shift index abstract
TRANSCRIPT
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TheShiftIndex
UncoveringtheEmergingLogicofDeepChangeJohnHagelIII,JohnSeelyBrown,andLangDavison
DeloitteCenterfortheEdgeJune2009
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ThisarticleisanextendedversionofthearticlethatappearedintheJulyAugust2009
versionoftheHarvardBusinessReview. JohnHagelIII,JohnSeelyBrown,LangDavison,
TheBigShift:MeasuringtheForcesofChange,HarvardBusinessReview,JulyAugust
2009,BR0907.
Downloadthereport:Measuringtheforcesoflongtermchange:The2009ShiftIndex
http://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdfhttp://www.edgeperspectives.com/shiftindex.pdf -
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Aglobaleconomiccrisis.Gyratingcapitalmarkets.Bluechipcompaniesinbankruptcy.Howdidwegetintothismess?
Thecausesarecomplex,butunderlyingmanyofthemistheascendancyofshort
termthinking
and
behavior.
Mortgage
lenders,
consumers,
regulators,
real
estate
speculators,investorsduringthelongboom,justabouteverybodychosenearterm
resultsoverlongtermcosts.
Isitanysurprisemanyofourcurrentmodels,forecasts,andassumptionsanticipatea
returntonormalaftertheGreatRecessionends?Suchcyclicalthinkingrisks
shortsightedlydiscountingorevenignoringpowerfulforcesoflongerterm,secular
changeforcesthatareincreasinglyundercuttingwidelyheldassumptionsaboutthe
sourcesofeconomicvalue.
Normalmay
in
fact
be
athing
of
the
past.
Trends
set
in
motion
decades
ago
are
fundamentallyalteringthegloballandscapeasanewdigitalinfrastructure,builtonthe
sustainedexponentialpaceofperformanceimprovementsincomputing,storage,and
bandwidth,progressivelytransformsourbusinessenvironment.Thisinfrastructure
consistsofinstitutions,practicesandprotocolsthattogetherorganizeanddeliverthe
increasingpowerofdigitaltechnologytobusinessandsociety.
WhilethecoretechnologiesunderlyingpreviousdisruptionstheBessemersteel
process,theSiemenselectricalgenerator,theautomobileallhadonebigperformance
breakthroughandthenverymodestperformanceimprovementsthereafter,today's
coretechnologiescontinuetoevolveatanexponentialrate.Astheydo,the
discontinuitiesthatinthepastoccurredinfrequentlynoweruptonacontinuousbasis,
drivenbyadigitalinfrastructurethatshowsnoprospectforstabilization.
Noone,toourknowledge,hasyetquantifiedthedimensionsofdeepchange
precipitatedbythisBigShift.Bydeepchange,wewanttohighlightthatnotalllong
termchangeisequallyimportant.IntryingtounderstandtheBigShift,wefocusonthe
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changesthatwillhavethegreatestlongtermimpactinreshapingthegameintermsof
whosucceedsandwhofails.
Intermsofunderstandinglongtermchange,fragmentarymetricsandsporadic
studiesexist,tobesure.Butnothingyetcapturesaclear,comprehensive,andsustained
viewof
the
deep
dynamics
changing
our
world.
We
experience
instead
adaily
bombardmentofshorttermeconomicindicatorsemployment,inventorylevels,
inflation,commodityprices,etc.
Cyclicalmeasureswillalwaysbenecessaryandhelpfulbuttheyarenolonger
sufficient.Inanattempttosupplementtheseshorttermmetricswevedevelopeda
ShiftIndexdesignedtomeasurethevelocityandmagnitudeofthelongerterm,secular
forcesreshapingtheworldaroundus.
Our first releaseof theShift Indexhighlightsacoreperformancechallenge for the
firmthat
has
been
playing
out
for
decades.
Remarkably,
the
return
on
assets
(ROA)
for
U.S.firmshassteadilyfallentoalmostonequarterof1965levelsatthesametimethat
wehaveseencontinued,albeitmuchmoremodest,improvementsinlaborproductivity.
