The Key to Your Company's Survival? Eat People
Editor's note: The following is a guest post written by Andy Kessler, author of (most recently) "Eat People and Other Unapologetic Rules for Game-Changing Entrepreneurs" (Portfolio 2011).
Want to know if your company will be around in a few years? Figure out if you are a Maker or Taker. A Creator or a Server. This is the new lens in which to view the survival of businesses. What do I mean? Let's go back to basics.
An economy is about increasing the living standards of its inhabitants. An economy grows two ways. The first is based on population growth. More mouths to feed and shelter and watch ESPN Sportscenter and all that. But if all we are doing is each other's laundry, there may be growth, but no wealth being created.
For wealth you need the second, and more important driver of economic growth -- productivity. In fact, individual wealth and societal wealth only come from productivity, doing more with less. The definition of productivity is output per worker hour. More workers actually means lower productivity. Getting higher output with fewer workers? Now we're talking. Eat people and you've found the road to riches. But how exactly do you do that? Often, it is by wasting something that's abundant.
The modern world is filled with examples. Google wastes hard drives and network connections, and eats librarians; ATMs waste transistors and eat tellers; 800 numbers wasted digital switches and ate operators; Travelocity wastes bandwidth and eats travel agents.
It's not just the digital revolution -- this is something that has been going on for a long time, driving progress in fits and starts. Here are some cool examples:
- In 1903, Charles Curtis perfected the steam turbine generator and brought cheap electricity to the masses. Wasting that cheap electricity, in 1907, James Spangler, a janitor with asthma, invented an electric suction-sweeper, today's vacuum cleaner. Think of how many sweepers lost their jobs, though vacuum manufacturers were hiring.
- In 1913, William David Coolidge's thermionic X-ray tube changed medicine. That same year, the Walker brothers in Philadelphia invented the first electric dishwasher. We all eventually could afford electric kitchen help.
- In 1916, Clarence Birdseye perfected the flash-freezing process (and Birds Eye potato puffs).
- In 1928, Thomas Midgley, Albert Henne, and Robert McNary synthesized the first chlorofluorocarbons (trademarked as Freon in 1930), ushering in safe refrigerators and air conditioning (other coolants eventually replaced Freon). The Iceman no longer cometh!
- Percy L. Spencer in 1945 watched a magnetron melt candy, leading to the invention of microwave ovens. Cheap cooks!
Wealth goes to the Creator, or the company that exploits the creator of these new fangled, labor-saving devices. But it's not a zero-sum world. Wealth also goes to society, to all of us who can now do more with less, even if that's just the enjoyment of microwaved potato puffs. It's always more. The middle class doesn't have a house filled with butlers and cooks and sweepers and clothes washers; we have the electronic equivalent of all of these for less than the cost to employ a full-time worker for a week, or even a day.
The same thing is going on today: Creators of productivity tools are turning the world of Servers upside down. Secretaries are being replaced by tech tools that handle email, voicemail, scheduling, etc. Salesmen are being replaced by search engine optimization tools, marketers by Twitter and Facebook campaigns. And yes, finally, lawyers are being replaced by eDiscovery tools that cheaply sift through millions of documents looking for keywords and concepts, displacing paralegals and lawyers who charge way too much per hour. Even doctors won't escape Creators' tools for computer-aided diagnostics and imaging tools that will look inside us with even greater clarity than Coolidge's X-Ray tube.
So what do you do? What does your company do?
Ask yourself, are you a Creator or a Server? It makes a difference. But even if you are a Server, it's not over. But be warned that your hiring decisions and criteria need to change. Look for ways to automate the services you provide.
Once you've figured out how to do more with less, don't just keep it to yourself. Maybe you have 10% of your market and these new tools will help you get 20%. But why not reinvent yourself and your company by packaging and selling the productivity tools to everyone in your industry, shooting for 100% market share of what is most likely a higher margin and higher profit product than your old service.
You constantly have to listen to technology and see where it goes. We're not all Apple or Facebook inventing entirely new segments and creating billions in market value. But by figuring out where technology is going, what will be cheap next, what will be wasted, you can harness technology to transform whatever business you are in and become a wealth-generating Creator rather than a transformed Server.
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