Big Shift Why It Matters

!ohn Pagel lll, !
ohn Seely 8rown, and Lang uavlson SepLember 2009

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!ohn Pagel lll, !ohn Seely 8rown, and Lang uavlson

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MosL analysLs and commenLaLors undersLandably focus on Lhe currenL economlc
downLurn, Lrylng Lo assess how deep lL wlll go and how long lL wlll lasL. AL Lhe same
Llme, mosL of us would acknowledge we are also ln Lhe mldsL of a much longerLerm,
more pervaslve shlfL ln how we do buslness and how we bulld relaLlonshlps, one LhaL
cuLs across boLh our professlonal and personal llves. Many observers have soughL Lo
proflle faceLs and sllces of Lhls 8lg ShlfL - everyLhlng from open lnnovaLlon Lo offshorlng
- buL few have aLLempLed Lo descrlbe, much less quanLlfy, Lhe full scope of Lhls
profound shlfL.

Why does Lhls maLLer? Well, as we shall see, )"# $%& '"%() ".0 7/.:.)%9.22+ %5)#50%(%#7
93:@#)%)%A# @/#008/#0 35 (%/:0 3A#/ 7#9.7#0B C%/:0 ".A# 03 (./ (.%2#7 )3 /#0@357
0899#00(822+ )3 )"#0# :385)%5& @#/(3/:.59# @/#008/#0B lL ls lmperaLlve LhaL we make
sense of Lhls longLerm Lrend. WhaL ls drlvlng Lhese performance pressures? Why have
flrms been so unsuccessful ln respondlng Lo Lhese pressures?

Maklng sense of Lhe currenL slLuaLlon - Lo undersLand Lhe deep sLrucLures and dynamlcs
LhaL are shaplng our broader professlonal and soclal envlronmenLs - ls helpful, buL lL
cerLalnly noL sufflclenL. We need roadmaps LhaL wlll help us Lo bulld on Lhls
undersLandlng and make progress by lmprovlng longLerm performance on a wlde range
of dlmenslons. 1hls paper wlll provlde a brlef overvlew of some our recenL research lnLo
boLh Lhe naLure of Lhe longLerm performance pressures and Lhe speclflc approaches
requlred Lo address Lhese performance pressures successfully. ,5 D/%#(E F# "3@# )3
:.G# 0#50# 3( )"# 235&)#/: 9".5&#0 85(327%5& ./3857 80 .57 "#2@ .22 3( 80 :.G#
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Quantifying the performance challenge
1o help managers ln Lhls decldedly challenglng Llme, we have developed an lndex Lo
measure Lhe changes LhaL have had Lhe blggesL effecL on buslness over Lhe pasL flve
decades. Cur flrsL release of Lhls !"#$% &'()* hlghllghLs a core performance challenge for
Lhe flrm.
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Clven Lhese longLerm Lrends, we cannoL reasonably expecL a reLurn Lo normal as Lhe
currenL economlc downLurn beglns Lo dlsslpaLe-on Lhe conLrary, all longLerm Lrends
polnL Lo a conLlnued eroslon of performance, and conLlnulng performance pressure.

Labor Productivity Competitive Intensity Return on Assets Topple Rate
1965
Firm performance metric trajectories (1965-2008)
Source: Deloitte analysis
Present

1
More than just bits and bytes, this digital infrastructure consists of institutions, practices, and protocols that together organize and
deliver the increasing power of digital technology to business and society.
LxhlblL 1: Whlle u.S. workers' producLlvlLy has grown, 8CA has dropped

5
lor Loday's blg lnsLlLuLlons, Lhese concluslons underscore a performance challenge on
Lwo levels. AL Lhe flrsL level, labor producLlvlLy ls lmprovlng aL a raLe far slower Lhan Lhe
underlylng lncrease ln performance of our dlglLal lnfrasLrucLures. 1he gap beLween Lhe
poLenLlal performance made posslble by dlglLal Lechnology and acLual flnanclal resulLs ls
sLeadlly wldenlng.

AL a second level, flrm performance conLlnues Lo deLerloraLe as compeLlLlon lnLenslfles,
drlven by Lhe spread of a new dlglLal lnfrasLrucLure and publlc pollcy lnlLlaLlves LhaL
reduce barrlers Lo enLry and barrlers Lo movemenL. ln oLher words, flrms are falllng Lo
capLure Lhe beneflLs for Lhemselves or for Lhelr shareholders of even Lhe modesL
producLlvlLy lmprovemenLs Lhey have achleved. 1hese beneflLs lnsLead appear Lo be
capLured lncreaslngly by creaLlve LalenL and cusLomers, who are galnlng more markeL
power as compeLlLlon lnLenslfles.

'%:@2+ @8)E (%/:0 ./# (.%2%5& )3 .9"%#A# )"# @/3789)%A%)+ %:@/3A#:#5)0 :.7# @300%D2#
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Cur lnsLlLuLlonal leadershlp, preoccupled wlLh shorLLerm clrcumsLances, evenLs, and
lncenLlves, has falled Lo noLlce Lhe deeper changes Laklng Lhe corporaLe secLor ever
furLher lnLo dlfflculLy. Cycllcal recovery ln Lhe economy may agaln make Lhe sympLoms
less lmmedlaLely apparenL buL Lhe underlylng Lrends appear Lo be relenLless ln Lhelr
forward march.