Additionalfindingsincludethefollowing:
TheROAperformancegapbetweenwinnersand losershas increasedover time,withthe winners barely maintaining previous performance levels, while the losers
experiencerapiddeteriorationinperformance.
Thetopplerate,atwhichbigcompanieslosetheirleadershippositions,hasmorethandoubled,suggestingthatwinnershaveincreasinglyprecariouspositions.
U.S.competitiveintensityhasmorethandoubledduringthelast40years. While the performance of U.S. firms is deteriorating, the benefits of productivity
improvementsappear tobecaptured inpartbycreative talent,which isexperiencing
greatergrowth in totalcompensation.Customersalsoappear tobegainingandusing
powerasreflectedinincreasingcustomerdisloyalty.
The exponentially advancing price/performance capability of computing, storage, andbandwidthisdrivinganadoptionrateforournewdigitalinfrastructure
1thatistwoto
five times faster than previous infrastructures, such as electricity and telephone
networks.
Given these longterm trends, we cannot reasonably expect to see a significant
easingofperformancepressureasthecurrenteconomicdownturnbeginstodissipate
onthecontrary,alllongtermtrendspointtoacontinuederosionofperformance.
1More than just bits and bytes, this digital infrastructure consists of institutions, practices, and protocols that together organize anddeliver the increasing power of digital technology to business and society.
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Labo r Pro ductivity Co mp eti tive In tensi ty Return o n Assets To ppl e Rate
1965
Firm performance metric trajectories (1965-2008)
Source: Deloitte analysis
Present
Theseconclusionscanbeframedintermsofaperformancechallengeontwolevels
forourinstitutions. Atthefirstlevel,ourproductivityisimprovingataratefarslower
thantheunderlyingincreaseinperformanceofourdigitalinfrastructures. Thegap
betweenpotentialandrealizedperformanceissteadilywidening.
Atasecondlevel,firmperformancecontinuestodeteriorateascompetition
intensifies,drivenbythespreadofdigitalinfrastructuresandpublicpolicyinitiatives
thatreducebarrierstoentryandbarrierstomovement. Inotherwords,firmsarefailing
tocapturethebenefitsforthemselvesorfortheirshareholdersofeventhemodest
productivityimprovementsachieved.Thesebenefitsinsteadappeartobecaptured
increasinglybycreativetalentandcustomers,whoaregainingmoremarketpoweras
competitionintensifies.
Simplyput,theperformancechallengeisthatfirmsarefailingontwolevels:theyare
failingtoharnessthefullpotentialofdigitalinfrastructuresintermsofproductivity
improvementand
the
benefits
from
the
modest
improvements
in
productivity
are
being
suckedoutofthefirmandcapturedbyincreasinglypowerfulconstituenciestalentand
customers.
Ourinstitutionalleadership,preoccupiedbyshorttermforces,hasfailedtonotice
thedeeperchangestakingthecorporatesectoreverfurtherintodifficulty.Cyclical
Exhibit1:WhileU.S.workersproductivityhasgrown,ROAhasdropped
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recoveryintheeconomymayagainmakethesymptomslessimmediatelyapparentbut
theunderlyingtrendsappeartoberelentlessintheirforwardmarch.
Howdowereversethisseculartrend?Forprecedentandinspirationwemightlook
tothegenerationofcompaniesthatemergedintheearly20th
century.AsAlfred
Chandlerand
Ronald
Coase
later
made
clear,
these
companies
discovered
how
to
harnessthecapabilitiesofnewlyemergingenergy,transportation,andcommunication
infrastructurestogenerateefficiencyatscale.
Todayscompaniesmustmakethemostofourownerasnewinfrastructurethrough
institutionalinnovationsdrivenbyshiftingtherationaleforthefirmfromscalable
efficiencytoscalablelearning.Theseinstitutionalinnovationsofferthepromiseof
generatingmuchgreaterproductivityimprovementfromourcontinuallyevolvingdigital
infrastructures.Evenascompetitioncontinuestointensify,substantiallygreater
rewardsshouldmakeiteasierforcompaniesandtheirshareholderstocapturetheirfair
shareofthesegrowingrewards.OnlythenwilltheShiftIndexturnfromanindicatorof
corporatedeclinetoonereflectingpowerfulnewmodesofeconomicgrowth.
