economy to Wall Street's increasingly abstract and risky financial instruments, accelerating the downward spiral with devastating results. While fixing Wall Street will help alleviate the current crisis, it's not enough for a return to real prosperity and long-term growth. That will require a rebirth of business based on new rules for a new era.
The old rules that most B-schools have preached were invented a century ago for supplying mass consumers with affordable goods and services. They are poorly suited to the values of today's new consumers, who want help to live their lives as they choose, with personal control, voice, and a practical sense of connection. Many smart people have spent decades trying -- and failing -- to adapt the old model to this new pattern of consumer demand.
As Harvard -- along with many other business schools -- now tries to understand what went wrong, it's essential that everyone involved in business learns how to be the future. There are turning points in history when it's time to salvage what is valuable from the old and put our energies into constructing a new model based on new rules. That's what Henry Ford did when he figured out how to make a car that could be sold for $260. It's time for a reinvention of business that is just as radical. There is no detailed map of the territory ahead, but here are some rules that can act as a compass.
New Rule No. 1: Race to I-Space The old rules assumed economic value. That's why Harvard Business School students have been trained for a century in the "administrative point of view." The manager's job was to oversee and control what was inside organization space, or what they were trained to view as "my company." Everything else was a distraction. The "administrative point of view" reflects a simpler time when business was about selling a product. It teaches you to operate from the perspective of organization space -- how to maximize your company's efficiency and serve its interests. It's a world of boundaries: who's inside and who's out; who's up and who's down. It's a world of producers vs. consumers, my company vs. your company, us vs. them.
Business is no longer just about the product. Now it's about solutions for the individual. Economic value is hidden in consumers' unmet needs and is released by providing people with the means to fulfill those needs. But in order to release new value, you need to get out of organization space and into the subjective space where individuals live. I call it "I-Space." This means shedding the "us-them" mentality. Now everyone is an insider.
Amazon (AMZN) and eBay (EBAY) moved into I-space and realized billions of dollars in new value in just a few years. Apple (AAPL) headed for I-space with iPod/iTunes and released massive quantities of value by giving people what they wanted on their own terms in their own space. Meanwhile, music industry executives were busy throwing tantrums in organization space and suing their most passionate customers. Microfinance achieved extraordinary results by reinventing banking from the vantage point of the people it wanted to serve, a model that is spreading from the third to the first world.
