The “three Ms” in business driving change in international business
Thomas Friedman, a Pulitzer-prizewinning columnist for The New York Times, gave a presentation at the Davos conference in Switzerland in January about how the “three Ms” in business have changed.
The first M refers to market forces, with globalization and the terms hyper-connected and interdependent at the forefront. Hyper-connected refers to how, via the Internet, both good and bad data is transmitted around the world at blinding speeds. Data that can wreak damage on a company’s reputation is virtually unstoppable nowadays.
Interdependent describes how everything is becoming mutually intertwined. From corporate infrastructures to our personal lives, we are dependent on IT, and when a system goes down, it can result in politics, the economy, and our very livelihoods collapsing into chaos.
The second M, for Mother Nature, refers to drastic environmental changes such as global warming. Businesses’ response to environmental issues will become an important point of differentiation. Take automakers for example, which are pouring funds into designing vehicles that are not only visually appealing but also eco-friendly, such as hybrid and fuel-cell cars.
The final M is for Moore’s Law, a concept introduced a half-century ago by Dr. Gordon Moore, one of the founders of Intel Corp. Moore observed that over the history of computing hardware, the number of transistors in a densely integrated circuit doubles about every two years.
The principle has been extended to social and economic applications, to describe the period when major change inevitably shakes up an industry. Moore’s Law is often used to guide strategy planning and research and development.
Looking at the list of “50 Smartest Companies” selected by MIT Technology Review, which I referred to in my April column, we can see that many of these organizations are incorporating the three Ms in their business model.
Japanese companies are woefully lacking in this area. While Japan can claim credit for having invented liquid crystal displays (LCDs), 3D technology, and the DVD, ultimately the most profitable aspects of these industries have been overtaken by foreign companies.
In Japan, the concept of making small improvements to finished products has become ingrained, with the tendency not to place value on the software that is ultimately linked to long-term profitability.
Just think: what is the added value in the iPhone that ensures its growth? It originates not from the hardware, but from software. At its core, the product’s continued popularity can be attributed to the development of interesting and convenient apps. If Moore’s Law holds true, the iPhone itself may become nothing more than a component.
Harnessing the power of brain waves
When considering the design of an aircraft that can be operated automatically, to enable precise control via a mechanical arm, the Japanese approach would typically entail production of the arm first, then adaptation so that it could be manipulated to fly the plane.
On the other hand, a US venture company has developed a system by which a plane can be operated using brain waves transmitted through a headpiece worn on a pilot’s head. Tests performed on an F-35 fighter jet simulator show that the head-mounted device can not only move the plane’s gearstick, but also control the angle of the aircraft.
Instead of the typical six-month training period for a fighter pilot to learn to fly an F-35, it has been suggested that with this device, a pilot could acquire the necessary flying skills in just four hours. Applied in a more general context, companies that become bogged down in fixed development methods will miss out on future areas of opportunity.
Unfortunately Japan seems behind in its capacity for flexible thinking. Venture companies here are overly dependent on monozukuri (the craft of making things), which means they often spend too much time trying to optimize micro aspects of a manufacturing process.
I question how businesses that are completely devoted to just one aspect of technology will ever survive.
Currently, gross profit earned from parts manufacture is only one-tenth of that earned from system development. Japan prides itself on being the world’s “parts shop,” but indulgence in this perception doesn’t bode well for a bright future. Profits from component development may last for several years, but eventually competitors will appear, prices will fall, and margins will shrink.
Originally posted: ACCJ Journal