TheDeepDynamicsoftheBigShift
TheShiftIndexconsistsofthreeindicesdesignedtocapturethreewavesoflong
term,deepchange.Byquantifyingtheseforcesweseektohelpinstitutionalleaders
steeracoursefortruenorth,whilehelpingminimizedistractionfromtheshortterm
eventsthatcompetefortheirdailyattention.Ratherthansimplyreactingtoevents,
institutionalleaderswillbebetterpositionedtoanticipatethechangesthatwillmake
thegreatest
difference
in
terms
of
success
or
failure.
While
this
Shift
Index
offers
rich
insightevenitsfirstrelease,thevalueoftheShiftIndexwillincreaseovertimeasthe
broadertrajectoryandpaceofchangecanbemoreclearlydefinedforeachmetric
WaveOneBuildingtheFoundationsThefirstwaveofchangeinvolvestherapid,unflaggingevolutionofanewdigital
infrastructureandparallel,magnifyingshiftsinglobalpublicpolicythathavereduced
barrierstoentryandmovement.Thesefoundationalforces,playingoutoverthelast
five
decades,
catalyze
and
contextualize
the
many
other
changes
occurring
in
nearly
everydomainofcontemporarylife.Asaresult,thechangesinthesefoundationalforces
providepowerfulleadingindicatorsofthedeepchangesthatwillbeplayingoutover
timeinotherwavesoftheBigShift.
TheFoundationIndexquantifiesandtrackstherateofchangeinthesefoundational
forces.Keymetricsincludethechangeinperformanceofthetechnologyfoundationsof
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thedigitalinfrastructure,growthintheadoptionrateofthisinfrastructureandasub
indexmeasuringproductandlabormarketregulationintheeconomy.
WaveTwoUnleashingRicherFlowsofKnowledgeThesecondwaveofchangewillbecharacterizedbyincreasingflowsofcapital,
talent,andknowledgeacrossgeographicandinstitutionalboundaries.Inthiswave
intensifyingcompetitionandtheincreasingrateofchangeprecipitatedbythefirstwave
shiftsthesourcesofeconomicvaluefromstocksofknowledgetoflowsofnew
knowledge.Inthisrapidlychangingworld,ourstocksofknowledge(whatweknow)
obsolescemorequicklyandsuccessdependsincreasinglyonourabilitytotapinto
expandinganddiverseflowsofknowledgetomorerapidlyrefreshourdepletingstocks
ofknowledge.Whiletheseknowledgeflowsareenhancedandenrichedbydigital
infrastructures,themostvaluableknowledgeflowsthosethatresultinnew
knowledgecreationratherthansimpletransfersofwellcodifiedexistingknowledge
stillmostoftenoccurinphysicalspacethroughfacetofaceinteractions. Inthisrapidly
changingworld,thereisfarmorevalueinatightlyknitteambringingtogetherdifferent
experiencesandviewsoftheproblemtosolveanewperformancechallengethanin
readingatrainingmanual.
ThemetricsintheFlowIndexcapturesphysicalandvirtualflowsaswellasthe
amplifierssuchashowpassionatelyengagedemployeesarewiththeirjobsandsocial
mediausethatresultfromandmagnifytheeffectofthedigitalinfrastructure.Given
theslowerratewithwhichsocialandprofessionalpracticeschangerelativetothe
digitalinfrastructure,thisindexwilllikelylagtheFoundationIndex.Itwillbeextremely
helpfulto
track
the
degree
of
lag
over
time
for
specific
elements
of
knowledge
flows
is
itincreasingordecreasing?