Pow do we reverse Lhls secular Lrend? lor precedenL and lnsplraLlon we mlghL look Lo
Lhe generaLlon of companles LhaL emerged ln Lhe early 20
Lh
cenLury. As Alfred Chandler
and 8onald Coase laLer made clear, Lhese companles dlscovered how Lo harness Lhe
capablllLles of newly emerglng energy, LransporLaLlon, and communlcaLlon
lnfrasLrucLures Lo generaLe efflclency aL scale-Lo geL ever more producLlve as Lhey goL
blgger.

!37.+W0 93:@.5%#0 :80) :.G# )"# :30) 3( 38/ 3F5 #/.W0 5#F %5(/.0)/89)8/# )"/38&"
%50)%)8)%35.2 %553A.)%350 7/%A#5 D+ 0"%()%5& )"# /.)%35.2# (3/ )"# (%/: (/3: 09.2.D2#
#((%9%#59+ )3 09.2.D2# 2#./5%5&B 1hese lnsLlLuLlonal lnnovaLlons offer Lhe promlse of
generaLlng greaLer producLlvlLy lmprovemenL from our conLlnually evolvlng dlglLal
lnfrasLrucLure. Lven as compeLlLlon conLlnues Lo lnLenslfy, Lhe subsLanLlally greaLer
economlc value creaLed should make lL easler for companles and Lhelr shareholders Lo
capLure Lhelr falr share . Cnly Lhen wlll Lhe ShlfL lndex Lurn from an lndlcaLor of
corporaLe decllne Lo one reflecLlng powerful new modes of economlc growLh.


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The deep dynamics of the Big Shift

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)".) 93:@#)# (3/ )"#%/ 7.%2+ .))#5)%35B I.)"#/ )".5 0%:@2+ /#.9)%5& )3 #A#5)0E
%50)%)8)%35.2 2#.7#/0 F%22 D# D#))#/ @30%)%35#7 )3 .5)%9%@.)# )"# 9".5&#0 )".) F%22 :.G#
)"# &/#.)#0) 7%((#/#59# %5 )#/:0 3( 0899#00 3/ (.%28/#B Whlle Lhls ShlfL lndex offers rlch
lnslghL ln lLs flrsL release, lLs value wlll lncrease over Llme as Lhe broader Lra[ecLory and
pace of change can be more clearly deflned for each meLrlc

Wave One Building the Foundations

1he flrsL wave of change lnvolves Lhe rapld, unflagglng evoluLlon of a new dlglLal
lnfrasLrucLure and parallel, magnlfylng shlfLs ln global publlc pollcy LhaL have reduced
barrlers Lo enLry and movemenL. 1hese foundaLlonal forces, playlng ouL over Lhe lasL
flve decades, caLalyze and conLexLuallze Lhe many oLher changes occurrlng ln nearly
every domaln of conLemporary llfe. As a resulL, Lhe changes ln Lhese foundaLlonal forces
provlde powerful leadlng lndlcaLors of Lhe deep changes LhaL wlll be playlng ouL over
Llme ln oLher waves of Lhe 8lg ShlfL.

normal" may ln facL be a Lhlng of Lhe pasL. 1rends seL ln moLlon decades ago are
fundamenLally alLerlng Lhe global landscape as . 5#F 7%&%).2 %5(/.0)/89)8/#E D8%2) 35 )"#
080).%5#7 #?@35#5)%.2 @.9# 3( @#/(3/:.59# %:@/3A#:#5)0 %5 93:@8)%5&E 0)3/.&#E .57
D.57F%7)"E @/3&/#00%A#2+ )/.50(3/:0 38/ D80%5#00 #5A%/35:#5)B 1hls lnfrasLrucLure
conslsLs of lnsLlLuLlons, pracLlces, and proLocols LhaL LogeLher organlze and dellver Lhe
lncreaslng power of dlglLal Lechnology Lo buslness and socleLy.

Whlle Lhe core Lechnologles underlylng prevlous dlsrupLlons-Lhe 8essemer sLeel
process, Lhe Slemens elecLrlcal generaLor, Lhe auLomoblle-all had one blg performance
breakLhrough and Lhen very modesL performance lmprovemenLs LhereafLer, Loday's
core Lechnologles conLlnue Lo evolve aL an exponenLlal raLe. As Lhey do, Lhe
dlsconLlnulLles LhaL ln Lhe pasL occurred lnfrequenLly now erupL on a conLlnuous basls,
drlven by a dlglLal lnfrasLrucLure LhaL shows no prospecL for sLablllzaLlon.

AL Lhe same Llme, Lhere has been a @./.22#2 )/#57 3A#/ )"# @.0) 0%?)+ +#./0 (3/ @8D2%9
@32%9+ )3 :3A# %5 )"# 7%/#9)%35 3( #9353:%9 2%D#/.2%X.)%35 ./3857 )"# F3/27. Whlle Lhls
Lrend could reverse aL any Llme (and Lhere are some dlsLurblng slgns of a gaLherlng
backlash boLh ln Lhe uS and abroad), lL ls remarkable how susLalned and wldespread
Lhls Lrend has been.


