Page 23 - Chapter One

Foreword

The stock market is booming. Corporations are reporting record levels of
profit. House prices are recovering. There are signs of a manufacturing
expansion. Multiple indicators at the aggregate level point to positive
economic outcomes for the time being.

Yet behind the scenes, many big organizations today are teetering on
the brink of chaos. As markets change faster and faster, and exponential
improvements in technology lead to exponential innovation, evidence is
steadily accumulating that organizations with legacy mindsets, structures
and management practices are not keeping up.
Businesses today are in fact facing a fundamental paradox. On the one
hand, new technology is indeed creating vast possibilities for doing
things better, faster, cheaper, smaller, lighter, more conveniently and more
personalized. Per capita labor productivity is steadily improving. There are

massive opportunities for big- win investments with huge upside potential.
Yet most big organizations are failing to capture value from these new
possibilities. Core performance has been deteriorating for decades: the
return on assets for US companies has steadily fallen to around one-
quarter of 1965 levels. The “topple rate” of industry leaders is accelerating.
Only one in five employees is fully engaged in his or her work, and even
fewer are passionate about their work – a critical problem at a time
when innovation is a key to success. The conclusion is inescapable: big

hierarchical bureaucracies with short- term mindsets have not yet found a
way to flourish in this changing world.

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