Our headline question today was posed by writers in a recent (12-15-15) issue of The Economist. The answer, they propose, is not what we thought.
Since at least the “nanosecond nineties” written about in Tom Peters’ “In Search of Excellence” business has often operated under the principle that the pace is accelerating and we all had better do so too if we want to keep up, let alone surmount the day’s competitive challenges.
Evidence at first blush appears to support the concept of a quicker pace. After all, as The Economist notes, apps are downloaded at Apple once every millisecond; they sell a thousand iPhones or Macs every couple of minutes; even Apple’s average stock share changes hands every five months due to manic trading by computers and speculators.
No less a luminary than Eric Schmidt, former CEO of Google, asserts that “the pace of change is accelerating” as he noted in his book “How Google Works.” Startups (known as “unicorns”) win billion dollar valuations in record time today – typically in a year or two.
And the rest of the business establishment chides itself for being too slow, notes the article. Most business owners today will tell you that what’s changing their business today is speed. GE CEO Jeff Immelt noted recently that his firm is “putting a premium on speed” according to a letter to shareholders. Speed, in short, is a popular idea. There’s just one problem: it’s hard to prove that it’s happening.
Truth is, as Economist editors put it, “Capitalism has always had its skates on.” With examples ranging from Henry Ford’s 1913 assembly line to Alfred Sloan and GM’s “dynamics obsolescence” aimed at designing a flurry of new products to make the current ones look obsolete, they note that the pace of business has always been on the increase. Moore’s Law has provided decades of exponential growth in computing equipment. Yet, they note, “hard evidence of a great acceleration is hard to come by.”
The Economist went on to measure a slew of means by which the speed of American business can be quantified and found that… most show little to no actual acceleration. True, some have accelerated, including patent registration growth and the pace at which we shop for groceries (helped largely by the spread of e-commerce). But other measures notably including companies’ WIP (Work in Process) as a percent of sales and the rate of new consumer product launches are even or declining. While inventory ratios improved in the 90s, they’ve declined since 2011. And the median private-sector worker still holds a job about 4 years, a decline among older males and slight lengthening for females.
Measures ranging from new corporate bond duration and CEO tenure, to job tenures and manufacturing inventory days have actually remained pretty stable over the past ten years.
One accelerator that is not in doubt however has been the pace of information flows in business – they are faster, utilizing more data than ever, from the number of emails in our inboxes to telecom network complaints. So there’s the illusion of acceleration which, they point out, is a dangerous thing when businesses do foolish and reactionary things like layoff people to prop up quarterly earnings even as industrial concentration leads to more oligopoly. The big tech platforms – Google, Facebook Apple – have high market shares, huge resources, lots of cash and extraordinary profits.
With new technologies spreading faster than ever before, it therefore may be more important than ever to take the long view, note the article’s authors. Investing in long-term assets, acquiring capacity and keeping people on longer for their depth of knowledge and skill sets may be in keeping with The Economist editors final caution about frantic acceleration: that perhaps “mastering the clock of business is about choosing when to be fast and when be slow.”