A brief history of business in the 21st Century
Perhaps it was an alcoholic haze, perhaps a version of the Millennium Bug. But over the year-end celebrations I thought I saw a copy of the Financial Times for 31 December 2099. It may provide some clues to business trends in the next century.
There was a profile of the world’s largest employer – the Educational Corporation of America. ECA was founded in 2005 when a group of parents and teachers in Seattle organised a buy out of a group of local schools. In the bad old days, the article explained with incredulity, the normal means of instruction had been for individual teachers, largely ignorant of education research or technique, to harangue groups of thirty or forty inattentive students.
ECA’s success was based largely on its management skills. It had also pioneered new educational technologies, constantly updated and developed in its research centres internationally. By the end of the twenty-first century one young person in three in the United States, and many more elsewhere, had enrolled in the ECA programme. Following a franchise agreement with the State of California in 2022, the ECA Berkeley had rapidly become the world’s leading institution of higher education. ECA universities in both advanced and poor economies were generally leaders in their fields: the era of branded education had arrived.
Memphis-based General Genetics was the world’s largest life sciences company. Following the genetic revolution in the early decades of the century, in which knowledge of gene and cell development had transformed medicine and nutrition, many companies had entered the new business of managed life care. Traditional pharmaceutical companies and agribusinesses had mostly fallen by the wayside. After a decade or so, the industry had consolidated around a few companies – some previously established in other industries, some new – and General Genetics had emerged as market leader.
Once personal space travel became economic in the mid twenty-first century, many companies, mostly supported by national governments, had entered the business of space capsule construction and operation. The huge losses of these corporations dwarfed even the sums which had been lost in the conventional aviation business in the hundred years before.
But one profitable corporation stood out from the rest – Planetary Networks. It did not manufacture capsules, or provide sources directly to users. The company had developed space management systems which enabled individuals to plan safe, uncongested journeys. Although many more sophisticated techniques of space management had been proposed – the Intergovernmental Space Agency Union had spent decades discussing the ideal intergalactic system for the twenty-third century – the rapid adoption by users of PN software had given the company an unassailable lead over its competitors.
Planetary Networks was a truly international company. It had no corporate headquarters, in a traditional sense, and was registered under the liberal, and secretive, r¾gime of the South American Economic Union. Bengal Customware was one of PN’s principal suppliers. In the first two decades of the century, leadership of the software industry had moved from the western United States to the Indian sub-continent: as the market matured, the competitive advantage of a cheap but well-educated labour force became overwhelming.
In business history, firms and industries change, but many principles remain the same. New industries emerged in the last century from new technologies – automobiles, aircraft, electronics – and from the application of commercial organisation to activities previously undertaken in different ways – as in law and accountancy, consultancy, and waste disposal. We can expect both these developments to continue in this century. Hence General Genetics and the Educational Corporation of America.
In the last two decades of the twentieth century, privatisation and deregulation have established new industries: and utilities, once private businesses, then state controlled, are private businesses once more. The telecommunications sector is today the darling of the stock market: in 1980 there was one telecommunication stock – A.T & T. Medicine, education and transport infrastructure are the next opportunities.
Activities at the frontiers of today’s fundamental research are plausible candidates for tomorrow’s commercial development. That makes biology – the most exciting area of modern science – such a plausible basis for new industries next century. Yet we should not assume that advances in knowledge or capabilities can be translated into business success easily, or at all. The twentieth century has seen disappointing progress in fuel technologies. Nuclear fission reached commercial development, only to prove an economic and political failure: fusion, fuel cells and new devices for storing electricity have never reached major commercial application at all. As a result, Shell and Exxon end the twentieth century still enjoying the dominant position in their businesses that they held at the beginning of it.
Yet getting these social and scientific predictions right is not a sure route to business success. It is currently fashionable to think that large profits can be made by identifying new industries first and investing in them. It is undeniably true that some people – from John D. Rockefeller to Bill Gates – have made a lot of money this way. But new industries, as a whole, are not more profitable than others: only more risky. They attract numbers of entrants that match their growth prospects and most of the entrants fall by the wayside.
Leaders ultimately emerge from this process as the shape of a new industry becomes evident, and the nature of competitive advantage in it is defined. The pioneers rarely become the leaders. Ultimately, the leader defines the standard – sometimes, not often, in the very literal way that Microsoft has and Planetary Networks might. More often, firms like General Motors and IBM define, for the period of their hegemony, the business model for their industry.
New industries have usually emerged first in already advanced economies and, as they reach maturity, their activities are transferred, first through sub-contracting and then completely, to poorer economies. This process will continue, with the result that China, India and other countries will play a far larger role in the future corporate economy than they do today. Hence Bengal Customware.
At this point, the haze lifted and the Bug departed. You will have to work out the rest of the century for yourself.