WaveThreeEffectivelyAddressingthePerformanceChallengeThethirdwaveoftheBigShiftreflectstheabilityofcompaniestoharnessthefirst
twowavesofchangesthroughinnovationstoinstitutionalarchitecturessuchasthe
abilitytodeployscalablelearningecosystemswhereperformanceacceleratesasmore
participantsjoin.Overtime,theseinnovationswillenablefirmstodevelopandadopt
newwaysofcreatingandcapturingwealthinthedigitalera.Initialdeteriorationin
shareholder
value
and
ROA
will
eventually
improve
as
firms
harness
the
foundational
andflowforcesofthefirsttwowavesofchangeandacceleratetheirrateof
performanceimprovement.
TheImpactIndexisforthatreasonalaggingindicatorreflectingtheimpactofthe
deepchangesplayingoutinthefirsttwowavesontheperformanceofthefirmand
equitymarkets,consumerchoice,andthevaluecapturedbytalent.
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Shift index indicators
1. TRS Total Return to Shareholders2. Creative occupations and cities defined by Richard Florida's "The Rise of the Creative Class." 20043. Measured by the Bureau of Transportation Statist ics Transportation Services Index
Source: Deloitte analysis
ImpactIndex
FlowI
ndex
FoundationIndex
Markets
Competitive Intensity: Herfindahl-Hirschman Index
Labor Productivity: Index of labor productivity as defined by the Bureau of Labor Statistics
Stock Price Volatility: Average stand ard deviation of daily sto ck price returns over one year
Firms
Asset Profitability: Total ROA for all US firms
ROA Performance Gap: Gap i n ROA between firms in the top and the bottom quartiles
Firm Topple Rate: Annual rank shuffling amongst US firms
Shareholder Value Gap: Gap in the TRS1 between firm in the top and the bo ttom quartiles
People
Consumer Power: Index o f 6 consumer power measures
Brand Disloyalty: Index of 6 con sumer disloyalty measures
Returns to Talent: Compensation gap between mo re and less creative o ccupational groupings2
Executive Turnover: Number o f To p Management terminated, retired or o therwise leaving companies
Virtual Flows
Inter-firm Knowledge Flows: Extent of employee p articipation in knowledge flows across fi rms
Wireless Activity: Total an nual volume of mobile minutes and SMS messag es
Internet Activity: Internet traffic between top 20 US ci ties wi th the most domestic bandwidth
PhysicalFlows
Migration of People to Creative Cities: Population gap between top and bo ttom creative cities2
Travel Volume: Total volume of l ocal commuter transit and p assenger air transportation3
Movement of Capital: Value of US Forei gn Direct Investment inflows and outflows
AmplifiersWorker Passion: Percentage o f employees most passionate about their jobs
Social Media Activity: Time spen t on Soc ial Media as a perc entage of total Internet time
TechnologyPerformance
Computing:Computing power per unit o f co st
Digital Storage: Digital storage capacity per unit of cost
Bandwidth:Bandwidth capacity per unit of c ost
InfrastructurePenetration
Internet Users: Number of people actively using the Internet as compared to the US population
Wireless Subscriptions: Percentage of ac tive wireless subscriptions as compared to the US population
Public Policy Economic Freedom: Index o f 10 freedom components as defined by the Heritage Foundation
ShiftIndexFindings
OurinitialdevelopmentoftheShiftIndexhasfocusedontheUSandUSindustries.
Subsequentreleaseswillbroadentheindextoaglobalscopeandprovideadiagnostic
tooltohelpassesstheperformanceofindividualcompaniesrelativetoasetoffirm
levelmetrics.
Thechoice
of
metrics
reflected
arobust
selection
process.
Many
metrics
are
directionalproxieschosenintheabsenceofidealalternatives.Somearedrawnfrom
secondarydatasourcesandanalyticalmethodologies;someareproprietary.Whilethe
datarevealssignificantcorrelationsacrossmetricsconsistentwiththeunderlyinglogic
ofourtheoreticalframeworkthefindingsaresuggestive.Wehavenotattemptedto
provecausalitygiventhelimitationsintheabilitytogeneratedatatodirectlyandtightly
measuremanyofthedeepchangesoccurringaroundus,butwearehopefulthatthe
Exhibit2:TheShiftIndexconsistsofthreeindicesthatquantifythethreewavesofthe
BigShift FoundationIndex,FlowIndexandImpactIndex eachmeasuredbyasetof
indicators.
