University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
The New Rule
Judging by the numbers has been an integral way of assessing the success or failure of a company or a CEO from then and even until present. The influence of this method has been augmented by the advocacy by “successful” executives through their published and mediated ideas. But even with the prevailing numerically-dependent idea on success, it seems that globalization has paved way for people to rethink and reconsider other “rules” that must have been missed out before. Fortune senior writer Betsy Morris wrote an article about “New Rules” that, as it is implied in the text, should replace the Wallstreet-pressured old ones. The question is: Is there really a necessity to replace the old rules with new ones?
The old rules are easier to manage and apply compared to the new ones. The old rules focus merely on raising the numbers; everything is judged based on the numerical values. Theoretically, there are no people to please, and not much effort on creative thinking is necessary. All that has to be done is to follow proven formulas of success, that is, as dictated by the experiences of “successful” businessmen and executives. The only goal is to be on top and it was believed that that goal can be easily attained with linear progression as long as the “book” was followed.
To exemplify this, there is this old rule about big dogs owning the street (Morris, 2006). Based on this old rule, the greatest benefits and rewards in the industry are reaped by the biggest player or by the economies of scale. This old rule is relatively easy to manage compared to its counterpart in the “new rules,” that is to be agile.
Although being big is not as easy as what might have been implied, this old rule is considered one because based on what is implied in the rule, just being big allows the player to take advantage of whatever resource in the industry or to take huge profits from a specific market without much effort and simply just by being “big.” As it is with their status, the natural laws of economics come to play under normal circumstances, that is, the economies of scale could naturally spread their fixed costs and thus acquire larger revenues (Morris, 2006).
This is not the case with its counterpart “new rule.” Based on the new rule, the player must be agile because being big can actually bring harm (Morris, 2006). This rule implies more than the requirement of a player to simply be agile. It implies the necessity of a certain ability that is, to properly observe the direction of the market and be able to apply this gained knowledge to the needs of the company.
The new rules, thus, require more than the ability to follow rules. It requires that the leader or executive is able to have the wisdom to realize the need to acquire knowledge and be able to use the gained knowledge (particularly the needs of the market) to direct the company towards adapting to these needs and continuously make the company flexible afterwards. The ease in managing the old rules is dependent on its nature which is based on “following,” while the new rules are mainly based on “skill and creativity”.
That the “old rules” are in fact labeled as “old” does not necessarily mean it should all be replaced with the new ones or worse, eradicated and forgotten. After all, these rules are based on wisdom from past experiences and it is not very difficult to find similarities, no matter how small between past experiences and current ones. The term “old” may not always be synonymous with “better” but the same can be said with “new”. It is actually possible that both are equally important and a fusion of which could create a better “rule”.
Citing again the example on the old rule of big dogs owning the street and its counterpart new rule, agility is best, it can be said that while the old rule may not necessarily be better than the old rule, being “not big” does not also guarantee positive effects. Agility and the company’s flexibility, plus, being big, can actually create more advantage for the company. With the big company’s ability to spread its fixed costs and the agile company’s ability to make efficient use of resources, the business can actually reduce its costs and make more revenues.
Similarly, any company can attempt to find a niche or create something new. This is not an easy feat because as it is said, it involves creativity. But a company must not limit itself to just one of two choices. The old and new rules that are presented in the article are not opposites. This means that it is actually feasible for a company to both strive being the best in the market and at the same time, strive to always create something new for their market.
Starbucks may have “continuous change” as their goal but this goal is only the surface of an underlying goal. Why does Starbucks want to keep moving and evolving? This is to continue their identity, which caters to their market, that keeps their profits and thus keep the enterprise going. Starbucks may not have had being number 1 as their main goal but they were able to be on top by always creating something new for their clients. In the end, it is able to take advantage of its ability to create something new, as well as its being on top.
Being on top had become one of the old rules because it had a rationale that is deeper than the “numbers”. A top business could improve the employees’ morale and could thus make them become better in performing their jobs. This could result in better relationships with clients. The businesses’ rules must not be limited to a choice between the old or the new. Both are not opposites and the instances when both can be done simultaneously to complement the other must be recognized.
While in general, the new rules teach about the importance of flexibility the necessity of the corporate world to be able to adapt and consider the actual needs of its clients, some of the old rules can be truly “greedy”.
One old rule that represents this is that the shareholders rule. According to a study done by One Bain & Co. (Morris, 2006), there is a significant discrepancy about the perceptions of the executives about the quality of their service and the perceptions of the customers themselves. It is said that 80% of the executives perceive themselves as doing a great service and only 8% of the customers agree (Morris, 2006).
This implies that the customers’ needs are not adequately met while the executives consider themselves as being justly compensated for their “efforts,” and the company being the just recipients of revenues. It may be that any business is made for the sole purpose of profiting. But this does not exempt anyone from disregarding ethical considerations. Simply put, any customer deserves the value of what they pay for.
In addition, the companies, whether profit-centered or otherwise, must realize that the laws of economics would indicate that catering to the customers would actually increase the revenues and considering the new rule (The Customer is King), can be a positive way of gaining profits instead of taking so much effort to decrease their operating costs, which could in almost all cases, also reduce their product’s quality. Considering the clients could only be symbiotic, benefiting both the clients and the business itself. This has been proven by companies like Apple and Genentech (Morris, 2006).
In the rapidly changing times and with globalization, it seems that the “new rules” are most applicable. This is because these new rules can only be products of observations of the successful companies and CEO’s at the present time. Still, it must be noted that the “old rules” were what the people considered then as the “new rules”. This means that rules are created based on what seems appropriate depending on the demands situations and circumstances that happen at a certain period.
With this in mind, what is important is not exactly to follow which rule is popular at a certain period but to allow circumstances and the nature of events to become guides in strategizing and decision-making. Truly, following the old rules religiously would be like staying at a certain era and preventing growth. But still, following the “new rules” by-the-book would be self-contradictory because the principle behind the “new rules” is to allow constant change and flexibility depending on specific factors involved. Like what the Morris (2006) said about the old rules, the “new rules” are made to answer specific problems of a specific situation at a specific time. Then, it is only the value of flexibility that must be retained.
As it is, the world will always change even with resistance from business players and all that can be done is to allow themselves to be swayed and be creative so that each situation can be used to their competitive advantage.
Still, the old rules must not be completely disregarded. These old rules must be seen based on the rationale or wisdom behind. Because such rules, when seen at a less common or different perspective could still apply to a specific present, although not necessarily modern situation. Jack Welch may right when he said that “If applied correctly… rules can work forever.” (Morris, 2006). The only question that matters then is “what is correctly?” Again, “correctly” depends on one’s ability to gain knowledge in situations, be flexible and be creative in using these situations to his or her advantage—but of course, with all the ethical considerations.
Morris, B. (2006). The New Rules. Fortune. Retrieved 28 Feb 2007 from http://money.cnn.com/2006/07/10/magazines/fortune/rules.fortune/index.htm.