The Second Curve : Radical Strategies for Managing Change

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Summary: Pretty obvious, formula-driven, consultant-speak stuff.
Review: Sort of like a combination of "In Search of Excellence" and in search of flatulence -- companies that win and companies that lay an egg. All this 1-2-3 wave business can make you seasick. Basically it would make a good set of business school cases. But the cases don't really fit into an overarching framework that has the explanatory power Morrison pretends

Rating:
Summary: A topical, provocative book replete with real-life anecdotes
Review: The business book is as ubiquitous an item as a laptop computer inairplanes. In every flight that I've ever been on in the US, there arelegions of rent-an-MBAs, wearing grey Hickey-Freeman suits and Cole-Haan wingtips, sipping a beer and grimacing as they try to ingest the latest idea from Tom Peters. They've learned about searching for excellence, the discipline of market leaders, constructing a virtual corporation and being part of a learning organization. They've been folded, spindled, mutilated and re-engineered. They have ridden the third wave and preached the fifth discipline. They have read the machinations of Machiavelli, the homilies of Dale Carnegie and the leadership secrets of Attila the Hun. They know that if they meet the Buddha on the road, they should kill him; that if it ain't broken, they should break it; that the future is always shocking and that you always swim with sharks. It was therefore with some cynicism that I picked up a new business book off the shelf at Keplers this weekend. Even the title put me off. "The Second Curve - Managing the Velocity of Change," by an Ian Morrison, who bore the grandiose title of President of the Institute of the Future. But I had some familiarity and liking for the writing of Paul Saffo, who works at the same institute. And my stack of books at home was getting quite short. So I took a twenty-five dollar bet. I am glad I did. "The Second Curve" kept me engrossed through the afternoon and the night, and I stayed up till two finishing it, something I do increasingly rarely nowadays. Mr. Morrison is that rarest of birds, an original thinker. More importantly, he is not an armchair theorist. Almost all his writing is bolstered by real-world anecdotes and experience from twenty years of being called upon as a consultant. In tone, it is reminiscent of "The Art of the Long View", another book that I highly recommend. The author's principal thesis is that technology is causing a sea change in almost every facet of our lives. The first curve is the one that people are used to and which still shows a reasonable pace of growth. Think, for instance, of the full-service brokerage services offered by a place like Merill-Lynch. The second curve is the one that understands that, in essence, such a company does nothing more than transactions and brokering information. Both of these can be automated and done much cheaper via the Internet. Enter Lombard OnLine. All transactions for twenty bucks! Unlimited company reports for free! After all, the only things you're consuming is a few extra cycles of cpu and a few extra kilobaud of bandwidth. Financial institutions still think of themselves as their physical presence - brick and mortar and oak veneer. But they are really nothing more than a conduit for electric impulses; credit A's account here, debit B's account there, feed the earnings report to a browser, download a mortgage calculation applet. As users get more aware of how they can access information themselves and manage their own financial affairs, paying huge percentages as fees is going to seem quaint. Dean-Witter and Smith-Barney have no idea how badly they are going to be hurt. To the authors credit, he strongly advises against expecting the change to happen tomorrow. A line that appears in many places in the book is that we always overestimate the change that will occur in one year and underestimate the change that will occur in ten. So a key chapter in the book is devoted to transition strategy from the first curve to the second. How do you gauge when a supposed second curve is in fact a mirage (the Newton, picture telephones, personal helicopters)? How do you surf a first curve to its entirety (the plain old telephone, video rentals, mainframes)? When does it pay to bet the farm on a new paradigm (there, I used that word)? When is it too risky to? There are some common-sense ideas here. One, that technology makes it possible to do most things faster, better and cheaper. Think of the fax machine and electronic mail replacing the US mail and memos. Two, that the new consumer expects exceptional service as a birthright. He or she wants to be able to order a pair of jeans from L.L Bean at midnight or to choose from six kinds of crackers at Safeway. Three, that the new consumer is not necessarily Caucasian or Japanese. In the next fifteen years, there will be 122 million middle-class households (incomes greater than $25K per year) springing up in South Asia, China, and Latin America. In addition, there are many provocative theses. One is that any industry that trafficks in information (insurance, publishing, recorded music) is going to get decimated if it does not adapt to the second curve. You can no longer live off your history as an authority figure. Gangsta rap artists will not automatically go to Time-Warner because of its history in the information business. Doctors can no longer expostulate that their long training makes them worth two hundred dollars an hour. The HMO down the street will just take that doctor off its database and cut his or her business by three-quarters. Medicine is not that lucrative a profession any more. The second is that the real power in a value chain is no longer with the manufacturer of a product but with the retailer. Wal-Mart can dictate the selling price of a toy much more than Mattel can. All it has to do is threaten to withhold shelf-space for the Mighty Morphin Power Rangers. In like vein, CompUSA decides which is a bestselling CD-ROM much more than Broderbund does, by the way it spends its advertising and display dollars. It is going to become increasingly important to own your channel or have very strong partnerships with it. And remember that with the Internet, the eighteen-year old in the garage can still bypass all established channels and go straight to the consumer. Id Software provides a sterling lesson in this in the way it sold "Doom". I judge a book by how many of its ideas resonate in my head when I drive to work the next morning. By this unscientific metric, "The Second Curve" is a very worthwhile read.