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ShiftIndexwillbecomeacatalystforabroadsetofresearchtotestandrefineour
findings.
Foramuchdeeperlookatourmethodologyanddataaswellasafulldiscussionof
ourfindingspleaseseeThe2009ShiftIndexReport.
Overall,theShiftIndexsuggeststhatthedeepchangesintheFoundationIndex
continuetomoveatafasterpacethanthechangesineitherFloworImpactIndices.
ThetrendlineforchangesinFoundationmetricshasamuchsteeperslopeof7.83
relativetotheslopeof5.95measuringchangeforFlowmetricsorandtheslopeof1.93
forImpactmetrics.
ThisisoneimportantwaytotrackwhereweareintheoverallBigShift. Wewould
expectthatcountriesandindustriesthatareintheearlieststageoftheBigShiftwillsee
thehighestratesofchangeintheFoundationIndex.Overtime,astheBigShiftgathers
momentumandpervadesbroadersectorsoftheeconomyandsociety,wewouldexpect
toseetheratesofchangeintheFlowandImpactIndicestopickupspeedwhiletherate
ofchangeintheFoundationIndexmaybegintoshowsignsofslowingdown.
FoundationIndexTheFoundationIndex,witha2008scoreof153,hasincreasedata10percent
compoundannualgrowthrate(CAGR)since1993,andtellsthestoryofaswiftlymoving
digitalinfrastructurepropelledbyunremittingpriceperformanceimprovementsin
computing,storage,andbandwidththatshownosignsofstabilizing.Ourfindingsshow
thattherateofchangeintheperformanceofthetechnologybuildingblocks
substantiallyexceeds
the
rate
of
change
in
the
two
other
foundational
metrics
adoptionratesandpublicpolicyshifts. Itremainstheprimarydriverofalltheother
deepchanges.
Publicpolicyremainsthewildcard.Thereisconsiderableriskthatapolicybacklash
drivingincreasingbarrierstoentryandbarrierstomovementmaygainforcein
responsetotheintensepressuresofthecurrenteconomicdownturn.TheShiftIndex
willmonitorthistrendovertimerelativetothechangesintheotherfoundations.
FlowIndexTheFlowIndex,witha2008scoreof139,hasincreasedatasevenpercentCAGR
since1993,althoughthetrendanalysesarelimitedherebytheearliestdatesforwhich
dataisavailable.
ThecreativeclassesRichardFloridaidentifiedasthedrivingforceforeconomic
developmentcontinuetoincreasinglycongregateinconcentratedspikesoftalent.
Increasingnumbersofcreativesarefleeingtheconfinesofthefirm,aswell.This
http://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdfhttp://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdfhttp://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdfhttp://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdfhttp://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdfhttp://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdfhttp://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdfhttp://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdfhttp://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdfhttp://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdfhttp://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdfhttp://www.deloitte.com/dtt/cda/doc/content/us_tmt_ce_ShiftIndex_0620092_1344(3).pdf -
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creativetalentisthemostpassionateabouttheirwork,andmostlikelytoparticipatein
knowledgeflowsrelativetotheirlesspassionatepeers.
Thefacetofaceinteractionsthatdrivethemostvaluableknowledgeflowsresulting
innewknowledgecreationareimpossibletomeasuredirectly.Socialmediausage,
conferenceand
web
cast
attendance,
professional
information
and
advice
shared
by
telephoneandinlunchmeetingsallprovidesuggestiveproxiesofvariouskindsof
knowledgeflows.OurShiftIndexsurveysestablishabaselineoftheseactivitiesand
indicatesthatsocialmediasuchasFacebookmaybeexpandinginterfirmknowledge
flows.Futuresurveyswillquantifythemagnitudeandpaceofchangeofthese
importantflows.