7
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%59/#.0#7 #9353:%9 @/#008/#0 35 .22 (%/:0B

1he C3857.)%35 ,57#? quanLlfles and Lracks Lhe raLe of change ln Lhese foundaLlonal
forces. key meLrlcs lnclude Lhe change ln performance of Lhe Lechnology foundaLlons of
Lhe dlglLal lnfrasLrucLure, growLh ln Lhe adopLlon raLe of Lhls lnfrasLrucLure and a sub
lndex measurlng producL and labor markeL regulaLlon ln Lhe economy.

Wave Two Unleashing Richer Flows of Knowledge

1he second wave of change ls characLerlzed by lncreaslng flows of caplLal, LalenL, and
knowledge across geographlc and lnsLlLuLlonal boundarles. ,5 )"%0 F.A# %5)#50%(+%5&
93:@#)%)%35 .57 )"# %59/#.0%5& /.)# 3( 9".5&# @/#9%@%).)#7 D+ )"# (%/0) F.A# 0"%()0 )"#
038/9#0 3( #9353:%9 A.28# (/3: R0)39G0S 3( G53F2#7&# )3 R(23F0S 3( 5#F G53F2#7&#B
ln Lhls rapldly changlng world, our sLocks of knowledge (whaL we know) obsolesce more
qulckly and success depends lncreaslngly on our ablllLy Lo Lap lnLo expandlng and
dlverse flows of knowledge Lo more rapldly refresh our depleLlng sLocks of knowledge.
Whlle Lhese knowledge flows are enhanced and enrlched by Lhe dlglLal lnfrasLrucLure,
Lhe mosL valuable knowledge flows - Lhose LhaL resulL ln new knowledge creaLlon raLher
Lhan slmple Lransfers of wellcodlfled exlsLlng knowledge - sLlll mosL ofLen occur ln
physlcal space Lhrough face Lo face lnLeracLlons. ln Lhls rapldly changlng world, Lhere ls
far more value ln a LlghLly knlL Leam or communlLy of pracLlce brlnglng LogeLher
dlfferenL experlences and vlews of Lhe problem Lo solve a new performance challenge
Lhan ln readlng a Lralnlng manual.

1he meLrlcs ln Lhe C23F ,57#? capLure physlcal and vlrLual flows as well as Lhe
ampllflers-such as how passlonaLely engaged employees are wlLh Lhelr [obs and soclal
medla use-LhaL resulL from and magnlfy Lhe effecL of Lhe dlglLal lnfrasLrucLure. Clven
Lhe slower raLe wlLh whlch soclal and professlonal pracLlces change relaLlve Lo Lhe
dlglLal lnfrasLrucLure, Lhls lndex wlll llkely lag Lhe loundaLlon lndex. lL wlll be exLremely
helpful Lo Lrack Lhe degree of lag over Llme for speclflc elemenLs of knowledge flows - ls
lL lncreaslng or decreaslng?

Wave Three Effectively Addressing the Performance Challenge

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3@@3/)85%)+B !"%0 F%22 82)%:.)#2+ /#N8%/# . @/3(3857 /#)"%5G%5& 3( 38/ %50)%)8)%35.2
./9"%)#9)8/#0 .57 7.%2+ @/.9)%9#0B WhaL worked so well for us ln Lhe pasL, and creaLed
subsLanLlal wealLh creaLlon ln Lhe early Lo mld LwenLleLh cenLury, now ls llkely Lo
become an obsLacle for harnesslng Lhe full poLenLlal of Lhe knowledge flows unleashed

8
by Lhe dlglLal lnfrasLrucLure and economlc llberallzaLlon. !"%0 F.A#E 0)%22 %5 %)0 #./2%#0)
0).&#0 3( &.)"#/%5& (3/9#E 3((#/0 80 )"# @3)#5)%.2 (3/ )"# (%/0) )%:# )3 )8/5 )"#
7%:%5%0"%5&/#)8/50 #?@#/%#59# 98/A# %5)3 .5 %59/#.0%5&/#)8/50 9322.D3/.)%35 98/A#B
CreaLlon spaces wlll provlde powerful plaLforms Lo drlve Lhls LransformaLlon. ln Lhe
process, we wlll move from scalable efflclency Lo scalable peer learnlng as Lhe prlmary
raLlonale for our lnsLlLuLlons.

Cver Llme, Lhese lnnovaLlons wlll enable flrms Lo develop and adopL new ways of
creaLlng and capLurlng wealLh ln Lhe dlglLal era. lnlLlal deLerloraLlon ln shareholder value
and 8CA wlll evenLually lmprove as flrms harness Lhe foundaLlonal and flow forces of
Lhe flrsL Lwo waves of change and acceleraLe Lhelr raLe of performance lmprovemenL.

1he ,:@.9) ,57#? ls for LhaL reason a lagglng lndlcaLor reflecLlng Lhe lmpacL of Lhe deep
changes playlng ouL ln Lhe flrsL Lwo waves on Lhe performance of Lhe flrm and equlLy
markeLs, consumer cholce, and Lhe value capLured by LalenL. As companles explolL
foundaLlonal lmprovemenLs ln Lhe dlglLal lnfrasLrucLure by creaLlng and sharlng
knowledge, Lhelr performance wlll lmprove.


