Our global economy is very much like this. Unlike Native the American history of living in harmony with nature, when Europeans first colonized the Americas, they quickly and thinly spread across the land like weeds taking as much natural resources as their efforts would allow.  The culture of “more” quickly spread across the globe, and over time, people have become more efficient at extracting renewable (and non-renewable) resources and the population is exploding.  On the other hand, for over a century now there has been no more land to spread to in search of virgin natural resources.

Just like we see in nature, our economy will grow differently from now on.  Our economy is changing into a more complex and mature one…  in 50 years from now we will have an economy that uses our limited resources better.  An economy that will support 10 billion humans (7 billion now) smartly and sustainably.  An economy that offers these 10 billion people employment and a decent quality of life.

There will surly be challenges, but as a society we will have no choice.  Economics will require our global economy to transition.  Creative entrepreneurs will find ways to generate commerce without increasing consumption (or better yet reducing consumption). They will be considered the heroes of the next generation.  I am looking forward to living in this new complex and creative economy.

Carbon footprint labels started in 2007.  They first appeared on potato chips of all things… The label was of a black footprint (a carbon footprint) and a number representing the # of grams of carbon each potato back “cost” the earth.

The problem of measuring the carbon footprint associated with consumer goods is that everyone seems to be measuring differently.  Should they include the manufacturing process, the consumer behavior with the product, the long supply chains to get the products to consumers… etc???  There are literally thousands of questions that need be answered before these carbon footprint labels really mean anything.  That being said, I am glad that we now have a focal point where we will begin to ask these questions.

So are carbon footprint labels here to stay?  You bet they are… They are not perfect but their very existence will act as a catalyst for businesses asking themselves tough questions as they decide where to locate factories or which material to use.

Fossil records indicate that humans have only been present on Earth for less than 1% of 1% of the Earth’s existence.  This equates to about 10,000 years and is referred to as the Holocene age. The Holocene era is notable for the wide spreading of mammals (particularly Humans) and flowering plants. Despite the relatively short existence of the human race on this planet, our ability to adapt and multiply is unmatched by any species at any other period during Earth’s existence. Furthermore, as humans multiply and spread across the earth, we are proactively changing the earth through selectively breeding animals and farming digestible plants.  These man made farming systems are good for the economy today but may not be so good for the human race long term.

Humans continue to claim more land as we grow our population (estimated 10 billion by 2050- Currently around 7 billion).  Over time we become more dependent on artificial man made systems like fertilizers, selective livestock breeding, hormone injections into our livestock, etc.

Over time the cycle continues and accelerates. This positive feedback loop (or acceleration), created by the explosion of human growth, permanently changes the planet by accelerating the extinction rate of species on our planet. Today we have the highest extinction rate ever. This is happening because we tend to forsake those species that do not immediately benefit our current agenda (our economy).

Many scientists today believe that we are no longer in the Holocene age but rather another age where humans completely control the fate of the planet and it’s ecosystems. The Anthropocene. Our dams stop silt from flowing down million year old rivers, eroding deltas and the wildlife which is dependent.  Selective breeding of livestock, human infrastructure and superhighways.  These all play a part.  Independently, they are all great achievements, but collectively we may be strangling the planet that gives us life.  More scientist believe the tipping point is reached and we must now more than ever, actively consider the environmental impact of our business decisions and government policies.

Whether the tipping point has already been reached or whether it is far in the future, for only being part of this planet for 0.01% of the time, the human race has made a grand entrance… If we want to make it to 0.02% we must think in larger systems.

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Later in the 1940′s -50′s W. Edwards Deming worked in Japan using a statistical approach to better understand systems objectively.  This was a more fair approach which looked at the capability of the system instead of punishing individual workers for the limitations of the larger system. The Japanese used Deming’s methods since the 1950′s but unfortunately, Deming’s philosophy was not fully embraced in the United States until after the Japanese began outselling US companies in the 1980′s. To this day, the Deming Prize is the highest honor a company can be given in Japan.

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In 1986 Motorola statisticians packaged Six Sigma.  This is a standardized and hierarchical “process improvement system” to be used by managers that are not statisticians. After taking a two week class (and in many cases less), managers use powerful statistical tools to make decisions. I believe this is like giving a kid the keys to an airplane after giving her just one flying lesson. Managers often make decisions based on questionable data. As a result, many have called six sigma a confidence trap because data is often manipulated  (or omitted) to drive a the  same changes suggested before the six sigma project was ever launched…

Today many managers are using science to help manage their systems… A good scientist tries to disprove a hypothesis… in many organizations managers are trying to do the opposite.

I hope that there aren’t management teams out there aiming to destroy the earth, but by limiting a “continuous improvement” program’s focus to only dollars, as many businesses and governments do today, we will surely sacrifice our long term sustainability for short term wealth today. We must collectively think triple bottom line.