0%
5%
10%
15%
20%
25%
30%
Disengaged Passive Engaged Passionate
ParticipationPercenta
ge
Google Alerts Web-casts Social Media Lunch meetingsCo mmun ity Org. Co nferences Pro fessional Org. Sh are in fo on p hone
Participation in Inter-Firm knowledge flows by type of worker (2008)
Source: Synovate, Deloitte analysis
ImpactIndex
TheImpactIndex,witha2008scoreof111ata2.4percentrateofchangesince
1993,tellsthestoryofintensifyingcompetitiontakingitstolloncorporateperformance
despiteasteadyriseinlaborproductivityacrossalltheindustriesinourstudy.
Consistentwithourviewthatnewdigitalinfrastructurescreatethepotentialformuch
greaterimprovements
in
productivity,
it
is
striking
that
the
Technology
and
Telecommunicationsindustriestheonesmostheavilyinvolvedindefiningand
deployingthedigitalinfrastructures haveledthepackintermsofproductivity
improvement.
Atthesametimetheeconomicenvironmenthasbecomeconsiderablymore
unstable,asshownbyincreasesinthetopplerateatwhichcompanieslosetheir
Exhibit3:Workerswhoarepassionateabouttheirjobsaremorelikelyto
participateinknowledgeflowsandgeneratevalueforcompanies
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leadershippositions,adoublinginstockpricevolatilitysince1972,andgrowing
divergencebetweenwinnersandlosers,asmeasuredbybothshareholdervalue
creationandROA.
Meanwhile,creativetalentcontinuestocaptureincreasinglydisproportionate
returnsin
terms
of
total
compensation
relative
to
the
rest
of
the
labor
force.
These
increasesinreturnstocreativetalentappeartobecorrelatedtoanaccelerationof
growthofthemostcreativecities.Onthecustomerside,newgenerationsenteringthe
marketplaceappeartobemorewillingtoexercisetheirmarketpowertoswitchto
productsandservicesthatmoreeffectivelymeettheirneeds,puttinggreaterpressure
onvendors.
Thegrowingpowerofcreativetalentandcustomersascompetitionintensifiesrises
helpstoresolvethemysteryofwhyROAisdecliningsomarkedlyatthesametimethat
productivityimprovementscontinuetooccur.Theanswerisnottofindwaystosqueeze
creativetalentandcustomersinazerosumbattletocapturemoreoftheexistingpie.
Economy-wide Asset Profitability (1965-2008)
Source: Compustat, Deloitte analysis
4.7%
0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005
R
eturnonAssets(%)
Return on Ass ets
2008
TheShift
Index
suggests
that
in
some
industries
companies
have
pursued
aggressive
M&Astrategies. Whilethismayhelptodrivenewscaleefficienciesandmarketpower
intheshortterm,thesedefensivestrategiesareadiminishingreturnsgame.Thistends
tobeconfirmedbythefactthatwinnersinthegrowingperformancegaparebarely
hangingonintermsofsustainingexistinglevelsofperformanceeventheyarefinding
itverydifficulttoholdontothebottomlinebenefitsofproductivityimprovements.
Exhibit4:AssetprofitabilityforU.S.firmssteadilyfallmorethan75%
overthe astfourdecades
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Economy-wide Asset Profitability by quartile (1965-2008 )
Source: Compustat, D eloitte analysis
1.2%
-14.7%
-100%
-80%
-60%
-40%
-20%
0%
20%
1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005
Bottom Quartile
12.9%11.0%
0%
5%
10%
15%
20%
Top Quartile
ReturnOnAssets(%)
2008
Asanalternative,theopportunityistodriveinstitutionalinnovationtomore
effectivelyharnesstheperformancepotentialofdigitalinfrastructuresandfindwaysto
unleashthecreativepotentialoftherestoftheworkforce(notjustthecreative
professions)sothatthereisamuchbiggerpieintermsoftotalreturnsthatcanbe
sharedmorefairlywithallrelevantconstituencies.