9
Shift index indicators
1. TRS Total Return to Shareholders
2. Creative occupations and cities defined by Richard Florida's "The Rise of the Creative Class." 2004
3. Measured by the Bureau of Transportation Statistics Transportation Services Index
Source: Deloitte analysis
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Markets
Competitive Intensity: Herfindahl-Hirschman Index
Labor Productivity: Index of labor productivity as defined by the Bureau of Labor Statistics
Stock Price Volatility: Average standard deviation of daily stock price returns over one year
Firms
Asset Profitability: Total ROA for all US firms
ROA Performance Gap: Gap in ROA between firms in the top and the bottom quartiles
Firm Topple Rate: Annual rank shuffling amongst US firms
Shareholder Value Gap: Gap in the TRS
1
between firm in the top and the bottom quartiles
People
Consumer Power: Index of 6 consumer power measures
Brand Disloyalty: Index of 6 consumer disloyalty measures
Returns to Talent: Compensation gap between more and less creative occupational groupings
2
Executive Turnover: Number of Top Management terminated, retired or otherwise leaving companies
Virtual Flows
Inter-firm Knowledge Flows: Extent of employee participation in knowledge flows across firms
Wireless Activity: Total annual volume of mobile minutes and SMS messages
Internet Activity: Internet traffic between top 20 US cities with the most domestic bandwidth
Physical
Flows
Migration of People to Creative Cities: Population gap between top and bottom creative cities
2
Travel Volume: Total volume of local commuter transit and passenger air transportation
3
Movement of Capital: Value of US Foreign Direct Investment inflows and outflows
Amplifiers
Worker Passion: Percentage of employees most passionate about their jobs
Social Media Activity: Time spent on Social Media as a percentage of total Internet time
Technology
Performance
Computing: Computing power per unit of cost
Digital Storage: Digital storage capacity per unit of cost
Bandwidth: Bandwidth capacity per unit of cost
Infrastructure
Penetration
Internet Users: Number of people actively using the Internet as compared to the US population
Wireless Subscriptions: Percentage of active wireless subscriptions as compared to the US population
Public Policy Economic Freedom: Index of 10 freedom components as defined by the Heritage Foundation

Shift Index findings

Cur lnlLlal developmenL of Lhe ShlfL lndex focused on Lhe uS economy and uS lndusLrles.
SubsequenL releases wlll broaden Lhe lndex Lo a global scope and provlde a dlagnosLlc
Lool Lo help assess Lhe performance of lndlvldual companles relaLlve Lo a seL of flrm
level meLrlcs.

1he cholce of meLrlcs reflecLed a robusL selecLlon process. Many meLrlcs are dlrecLlonal
proxles chosen ln Lhe absence of ldeal alLernaLlves. Some are drawn from secondary
daLa sources and analyLlcal meLhodologles, some are proprleLary. Whlle Lhe daLa
reveals slgnlflcanL correlaLlons across meLrlcs-conslsLenL wlLh Lhe underlylng loglc of
our LheoreLlcal framework-Lhe flndlngs are suggesLlve. We have noL aLLempLed Lo
prove causallLy glven Lhe llmlLaLlons ln Lhe ablllLy Lo generaLe daLa Lo dlrecLly and LlghLly
measure many of Lhe deep changes occurrlng around us, buL we are hopeful LhaL Lhe
LxhlblL 2: 1he ShlfL lndex conslsLs of Lhree lndlces LhaL quanLlfy Lhe Lhree waves of Lhe
8lg ShlfL loundaLlon lndex, llow lndex and lmpacL lndex each measured by a seL of
lndlcaLors.

10
ShlfL lndex wlll become a caLalysL for a broad seL of research Lo LesL and reflne our
flndlngs.

lor a much deeper look aL our meLhodology and daLa-as well as a full dlscusslon of our
flndlngs-please see 1he 2009 ShlfL lndex 8eporL.

Cverall, Lhe ShlfL lndex suggesLs LhaL Lhe deep changes ln Lhe loundaLlon lndex conLlnue
Lo move aL a fasLer pace Lhan Lhe changes ln elLher llow or lmpacL lndlces. 1he Lrend
llne for changes ln loundaLlon meLrlcs has a much sLeeper slope of 7.83 relaLlve Lo Lhe
slope of 3.93 measurlng change for llow meLrlcs or and Lhe slope of 1.93 for lmpacL
meLrlcs.

1hls ls one lmporLanL way Lo Lrack where we are ln Lhe 8lg ShlfL. We would expecL LhaL
counLrles and lndusLrles ln Lhe earllesL sLage of Lhe 8lg ShlfL wlll see Lhe hlghesL raLes of
change ln Lhe loundaLlon lndex. Cver Llme, as Lhe 8lg ShlfL gaLhers momenLum and
pervades broader secLors of Lhe economy and socleLy, we would expecL Lo see Lhe raLes
of change ln Lhe llow and lmpacL lndlces plck up speed whlle Lhe raLe of change ln Lhe
loundaLlon lndex may begln Lo show slgns of slowlng down.

