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The support economy: Why corporations are failing individuals and the next episode of capitalism

Book cover

by Shoshana Zuboff and James Maxmin, Allen Lane, Penguin Press, 2002.

Abstract

People require deep support for their individual needs and wants. They are tired of the adversarial competitiveness of old style capitalism. The new style capitalism proposes alliances or chains of complementary organisations, from which advocacy teams create what people really want. The fruits of many enterprises cooperating are brought to people‘s doors.

(Reviewed by Edgar Wille in July 2003)

(These book reviews offer a commentary on some aspects of the contribution the authors are making to management thinking. Neither Ashridge nor the reviewers necessarily agree with the authors’ views and the authors of the books are not responsible for any errors that may have crept in.

We aim to give enough information to enable readers to decide whether a book fits their particular concerns and, if so, to buy it. There is no substitute for reading the whole book and our reviews are no replacement for this. They can give only a broad indication of the value of a book and inevitably miss much of its richness and depth of argument. Nevertheless, we aim to open a window on to some of the benefits awaiting readers of management literature.)

The old paradigm of capitalism

You may have read Shoshana Zuboff’s book In the Age of the Smart Machine. If so you will know that you are in for a challenging and fascinating read in her new book. The first one was concerned with the impact of new technology on the work place and on customer relationships. But it was working with what she would now call the old paradigm of capitalism which she, and her husband and co author, see as preventing the customer from being truly in the driving seat.

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The new individualism

The underlying philosophy of this book is that the world is inhabited by a new breed of people. Mainly brain workers, who use their minds rather than their bodies, both at work and in the personal organisation of their lives. They are less disposed to follow the masses and have their own individual view of their needs and wants. They are self determining; they have a profound sense of their own identity, their own uniqueness and a desire for privacy. They need their own sanctuary in which self actualisation develops, often within the nuclear family context. They have a voice which they want to be heard and considered by the business processes with which they relate .They also have a need for connection, but of their own choice, not foisted upon them by external institutions who are focussed on their own agendas, however much they may trumpet their dedication to customer service.

These new people are presented as consumers, who decide what they want to consume and are the basis for the activity of what is termed the new capitalism. They do not want to be the end of a value chain, receiving what others have determined for them. They want what they want. Modern technology makes this possible, if harnessed to a new form of organisation. They seek autonomy, diversity, and choice, as against hierarchies, authority and conformity.

They don’t want to be the pawns of market segmentation, target customer categories, market penetration, customer relationship systems, mass customisation as defined by companies, of pseudo intimacy and even the best of current capitalism’s customer orientation. They are aware as never before of living in their own individual space and resent a system which does not focus on enabling them to live rich lives within that individual space.

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Deep support in individual space

They themselves are the place where value is defined. They are not prepared to lower their demands, just because companies are preoccupied with their own internal efficiency. They look to the capitalist system to reform itself in a way that will truly put them first, and in doing so find its own best interests served as well.

This yearning is called by our authors deep support, where everything revolves around them and helps them to achieve their dreams for life, with the business system taking care of the support they need, so releasing time for them to turn their personal visions into realities.

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The standard enterprise logic

These new people (if they are so new) are tired of the adversarial nature of current capitalism, of being the victims of what the authors call the "transaction crisis". They are wearied by the frustrations of getting exactly what they want, in spite of the much heralded quality movement; of being treated as morons or enemies by company representatives and by bureaucracies with their rules and failure to establish real customer relations. They all have their horror stories of things that went wrong, of defective goods, of long delays, of broken promises and sometimes of blatant rudeness, being treated as the enemy instead of the one who provides the success of the company.

The authors recognise that many attempts have been made to improve things, but they believe that as long as the current model of capitalism prevails, the disappointment will continue. What they call the "standard enterprise logic" has become irrelevant to the wants of people. Forsaking it for a new approach will in fact bring opportunities for greater wealth creation to the betterment of life for all.