Summary
Itiscompletelyunderstandablethatweallhavebecomesofocusedontheshort
termeconomiceventsplayingoutaroundus. Atthesametime,though,itisvery
dangeroustolosesightofthedeepchangesthatwillcontinuetoplayoutlongafterthe
currenteconomicdownturnisadistantmemory. Wefacealongtermperformance
challengethatcontinuestointensify. Thestepswetakenowtoaddressthischallenge
willnotonlyhelpustoweatherthecurrenteconomicstormsbutwillpositionusto
createsignificanteconomicvalueinanincreasinglychallengingbusinesslandscape.We
believethat
the
Shift
Index
can
serve
as
auseful
compass
and
catalyst
for
the
actions
requiredtoturnaperformancechallengeintoaperformanceopportunity.
Exhibit5: Winningcompaniesarebarelyholdingon,whilelosersarerapidlydeteriorating
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JohnHagelIII
Cochairman,
Deloitte'sCenterfortheEdge
JohnHagelIIIhasnearly30yearsexperienceasamanagement
consultant,author,
speaker
and
entrepreneur,
and
has
helped
companiesimprovetheirperformancebyeffectivelyapplying
informationtechnologytoreshapebusinessstrategies.John
currentlyservesascochairmanoftheSiliconValleybased
DeloitteCenterfortheEdge,whichconductsoriginalresearchand
developssubstantivepointsofviewfornewcorporategrowth.
BeforejoiningDeloitte,Johnwasanindependentconsultantand
writer.Priortothat,heheldsignificantpositionsatleading
consultingfirmsandcompanies. From1984to2000,hewasaprincipalatMcKinsey&
Co.,wherehewasaleaderoftheStrategyPractice.Inaddition,hefoundedandled
McKinseysElectronicCommercePracticefrom1993to2000.Johnhasalsoservedas
seniorvicepresidentofstrategicplanningatAtari,Inc.,andearlierinhiscareer,worked
atBostonConsultingGroup.HeisthefounderoftwoSiliconValleystartups.
Johnistheauthorofaseriesofbestsellingbusinessbooks,includingNetGain,NetWorth,OutoftheBoxandTheOnlySustainableEdge.HehaswontwoawardsfromHarvardBusinessReviewforbestarticlesinthatpublicationandhasbeenrecognizedasanindustrythoughtleaderbyavarietyofpublicationsandprofessionalservicefirms.
DeloitteCenterfortheEdge TheBigShiftBlog JohnHagel.com EdgePerspectives EdgePerspectivesBlog
http://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://www.johnhagel.com/http://www.johnhagel.com/http://www.edgeperspectives.com/http://www.edgeperspectives.com/http://www.edgeperspectives.typepad.com/http://www.edgeperspectives.typepad.com/http://www.edgeperspectives.typepad.com/http://www.edgeperspectives.typepad.com/http://www.edgeperspectives.com/http://www.edgeperspectives.typepad.com/http://www.johnhagel.com/http://blogs.harvardbusiness.org/bigshift/http://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.html -
7/29/2019 Shift index Abstract
14/15
14
JohnSeelyBrown
IndependentCochairman,
Deloitte'sCenterfortheEdge
JohnSeelyBrownistheindependentcochairmanoftheSilicon
Valleybased
Deloitte
Center
for
the
Edge,
which
conducts
original
researchanddevelopssubstantivepointsofviewfornewcorporate
growth. Inaddition,heisanAdvisortotheProvostandaVisiting
ScholarattheUniversityofSouthernCalifornia,apositionhehasheld
since2003.ThispositionfollowedalengthytenureatXerox
Corporation,whereheservedaschiefscientist(19922002)and
directoroftheXeroxPaloAltoResearchCenter(PARC)(19852000).