1he currenL flndlngs suggesL LhaL we are aL besL ln Lhe early Lo mlddle parL of Lhe second
wave. 1he rapld changes ln foundaLlons and knowledge flows are gaLherlng momenLum,
buL our flrms, deslgned for anoLher era and an earller generaLlon of lnfrasLrucLure, have
had dlfflculLy coplng wlLh Lhe mounLlng pressures generaLed by Lhese changes.

!"#$%&'("$ )$%*+

1he loundaLlon lndex has lncreased aL a 10 percenL compound annual growLh raLe
(CAC8) slnce 1993, and Lells Lhe sLory of a swlfLly movlng dlglLal lnfrasLrucLure propelled
by unremlLLlng prlce performance lmprovemenLs ln compuLlng, sLorage, and bandwldLh
LhaL show no slgns of sLablllzlng. J8/ (%57%5&0 0"3F )".) )"# /.)# 3( 9".5&# %5 )"#
@#/(3/:.59# 3( )"# )#9"5323&+ D8%27%5& D239G0 08D0).5)%.22+ #?9##70 )"# /.)# 3(
9".5&# %5 )"# )F3 3)"#/ (3857.)%35.2 :#)/%90 V .73@)%35 /.)#0 .57 @8D2%9 @32%9+ 0"%()0B
,) /#:.%50 )"# @/%:./+ 7/%A#/ 3( .22 )"# 3)"#/ 7##@ 9".5&#0B

ubllc pollcy remalns Lhe wlld card. 1here ls conslderable rlsk LhaL a pollcy backlash
drlvlng lncreaslng barrlers Lo enLry and barrlers Lo movemenL may galn force ln
response Lo Lhe lnLense pressures of Lhe currenL economlc downLurn. 1he ShlfL lndex
wlll monlLor Lhls Lrend over Llme relaLlve Lo Lhe changes ln Lhe oLher foundaLlons.

11

!,"- )$%*+

1he llow lndex has lncreased aL a seven percenL CAC8 slnce 1993, alLhough Lhe Lrend
analyses are llmlLed here by Lhe earllesL daLes for whlch daLa ls avallable.

!"# 9/#.)%A# 92.00#0 I%9"./7 C23/%7. %7#5)%(%#7 .0 )"# 7/%A%5& (3/9# (3/ #9353:%9
7#A#23@:#5) 935)%58# )3 %59/#.0%5&2+ 935&/#&.)# %5 9359#5)/.)#7 R0@%G#0S 3( ).2#5)B
,59/#.0%5& 58:D#/0 3( 9/#.)%A#0 ./# (2##%5& )"# 935(%5#0 3( )"# (%/:E .0 F#22B !"%0
9/#.)%A# ).2#5) %0 )"# :30) @.00%35.)# .D38) )"#%/ F3/GE .57 :30) 2%G#2+ )3 @./)%9%@.)#
%5 G53F2#7&# (23F0 /#2.)%A# )3 )"#%/ 2#00 @.00%35.)# @##/0B

1he face Lo face lnLeracLlons LhaL drlve Lhe mosL valuable knowledge flows-resulLlng ln
new knowledge creaLlon-are dlfflculL, maybe even lmposslble Lo measure dlrecLly.
Soclal medla use, conference and webcasL aLLendance, professlonal lnformaLlon and
advlce shared by Lelephone and ln lunch meeLlngs all provlde suggesLlve proxles of
varlous klnds of knowledge flows. Cur ShlfL lndex surveys esLabllsh a basellne of Lhese
acLlvlLles and lndlcaLes LhaL soclal medla such as lacebook may be expandlng lnLerflrm
knowledge flows. luLure surveys wlll quanLlfy Lhe magnlLude and pace of change of
Lhese lmporLanL flows.

0%
5%
10%
15%
20%
25%
30%
Disengaged Passive Engaged Passionate
P
a
r
t
i
c
i
p
a
t
i
o
n

P
e
r
c
e
n
t
a
g
e
Google Alerts Web-casts Social Media Lunch meetings
Community Org. Conferences Professional Org. Share info on phone
Participation in Inter-Firm knowledge flows by type of worker (2008)
Source: Synovate, Deloitte analysis

LxhlblL 3: Workers who are passlonaLe abouL Lhelr [obs are more llkely Lo
parLlclpaLe ln knowledge flows and generaLe value for companles

12
,:@.9) ,57#?

1he lmpacL lndex has experlenced a 2.4 percenL raLe of change slnce 1993, Lelllng Lhe
sLory of lnLenslfylng compeLlLlon Laklng lLs Loll on corporaLe performance desplLe a
sLeady rlse ln labor producLlvlLy across all Lhe lndusLrles ln our sLudy. ConslsLenL wlLh
our vlew LhaL Lhe new dlglLal lnfrasLrucLure creaLes Lhe poLenLlal for greaLer producLlvlLy
lmprovemenLs, lL ls sLrlklng LhaL Lhe 1echnology and 1elecommunlcaLlons lndusLrles -
Lhe ones mosL heavlly lnvolved ln deflnlng and deploylng Lhe dlglLal lnfrasLrucLure have
led Lhe pack ln Lerms of producLlvlLy lmprovemenL.