The new people are fed up with the old style corporation, which is self interested, manipulative and fails to enter into dynamic partnership with its customers. The book does recognise the benefits that earlier forms of capitalism have brought and the abundance that has been created, but believes the time has come for fundamental change.

Having read several chapters of such a critique of the present arrangements I was burning with curiosity to know what was proposed in place of the present system.

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The new capitalism

The proposal for a new form of capitalism came briefly in an early chapter, but I had to wait until towards the end to get a concrete case study of the new world of capitalism. The object of this book summary is to encourage managers in companies and other organisations to examine the proposals and see if there is something worth taking on board and working toward in a way which might enhance the organisations’ prospects to create wealth in the very act of meeting these supposedly new dreams of the individualistic customers.

The picture the authors have is of federations of companies, whole networks of customer supply chains, which are focussed on providing DEEP SUPPORT for these individuals and their families, taking off from them the burden of having to organise so many aspects of life for themselves in time which is already in short supply because of the demands of modern life and the desire to live richer and fuller lives. The idea is that capitalism should so organise itself that the individual can outsource as much as possible of individual need and want satisfaction to networks of companies, who are so interrelated that they can provide the products and service with minimum effort by the individuals, who yet are in the driving seat, given full ranges of choice and full information with which to make informed choices.

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The new federations

These federations are alliances or chains of complementing organisations, where the components of the value chain really do work unitedly to respond to the customers’ needs, while reducing their own costs by true cooperation, made dynamic by the focus on the individuals who are the goal and yet the source of all their activity. Such an approach is possible only by the use of the most advanced information and communication technology (ICT), which is able to coordinate a multitude of activities in a way which makes the providing organisations more efficient, as well as satisfying the demands in a timely and appropriate way.

Various ICT platforms direct the actual bringing together of scores of providers of the different ingredients of the individual needs. These are dynamic providers of relations in which hundreds of organisations are constantly being called in, in ever flexible combinations, to meet specific needs. Advocacy teams work on the bringing together of the appropriate bodies to meet the specific needs. These teams, say of four people, may have 300 or 400 clients, with whom they build up close relationships. One advocate will be the lead coordinator or advocate for a number of families.

For different areas of life the families may link with several federations and will therefore be dealing with several advocates. The job of the advocate is to help the client in the first instance to have clear information on the options to meet the want. A decision is reached and the advocate links together, though ICT and personal discussion, all the organisations who will have some input to offer, making sure that the best deal is obtained in terms of cost and quality as previously agreed with the client.

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The role of the advocate

Automated arrangements will have been made as to when the cash will be released from the individual’s resources and which resources will be controlled on their behalf by the advocate, who enjoys and does not abuse the full trust of the individual client. When that cash is released then it goes through the whole of the particular network involved and everyone gets paid immediately for their part in the cooperative effort to meet the individual’s wants. The whole paraphernalia of invoicing, waiting for payment, and cash flow difficulties is thus banished from the equation of client and inter-company relationships. The advocate or advocacy teams work in the individual space of their clients and at the same time work in the organisational space where the individual wants are provided for.

From the organsations’ point of view there is a transformation in ways of working. By the network approach, well coordinated by advocates, a path through complexity is blazed and much of the unpredictability of business is cut out because everything is happening in real time, with the market finding the producer, instead of the producer finding the market.

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Infrastructure convergence

One of the terms used to describe this flexible relationship between many companies within a network or more widely within a federation, is infrastructure convergence. This term conveys the idea of a large number of enterprises contributing to the provision of the goods and services required by the individual and in doing so working on a common infrastructure for the unique purpose. Thus duplication is reduced, and with it costs. Everything is tracked through the participating enterprises as if they were one enterprise, which for the specific purpose they are, though at the same time they may be part of a number of other federations or networks. Each company keeps its own identity and its own responsibilities, but at any time is temporarily married to a number of other organisations, in respect of just one sequence of activity for a particular individual.

