My favorite part of The Economist is the Schumpeter column at the end of the business section, so for today’s post I decided to list some of the columns I have enjoyed the most. There are so many of them I like (even when I limit myself to those published in the last two years) that this post will be in several parts, with the second part being posted this Thursday. The Economist’s columnists change every few years, so I don’t know if the columns mentioned below are the work of a single person, and although they are definitely not written by someone named Schumpeter, I will refer to the author as Schumpeter below for convenience. The columns consistently discuss the most important trends in business and quote cutting-edge business research in the most recent academic journals or conferences. They are well worth reading every single time.
Here we go, in no particular order:
“Planning for the sequel: how Pixar’s leaders want to make their creative powerhouse outlast them” (June 19th, 2010)
Pixar’s president was 65 and its chief creative officer was 53 when the column was published, which raised questions as to their successors at the moment when Toy Story 3 was about to open in theaters. Schumpeter attributes Pixar’s success to two factors:
- “the company puts people before projects… Pixar starts by bringing in creative people and then encourages them to generate ideas.” The column gives the example of Brad Bird, who oversaw “The Incredibles” and “Ratatouille.”
- “the company devotes a lot of effort to getting people to work together… Pixar… tries to foster a sense of collective responsibility among its 1,200 staff.”
What I find fascinating is that Pixar apparently got the idea for its creative process from Toyota and its lean production system, especially the constant feedback loop.
“The art of management: business has much to learn from the arts” (February 19th 2011)
In Schumpeter's words, Jamie Anderson and his co-authors for “The Fine Art of Success” (which as a side note is published by Wiley, has a grand total of 200 pages and sells for $38.95, or $29.60 if you order the book from Amazon, showing yet again that academic publishers operate on a different business model than many of their counterparts) "point out that many artists have also been superb entrepreneurs. Tintoretto upended a Venetian arts establishment that was completely controlled by Titian. He did this by identifying a new set of customers… and by changing the way that art was produced… Damien Hirst… realized that nouveau riche collectors would pay extraordinary sums for dead cows and jewel-encrusted skulls. He upturned the art world directly through Sotheby’s, an auction house.”
Schumpeter continues: “Many of the world’s most successful businesses are triumphs of story-telling.” He also argues that the art world has centuries of experience managing prima donnas, who can now be found as the top performers of many companies. The arts can also help companies in their quest to unlock creativity.
“The bottom of the pyramid: businesses are learning to serve the growing number of hard-up Americans” (June 25th 2011)
Excerpt: “Management gurus have rhapsodized about “the fortune at the bottom of the pyramid” in emerging markets ever since C.K. Prahalad popularized the idea in 2006… But when it comes to the bottom of the pyramid in the rich world, the gurus lose interest.” Schumpeter points out that “even in one of the world’s richest countries [read: the U.S.] the hard-up represent a huge and growing market… This is a challenge to the American dream. But it is also an opportunity for clever companies.”
McDonald’s, Walmart and Target are thriving, but the German discounter Aldi, which “has been doing surprisingly well in America, too” is the one covered in detail in the column, from its supply chain model to the size of its stores. “Aldi’s success highlights an interesting fact: that there is a lot of innovation in this market.” Popular models include:
- Paying for things upfront (such as prepaid wireless cards)
- Collaborative consumption (such as swapping DVDs or children’s clothes)
If American companies don’t seize these new opportunities, then this niche will be filled by foreign companies: “Emerging giants such as India’s Tata and China’s Haier regard America as a natural market for their frugal products.”
“The guru of the bottom of the pyramid: C.K. Prahalad’s death on April 16th has deprived the world of a great management thinker” (April 24th 2010)
C.K. Prahalad, a distinguished professor at the University of Michigan and frequent contributor to Harvard Business Review, “was the most creative management thinker of his generation,” who “revolutionized thinking on two big subjects, business strategy and economic development, and made a significant contribution to a third, innovation.”
- With respect to business strategy, he believed that firms should “capitalize on their advantages to redefine markets in their favor” rather than simply competing in their existing markets.
- With respect to innovation, he “argued that company-centric innovation was giving way to co-creation, in which firms collaborate with their customers and business allies.”
- Finally, with respect to economic development, he “argued that the world’s poor represented trillions of dollars’ worth of pent-up spending power” and that innovative companies “were learning how to turn these people into paying customers.”
You can find Prahalad's HBR articles here and his books here. According to Schumpeter, his success might have been due to the fact that he “was an outsider in the American dominated world of management theory” displaying a certain amount of “intellectual restlessness”, evidenced by his always working with a collaborator and “never wr[iting] more than two articles on the same subject.” The loss to management thinking is certainly enormous. As his legacy-making contribution, he “taught everyone to see the developing world not as an also-ran but as a vortex of innovation and creativity.”
“Angst for the educated: A university degree no longer confers financial security” (September 3rd 2011)
- “The best and the brightest of the rich world must increasingly compete with the best and the brightest from poorer countries who are willing to work harder for less money.”
- “Several economists… have begun to argue that post-industrial societies will be characterized not by a relentless rise in demand for the educated but by a great “hollowing out” as mid-level jobs are destroyed by smart machines and high-level job growth slows.”
- Also read what David Autor and Thomas Malone, both of MIT, and Alan Blinder of Princeton have to say about this trend, especially Malone’s opinion about “the application of the division of labor to brain-work”.