AL Lhe same Llme Lhe economlc envlronmenL has become conslderably more unsLable,
as shown by lncreases ln Lhe Lopple raLe aL whlch companles lose Lhelr leadershlp
poslLlons, a doubllng ln sLock prlce volaLlllLy slnce 1972, and growlng dlvergence
beLween wlnners and losers, as measured by boLh shareholder value creaLlon and 8CA.

Meanwhlle, creaLlve LalenL conLlnues Lo capLure lncreaslngly dlsproporLlonaLe reLurns ln
Lerms of LoLal compensaLlon relaLlve Lo Lhe resL of Lhe labor force. 1hese lncreases ln
reLurns Lo creaLlve LalenL appear Lo be correlaLed Lo an acceleraLlon of growLh of Lhe
mosL creaLlve clLles. Cn Lhe cusLomer slde, new generaLlons enLerlng Lhe markeLplace
appear Lo be more wllllng Lo exerclse Lhelr markeL power Lo swlLch Lo producLs and
servlces LhaL more effecLlvely meeL Lhelr needs, puLLlng greaLer pressure on vendors.

!"# &/3F%5& @3F#/ 3( 9/#.)%A# ).2#5) .57 980)3:#/0 .0 93:@#)%)%35 %5)#50%(%#0 /%0#0
"#2@0 )3 /#032A# )"# :+0)#/+ 3( F"+ IJK %0 7#92%5%5& 03 :./G#72+ .) )"# 0.:# )%:#
)".) @/3789)%A%)+ %:@/3A#:#5)0 935)%58# )3 3998/B 1he answer ls noL Lo flnd ways Lo
squeeze creaLlve LalenL and cusLomers ln a zero sum baLLle Lo capLure more of Lhe
exlsLlng ple, buL raLher, as we wlll see, Lo dlscover new ways of organlzlng and operaLlng
Lo more effecLlvely creaLe and capLure new value.

Economy-wide Asset Profitability (1965-2008)
Source: Compustat, Deloitte analysis
4.7%
0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005
R
e
t
u
r
n

o
n

A
s
s
e
t
s

(
%
)
Return on Assets
2008


13

1he ShlfL lndex suggesLs LhaL ln some lndusLrles companles have pursued aggresslve
M&A sLraLegles. Whlle Lhls may help Lo drlve new scale efflclencles and markeL power ln
Lhe shorL Lerm, Lhese defenslve sLraLegles are a dlmlnlshlng reLurns game. 1hls Lends Lo
be conflrmed by Lhe facL LhaL wlnners" ln Lhe growlng performance gap are barely
hanglng on ln Lerms of susLalnlng exlsLlng levels of performance - even Lhey are flndlng
lL very dlfflculL Lo hold on Lo Lhe boLLom llne beneflLs of producLlvlLy lmprovemenLs.

Economy-wide Asset Profitability by quartile (1965-2008)
Source: Compustat, Deloitte analysis
1.2%
-14.7%
-100%
-80%
-60%
-40%
-20%
0%
20%
1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005
Bottom Quartile
12.9%
11.0%
0%
5%
10%
15%
20%
Top Quartile
R
e
t
u
r
n

O
n

A
s
s
e
t
s

(
%
)
2008

K0 .5 .2)#/5.)%A#E (%/:0 0"3827 233G )3 %50)%)8)%35.2 %553A.)%350 )".) :3/# #((#9)%A#2+
"./5#00 )"# @#/(3/:.59# @3)#5)%.2 3( )"# 7%&%).2 %5(/.0)/89)8/# .57 (%57 F.+0 )3
852#.0" )"# 9/#.)%A# @3)#5)%.2 3( )"# /#0) 3( )"# F3/G(3/9# H53) Y80) )"# R9/#.)%A#S
@/3(#00%350LB !"%0 F%22 &#5#/.)# :3/# )".5 #538&" #9353:%9 A.28# )3 0"./# :3/# (.%/2+
F%)" .22 /#2#A.5) 9350)%)8#59%#0B

LxhlblL 3: Wlnnlng companles are barely holdlng on, whlle losers are
rapldly deLerloraLlng
LxhlblL 4: AsseL proflLablllLy for u.S. flrms sLeadlly fall more Lhan 73
over Lhe pasL four decades

14
The growing power of pull
1he ShlfL lndex palnLs a bleak plcLure for flrms. lnsLlLuLlonal performance ls almosL
unlversally sufferlng ln Lhe face of lnLenslfylng compeLlLlon Lven Lhe wlnners" are
barely hanglng on. !"#0# @#/(3/:.59# )/#570 0%&5%(+ . :%0:.)9" D#)F##5 )"# F.+
:30) 3( )37.+W0 93:@.5%#0 ./# 3@#/.)#7 .57 &3A#/5#7 "3F )"# D80%5#00 2.5709.@# %0
9".5&%5&B '3:#)"%5& ".0 &3) )3 &%A#Z )"# 98//#5) )/.Y#9)3/+ %0 92#./2+ 53) 080).%5.D2#B

1o make progress ln Lhls world of mounLlng pressure, we musL develop an enLlrely
dlfferenL seL of pracLlces and lnsLlLuLlonal arrangemenLs LhaL are beLLer equlpped Lo
harness Lhe prollferaLlng knowledge flows. lf we do Lhls rlghL, we have Lhe poLenLlal Lo
Lurn growlng challenges lnLo expandlng opporLunlLles.