Some of this kind of thing happens already, but not on the scale envisaged by our authors. Fedex, UPS and similar organisations have long been tracking each parcel they handle and making the information available to customers. Outsourcing has often been pushed to the extent where the partners in the chain become part of a family. On line ordering of goods already exists and many other transactions are on line and personalised. The proposal of the book is to take this kind of approach to the nth degree. It is a new view of capitalism in which competition continues, but cooperation is coordinated for specific parts of the action.

I am sure that many questions are arising in readers’ minds. But if we could suspend scepticism for the moment, we could discuss difficulties at the end and even put them to the authors. If it seems a bit Utopian or idealistic, we would be unwise to dismiss it all without further thought. We might have missed a golden opportunity to apply our own creativity in our own situation with resultant transformation of our business success, and perhaps also an enhancement of the enjoyment of our daily work life, at whatever level. This may be an opportunity to bring new power to consumer choice as well as to organisational providing of goods and services.

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Individual expectations

The areas in which individuals may seek help include the whole gamut of commercial and industrial provision, and even governmental and voluntary provision. Everything in the individuals’ life can be covered: the selection and purchase of a new car, house purchase, financial loans, mortgages, grocery selection purchase and delivery, business and holiday travel, eating out, entertainment, insurance, banking and so on.

We are told the story of Lillian and Carlos and one of their advocates, David. He organises their life without taking it over. He and his supporting ICT systems deal with all their purchase payments, and credit card payments; when they want a new computer, he pulls together the information they need to decide on the model and software; he organises their holiday, transport at all stages, hotel, journey care, cancellations, cash; he looks after medical choices and appointments; Christmas presents and birthdays, reminders and purchases; car maintenance. Lillian and Carlos make the decisions in minutes and the network takes care of what would have taken them hours and days to organise. They are kept informed of progress all the time. The federation activated by the advocate takes the hassle out of life, so they can devote their efforts to whatever it is that holds their individual interest and personal commitment - what they really live for.

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Background history

Before arriving at this unified approach to the meeting of individual wants, a good history is offered of the evolution of capitalism, as a background to the new type of capitalism envisaged. We are reminded of how the early owner capitalists managed everything, but, like Wedgwood, early realised the need to introduce standard methods and procedures, which enabled them to offer goods at lower prices. Consumption grew as the industrial system put money in the hands of many more workers, which gave scope for greater self expression within the limits of what was being provided.

Then came mass production. Ford is the key figure here, with his one affordable model and his introduction of five dollars a day payment to line employees. Design was fragmented into parts that made for ease of assembly; simplification and extreme division of labour enabled high profits from relatively inexpensive cars. Not only did Ford change the face of production, but he also gave a boost to the development of consumerism. Workers began to make the move toward joining the middle classes.

Alfred Sloan at General Motors took the development of capitalism further. He moved to diversity of products and services and had to support this with new administrative practices, marketing activity, pricing policies, distribution strategies, new product development. He continued the search for economies of scale, standardisation, high volume sales with low unit costs. This was managerial capitalism. The ownership was diffused among many shareholders, but the management of the enterprise was in the hands of the new breed of managers.

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The growth of consumerism

The very consumerism which managerial capitalism generated, also in the second half of the twentieth century, created discontent, both amongst consumers and employees. Workers tired of being expected to leave their brains at the factory gate and wanted to be more involved in having a say about what they were doing. Consumers tired of being told that they could buy only what the companies decided to make or provide. The way was paved for new approaches, allied with the enormous technological developments of the last quarter of the last century.

Many changes took place to reflect the new mood, but to a large extent they were piecemeal. This book forecasts something which is more coherent and all embracing than reengineering, mass customisation, customer relationship marketing, quality of working life movements, empowerment, total quality, supply chain management, continuous improvement and similar advances of the second half of the last century. The book refers to the improvement that the new capitalism will make possible in working conditions of the new breed of individualists, but does not pursue the theme in great detail, except to indicate that the new style enterprise requires a lot of coordinators, advocates and ICT people and that the advent of infrastructure convergence will transform working life.