WhileheadofPARC,Johnexpandedtheroleofcorporateresearchto
includesuchtopicsasorganizationallearning,complexadaptivesystems,micro
electricalmechanicalsystem(MEMS)andNanotechnology.Hisresearchinterests
includedigitalculture,ubiquitouscomputing,serviceorientedarchitectures,global
innovationnetworksandlearningecologies.
In2009,JohnwaselectedasamemberoftheAmericanAcademyofArts&Sciencesin
thefieldofComputerSciences.HeisalsoamemberoftheNationalAcademyof
Education,afellowoftheAmericanAssociationforArtificialIntelligenceandatrusteeof
theMacArthurFoundation.Heservesonseveralcorporateandadvisoryboards.John
haspublishedmorethan100papersinscientificjournalsandauthoredorcoauthored
fivebooks,including"TheSocialLifeofInformation"and"TheOnlySustainableEdge."
Heholdsabachelor'sdegreefromBrownUniversity,adoctoratefromtheUniversityof
MichiganandhonorarydoctoratesfromBrown,theUniversityofMichigan,Claremont
GraduateUniversity,
the
University
of
Londons
Business
School
and
North
Carolina
StateUniversity.
DeloitteCenterfortheEdge TheBigShiftBlog JohnSeelyBrown.com
http://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://www.johnseelybrown.com/http://www.johnseelybrown.com/http://www.johnseelybrown.com/http://blogs.harvardbusiness.org/bigshift/http://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.html -
7/29/2019 Shift index Abstract
15/15
15
LangDavison
ExecutiveDirector,
Deloitte'sCenterfortheEdge
LangDavisonistheexecutivedirectoroftheDeloitteCenterforthe
Edge,which
conducts
original
research
and
develops
substantive
pointsofviewfornewcorporategrowth.
Inthisrole,Langdefinesandguidesthemarketplacepositioningand
developmentofthecentersplatformsandkeyactivities,andhelps
representDeloittewithselectclients.Heisalsoresponsiblefor
discoveringanddevelopingdistinctiveintellectualcapitaland
distributingittoaudiencesinnewandmeaningfulways.
LangjoinedDeloittefromMcKinsey&Company,wherehewaseditorofitsflagship
publication,TheMcKinseyQuarterly.Duringhis14yearsatMcKinsey,Langservedinavarietyofseniorcommunications,contentandmediaroles,leadingthedevelopment
teamformckinseyquarterly.com,whichheeditedfrom1998to2003.Hewasthe
collaboratingwriterforthebestsellingandcriticallyacclaimedbooksNetGainandNetWorthandformorethan300articlesinTheMcKinseyQuarterly,HarvardBusinessReview,FinancialTimesandTheWallStreetJournalbythoughtleaderslikeStanfordsRobertSutton,HarvardsPankajGhemewat,McKinseysLowellBryanandEric
Beinhocker,andInternationalInstituteforManagementDevelopmentsPhil
Rosenzweig.UnderhisownbylinehehaspublishedinHarvardBusinessReview,TheConferenceBoardReview,DeloitteReview,andotherpublications.
DeloitteCenterfortheEdge TheBigShiftBlog
ThisabstractispartofalargerresearcheffortaroundtheShiftIndexconductedat
DeloitteCenterfortheEdgeledbyDuleeshaKulasooriyaandTamaraSamoylova
withthesupportofBrentDance,MarkAstrinos,andDanElbert.
http://www.deloitte.com/dtt/leadership/0%2C1045%2Csid%25253D153749%2C00.html?langdavisonhttp://www.deloitte.com/dtt/leadership/0%2C1045%2Csid%25253D153749%2C00.html?langdavisonhttp://www.deloitte.com/dtt/leadership/0%2C1045%2Csid%25253D153749%2C00.html?langdavisonhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.htmlhttp://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://blogs.harvardbusiness.org/bigshift/http://www.deloitte.com/dtt/leadership/0%2C1045%2Csid%25253D153749%2C00.html?langdavisonhttp://blogs.harvardbusiness.org/bigshift/http://www.deloitte.com/dtt/section_node/0,1042,sid%253D227141,00.html