1he roadmap for maklng progress hlnges on undersLandlng LhaL Lhe 8lg ShlfL ls
ulLlmaLely abouL movlng from a world of push Lo a world of pull, from a Lopdown,
cenLrallzed, hlerarchlcal, zerosum, and ofLen bureaucraLlc approach Lo dolng buslness
Lo a parLlclpaLlve, collaboraLlve, boLLomup, flexlble, and ofLen poslLlve sum approach
LhaL emphaslzes learnlng over efflclency and LalenLed people over processes and
organlzaLlonal rouLlnes."

ln Lhe early 20
Lh
cenLury, when LransporLaLlon and communlcaLlon lnfrasLrucLures were
new, we saw Lhe rlse of Lhe Chandlerlan flrm, one LhaL focused on economles of scale.
1hese flrms ploneered a sophlsLlcaLed pushdrlven approach Lo moblllzlng resources.
ueLalled push programs deslgned Lo ensure LhaL Lhe rlghL resources were dellvered Lo
Lhe rlghL place aL Lhe rlghL Llme hlnged upon Lhe ablllLy Lo accuraLely forecasL demands.
1hese push programs and demand forecasLs provlded Lhe foundaLlon for scalable
efflclency, noL [usL ln flrms buL all klnds of lnsLlLuLlons, lncludlng schools, nonproflLs,
and governmenL organlzaLlons.

1he new dlglLal lnfrasLrucLure and publlc pollcy llberallzaLlon fosLer more frequenL
economlc and soclal dlsrupLlons, erodlng Lhe ablllLy Lo rellably forecasL demand.
AlLernaLlve approaches Lo resource moblllzaLlon have become lncreaslngly lmporLanL. ,5
@./)%982./E F# 0## . &/3F%5& 5##7 (3/ @822 R@2.)(3/:0S )".) "#2@ .22 3( 80 :.G# :3/#
(2#?%D2# 9355#9)%350 F%)" @#3@2# .57 /#038/9#0 %5 3/7#/ )3 :3/# #((#9)%A#2+ .9"%#A#
38/ @3)#5)%.2B ,5 (.9)E )"/## 2#A#20 3( @822 V .99#00E .))/.9)E .57 .9"%#A# ./# D#93:%5&
%59/#.0%5&2+ 9#5)/.2 )3 38/ @#/035.2 .57 @/3(#00%35.2 0899#00B

Access The first level of pull

K99#00 %5A32A#0 )"# .D%2%)+ )3 (%57E 2#./5 .D38)E .57 9355#9) F%)" /#038/9#0 H@#3@2#E
@/3789)0E .57 G53F2#7&#L 35 .5 .0 5##7#7 D.0%0 )3 .77/#00 85.5)%9%@.)#7 5##70B ,5
)"# $%& '"%()E )"%0 9.@.D%2%)+ D#93:#0 %59/#.0%5&2+ 9#5)/.2 )3 38/ 08/A%A.2 .57 . @/#
/#N8%0%)# (3/ 38/ 0899#00B WhaL Lools and approaches help us Lo harness Lhls capablllLy?

15
Search englnes represenL Lhe nowclasslc example of access, helplng us flnd and connecL
wlLh a broad range of people and resources. 8uL search englnes are only Lhe beglnnlng.
uslng pull plaLforms, companles ln Chlna and lndla are ploneerlng ways Lo provlde
scalable access across very large neLworks of Lhousands of parLlclpanLs.

1hese emerglng plaLforms are lncreaslngly necessary Lo deal wlLh Lhe unexpecLed
evenLs LhaL dlsrupL our carefully crafLed push programs. ln a world of lncreaslng
uncerLalnLy and more frequenL dlsrupLlons, we musL flnd more effecLlve ways Lo
connecL wlLh resources when we need Lhem. 1hls flrsL level of pull Lherefore follows
naLurally from Lhe flrsL wave of Lhe 8lg ShlfL as barrlers Lo enLry and movemenL erode
rapldly.

ScalablllLy of Lhese pull plaLforms Lo allow ever greaLer access hlnges on effecLlve
modularlzaLlon, deflnlLlon of approprlaLe sLandards, and shlfLlng Lo LlghL speclflcaLlon of
ouLcomes (Lhe whaL) raLher Lhan acLlvlLles (Lhe how). lf done rlghL, Lhese plaLforms
aggregaLe resources across Lhousands or even mllllons of lndependenL parLlclpanLs.
1hey requlre clear and slmple proLocols for lnLeracLlon and dlspuLe resoluLlon, as well as
lncenLlve sLrucLures LhaL moLlvaLe parLlclpanLs Lo aggregaLe Lhelr resources.