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Eleven principles of the new capitalism

Towards the end of the book the theme is summarised in eleven main principles. These are:

  1. All value resides in the individual who pays for the goods and services.
  2. Organisational structures are distributed to meet the needs of these self determining individuals.
  3. The economics of the new capitalism are built around relationships; these relationships are the key to wealth creation in the new economy.
  4. Markets are self authorising. They start from the demands of the individual and work backward into the federations of enterprises who cooperate for specific purposes to meet the individual requirements.
  5. The key to all the activity is the provision of DEEP SUPPORT to the individual, bringing the fruits of many enterprises to their door.
  6. The new capitalism will be based on a well coordinated linkage of many enterprises who act as federations, maintaining their independence in respect of their core activity, but cooperating to bring it to the individual. They will still compete to be the best providers, and therefore welcome in the best federations.
  7. All practices will be aligned between companies within the federations with a focus on the individual.
  8. Infrastructure convergence means cost reduction and the freeing of resources for the enterprises of the new capitalism.
  9. Federations can be infinitely configured.
  10. New methods of valuation will follow from the ready availability of information. When business turns to the satisfaction of consumers in their individual space, then intangible benefits will assume a greater significance and the whole system of valuation and related accounting will change. Realised relationship value per individual (RRVI) will be a key ratio. Another significant metric will be the amount of time that is saved for the individual.
  11. The new consumption, having such significant elements which are intangible, will change the nature of work for, perhaps, a majority of employees, who will also bring their experience as consumers into the development of responses to individual wants.

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Questions which arise

I apologise to the authors that in a few pages I have been unable to do full justice to their 450 pages. But I believe the key mood of what they are advancing is fairly presented.

Writing the summary somewhat reduced my original scepticism, though there are many gaps to be filled. No doubt our authors will be responding to many comments that they will receive and we should look out for these in the management press.

I personally am intrigued to know how it will all work out. I find difficulty in imagining how the evolution or revolution, from where we are now to where we want to be, will take place. The federation concept is so different from the current mergers, alliances and takeovers of which the financial newspapers and pages are full. The association within a federation will vary from situation to situation and will be more like the co-opetition which has been discussed over the last few years. But how do we get there?

How do the large raw and basic material companies fit in, such as aluminium processors, basic pharmaceutical chemical manufacturers, steel manufacturers, oil companies? How can they work within a federation structure? How can advocates make sure that their early part in satisfying individual wants is considered and implemented by the large companies? How will the necessary trust be generated? Will there not be scope for advocates to cheat? Will the "unacceptable face" of current capitalism disappear?

Then again doesn’t it all sound like a Western, developed economy, mainly for the benefit of the middle class? How will the developing countries and the really poor of all countries be helped to join the new economy? Will unfair trading disappear? Is there a not a danger that a huge bureaucracy will develop? How do governmental contributions fit into being part of federations, for example, in Britain at least, the social security services, the National Health Service and the school and university system? And what about profit? How will it be determined? Will it be squeezed by customer unwillingness to pay for such support? This is the question asked by the Economist in its very fair one page review, which however ends with a wager: "The Economist will make this bet: if the customer-centric support economy does come to be, the main reason will have been the unrestrained pursuit of profit."

There are many other questions. They are mainly about the ‘how’ of the proposals. The ‘what’ is attractive if it is feasible. But the path to its achievement is likely to be strewn with rocks and potholes. Nevertheless we should give the book serious consideration and seek to give our own answers to the questions and perhaps write to the authors seeking their further clarification. Progress comes by taking seriously proposals for change. From the ensuing dialogue, new wealth, new prosperity, new employment modes, new life styles and deeper harmony might emerge, so long as it does not all lead to a new version of 1984 or Skinner’s Walden Two, where everything is neatly controlled, for our good of course!

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