is no going back. In the greatest burst of "creative destruction" since the Industrial Revolution, the highly evolved Machine Age economic ecosystem is being smashed flat and replaced by organizational forms and economic species never before seen. Only those who appreciate the nature of this deep historical transition and understand its implications for competitive strategy and organizational design will be able to exploit the vast opportunities opened up by the "microchip extinction." The rest will be among its many victims.
Evidence of this shift is everywhere. General Motors and IBM, probably the two greatest organizations of the Machine Age, have been humbled by smaller, nimbler rivals like Honda, Mazda, Microsoft, and Sun Microsystems. Today, both giants are tearing themselves apart in desperate efforts to adapt to the emerging Information Age ecosystem.
From Moscow to Armonk, hierarchical bureaucracies -- the "command-and-control" central nervous systems of large Machine Age organizations -- are being ripped out. In 1971, America's top 500 industrial firms accounted for 22% of all nonfarm jobs. Today, they employ less than 10% of nonfarm workers. While big companies shed 3.5 million employees during the Eighties, a new breed of small, quick, microchip-equipped firms created 20 million new jobs.
Among large firms, powerful but plodding behemoths are being outcompeted by highly decentralized companies, whose superior organizational intelligence allows them to respond quickly and precisely to unexpected shifts in technologies and markets. Successful Information Age companies, like Johnson & Johnson and Dow Corning, are flattened networks of smaller, independent organizations that share little more than a bank account and a corporate logo.
With human creativity expanded and time compressed by the microchip's powers, market windows open and shut in the blink of a corporate eye, making organizational speed and agility far more valuable than size and strength. Motorola, for instance, must now cope with cellular phone product life cycles that have shrunk to six months. And, as the microchip's vortex of accelerating change sweeps across the economy, companies in all fields are being forced to become quicker and more flexible.
But ironically, even as executives attempt to adapt their operations to the Information Age, too many are doing so with concepts borrowed from the Machine Age. Consider, for example, the buzzword du jour -- "reengineering." Like most of the management jargon we've inherited from pre-1971 days, "reengineering" implies that companies work like machines, that managing a company is more like manipulating a static mechanism than nurturing a living organism. But what organization is like a machine? Do machines grow? Can machines evolve and adapt to a changing competitive environment?
The problem with "reengineering" is not that its message is wrong. It always makes sense to simplify business processes and increase efficiency. But by labelling this advice "reengineering," its proponents imply that managers can design optimal solutions even as new technology keeps redefining the problems. However efficient a "reengineered" order entry process is today, you can be sure it'll be outmoded in a couple years. Is it any wonder that, as its own proponents readily admit, 70% of all "reengineering" campaigns fail? In a time of accelerated evolution, static, mechanical fixes simply won't do.
Instead, executives must learn to create organizations that continuously adapt to the latest turns in markets and technologies. Unlike the dinosaurs who were doomed to extinction by the shock of that meteorite, intelligent organizations can consciously adapt themselves to the consequences of the microchip. The more intelligent the organization, the better its chances of survival and growth.
Unfortunately, no one yet knows precisely how to raise a company's IQ. Even thinking about companies as intelligent social organisms -- one aspect of the bionomic perspective -- is quite new. Nonetheless, ideas borrowed from studies of human intelligence and advances in supercomputer design offer some intriguing clues.
For example, we now know the basic architecture of the human brain. Its 100 billion neurons are linked by about 100 trillion connections into a staggeringly complex network. No single neuron or group of neurons accounts for intelligence. Instead, intelligence is what biologists call an "emergent property;" a phenomenon that emerges out of the incessant communication among 100 billion network nodes.
The quest for "artificial intelligence" began with a much different architecture. Built around a single blindingly fast central processor, each new machine relied on an even faster processor to outperform its predecessors. But eventually, several designers concluded that no single processor, regardless of its speed, could ever compute fast enough to cope with hugely complex problems like weather modelling.
To overcome the inherent one-calculation-after-another limitation of the single processor architecture, these designers developed a new generation of supercomputers which used a handful of microprocessors working in parallel, each one crunching away simultaneously on a piece of a larger problem. In time, this approach evolved into "massively parallel" supercomputers, where thousands of standard off-the-shelf microprocessors are linked together. Today, clusters of desktop workstations are being linked into massively parallel networks that function as "virtual" supercomputers. By mimicking the brain's massively parallel architecture, these new information processors are beginning to take on the characteristics of intelligence.
For an executive determined to raise his company's IQ, the basic lessons of these findings are plain enough. Intelligence, whether in humans or machines, emerges from communication among processors arranged in massively parallel networks. If, instead of neurons and microprocessors, network nodes are individuals and teams, then the organization's intelligence depends on the speed and clarity of the communication flowing among its workers.
The old central processor organization, with the CEO sitting atop the corporate hierarchy making all the important decisions, is finished. It worked well enough in the Machine Age. But now that the microchip has so radically accelerated the pace of change, too many business variables are in play at the same time, and problems are far too complex for even the most brilliant CEO.
In the Information Age, success belongs to firms that turn raw information on markets, technologies, and finances into high performance/low cost customer solutions before their competitors. To make it actually happen, to fully mobilize a company's intellectual potential, every worker must have the chance to contribute. Every node on the network matters. As Konosuke Matsushita put it, "Only by drawing on the combined brainpower of all its employees can a firm face up to the turbulence and constraints of today's environment." In the wake of the microchip extinction, corporate survival demands no less.