A balanced and healthy “Continuous Improvement” program…

1. Is focused on long term benefits
2. Not forced (but instead, grown organically with a triple bottom line focus)
3. Network focused (teamwork… not hierarchical)
4. Not overly standardized (but flexible)
5. Acknowledges everyone’s effort to make the system better (again…not only $ savings focus)
6. Acknowledges the interactions that occur within and outside the organization

There are some advantages for using DMAIC…
1. Clear roles and responsibilities
2. Stated goal (at project level)
3. Easy to understand statistical tools
4. Common standardized language
5. Statistical approach

This is great for complex processes in large organizations that have pre-existing mountains of qualified data, but what if I am a small organization or a start up needing to rapidly innovate without the luxury of a strong team of statisticians or high priced statistical software.

Perhaps a better system is a simpler system…

W. Edwards Deming popularized the Shewhart cycle (and modified it slightly). This cycle is a simple way of driving improvement in organizations with less formality than Six Sigma. There are four simple phases (Plan, Do, Study, Act).

Unlike Six Sigma, measurement and deep analysis are not baked into the cycle (although for organizations with means it is always prudent to perform statistical analysis).

For quick innovation in smaller organizations I like the PDSA model. Statistical tools can be applied but are not mandatory.  Simply plan something, do something, study the result, and if reasonable… act on it.  This is ideal for entrepreneurial groups making quick decisions.

The main point of “The Next Economy” is to show there is an age old struggle between the Mass Economy and the Informative Economy.

In short, According the Paul Hawken, The Mass Economy is about reducing inefficiencies in the largest oldest industries to increasing output to grow as fast as possible (some call this, economies of scale).

The Informative Economy is about transforming products and services by putting more information into them (this is “intelligent design”).

I have no doubt there will always be opportunities in both the traditional “mass economy” and the more creative “informational economy”.  To me the question is merely where is there more opportunity today?

Over the past few years, many other authors have made the case that the informative economy is outpacing the mass economy:

Chris Anderson – The Long Tail -

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Chris Anderson argues that as parts of the economy shift (to an informative economy) the tail grows and raises.  Therefore the companies that find creative ways to take advantage of the many diverse ideas in the long tail will do better than those that only focus on the traditional big “blockbuster” ideas. Chris Anderson uses Amazon’s and iTunes’ business model to show how companies are making $ billions by selling just one of a particular item… then doing that a million times with a million items…

Daniel Pink – A Whole New Mind - Daniel Pink argues that over the past century or so we have been rewarded for using our left brain (reading, writing, and arithmetic).  Going forward however, those that will succeed will be the ones that combine the left side of the brain with the more creative “right side” that is more in touch with feeling, and design.  This is naturally happening as computers allow us to perform “left brain” calculations millions of times faster than we could do with pen and paper.  Outsourcing to cheap, educated labor in developing countries are also accelerating this trend.  Daniel Pink’s example is that unlike decades ago people buy a toaster based on how it looks… not the quality of the engineering team.

My thoughts: The right brain is about finding new ways to live with the world while the left brain is about multiplying one way through exploiting a competitive advantage…  Like ying yang, at first the creative brain and the structured brain seem at odds with one another, but in reality they are intertwined.  They are both critical to achieving a goal.

I can’t predict when, but I believe that as resources become more scarce, our economy will continue moving deeper into the informative (creative) economy.  We will need to develop new creative ways to live in this world while consuming less material items.  Many of these new ideas and services will blossom and grow into very large industries… If sustainability is a long term priority, then over time we will approach our goal by using both our creative and analytical talents.

Many leaders of systems try to play unnatural roles which will create discomfort, stress, and anxiety inside the system they manage (ex. chronically understaffed organizations, or mismanaged finances, etc. ). This is like a saxophone playing the oboe role.  We may get away with it for a short while but over time our true pitch will come out and consequences will be addressed.  This is only natural.

When systems play at an unnatural (unsustainable) frequency,  the stress and anxiety builds up over time.  If not proactively addressed by leadership, a system will eventually self correct (ex. Key employees quit, bankruptcy, divorce, etc.).

To reach our full potential we must learn to play the instrument that has been given to us. We must understanding our strengths and limitations. We must understand the strengths and limitations of those around us. We must realize we operate both as a system with internal components, and operate within a larger system (as an internal component). We must therefore understand and manage both our internal energies and the energies we project to the world. We should strive for sustainability.

As a consultant, I have worked with managers inside several business and governmental organizations.   I’ve found that while products and services may vary greatly, there are several key goals all businesses try to achieve regardless of industry.

1. How to grow or operate sustainably over time
2. How to best allocate company resources
3. How to partner and build strategic relationships

So if we are all asking the same questions, why do some businesses make stable profits, treat employees fairly, and are good corporate citizens year after year while others seem stuck in a rut… demanding cruelly long hours on a shoestring budget, yet still fail to stay relevant over the long term? Where does all that energy go?… Maybe the Deohako metaphor can teach us something… More posts on this topic to come!