Attract The second level of pull

,5 )"# $%& '"%()E . 0#9357 2#A#2 3( @822 .203 D#93:#0 A.28.D2# V )"# .D%2%)+ )3 .))/.9)
/#2#A.5) .57 A.28.D2# @#3@2# .57 /#038/9#0 +38 5##7 D8) 7%75W) G53F +38 F#/#
233G%5& (3/E 3/ #A#5 )".) )"#+ #?%0)#7 %5 )"# (%/0) @2.9#B !"%5G "#/# 3( 0#/#57%@%)+
/.)"#/ )".5 0#./9"B SerendlplLy ofLen occurs ln soclal neLworks, where we unexpecLedly
encounLer frlends of frlends or even LoLal sLrangers who prove helpful. MosL of us Lend
Lo Lhlnk of serendlplLy as pure luck - Lhere ls noL much you can do abouL lL, excepL be
prepared when lL happens. ln conLrasL, F# 0## . &/3F%5& 3@@3/)85%)+ )3 0".@#
0#/#57%@%)+ - Lo lncrease Lhe probablllLy and quallLy of serendlplLous encounLers by Lhe
cholces we make abouL where Lo llve and work-by developlng speclflc pracLlces LhaL
encourage aLLracLlon, and Lhrough varlous forms of preparedness.

Many of Lhe envlronmenLs fosLerlng serendlplLy occur ln physlcal space - for example,
geographlc splkes of LalenL and conferences. Cn Lhe oLher hand, many of Lhe mosL
lnLeresLlng envlronmenLs for serendlplLy are emerglng as plaLforms ln vlrLual space - ln
parLlcular, soclal neLwork plaLforms and varlous forms of connecLlon plaLforms llke
lnnoCenLlve. lor Lhese plaLforms Lo work, exlsLlng lnsLlLuLlons wlll have Lo flnd ways Lo
encourage Lhelr employees Lo parLlclpaLe on vlrLual plaLforms ln ways LhaL lnLegraLe
Lhelr personal and professlonal llves. ulfflculL lssues llke confldenLlallLy of daLa and
poLenLlal legal llablllLles wlll need Lo be addressed ln a much more consLrucLlve way
Lhan has occurred Lo daLe.


16
SerendlplLy has always been an lmporLanL parL of our llves. Why ls lL becomlng even
more crlLlcal Lo our success now? 1o answer LhaL, we need Lo reLurn Lo Lhe second wave
of Lhe 8lg ShlfL whlch generaLes a growlng dlverslLy of rlch knowledge flows on a global
scale. Many of Lhe mosL valuable knowledge flows Lend Lo surface on relevanL edges
where Lhe seedbeds for Lhe nexL wave of lnnovaLlons are emerglng Lo dlsrupL our soclal
and buslness landscape. 1hese lnnovaLlons percolaLe on Lhe edge, unseen by mosL of us,
unLll Lhey erupL suddenly and qulckly Lransform Lhe cores where mosL of us llve. We
need Lo flnd ways Lo aLLracL relevanL lnnovaLors and edge parLlclpanLs Lo us so LhaL we
can dlscover early wlndows lnLo Lhe developmenLs LhaL wlll end up Lransformlng how
we llve and work. '8/#E 0#/#57%@%)+ ".0 .2F.+0 D##5 %:@3/).5)E D8) %5 . F3/27 3( 5#./
9350).5) 7%0/8@)%35E %) D#93:#0 #00#5)%.2 )3 08/A%A.2B *%)"38) )"# @2#.0.5) 08/@/%0#0 3(
0#/#57%@%)+E F# F%22 %50)#.7 ".A# )3 93@# F%)" )"# 85@2#.0.5) 0"39G 3( 85.5)%9%@.)#7
7%0/8@)%350 )".) 9.5 857#/:%5# .22 F# ".A# F3/G#7 )3 .9"%#A#B
Achieving our potential The third level of pull

!"# (%/0) )F3 2#A#20 3( @822 [ .99#00 .57 .))/.9)%35 [ ./# 82)%:.)#2+ 0).)%9; )"#+
.008:# )".) )"# /%&") @#3@2# .57 /#038/9#0 .2/#.7+ #?%0) .57 )".) )"# 9".22#5&# %0
:#/#2+ )3 #59385)#/ )"#:B $8) %5 . F3/27 3( :385)%5& @/#008/# .57 85(3/#0##5
3@@3/)85%)%#0E F# 5##7 )3 982)%A.)# . )"%/7 2#A#2 3( @822 V )"# .D%2%)+ )3 @822 (/3: F%)"%5
38/0#2A#0 )"# %50%&") .57 @#/(3/:.59# /#N8%/#7 )3 :3/# #((#9)%A#2+ .9"%#A# 38/
@3)#5)%.2B We need Lo undersLand how we can use pull Lo learn fasLer and LranslaLe LhaL
learnlng lnLo rapldly lmprovlng performance, noL [usL for ourselves, buL for Lhe people
wlLh whom we connecL.

!"%0 )"%/7 2#A#2 3( @822 D8%270 8@35 )"# (%/0) )F3 2#A#20 3( @822 V F# 9.5 80# .99#00 .57
.))/.9) )3 :3/# #((#9)%A#2+ .9"%#A# 38/ @3)#5)%.2B $8) %) &3#0 35# 0)#@ (8/)"#/ .57
(3980#0 35 )"# )#9"5%N8#0 /#N8%/#7 )3 /#.9" 5#F 2#A#20 3( @#/(3/:.59# (.0)#/ .57
)"#/#(3/# 2#./5 (.0)#/ D+ F3/G%5& F%)" 3)"#/0B

ln a world of growlng performance pressure, maklng our passlon our professlon can
slgnlflcanLly reduce sLress. 8uL, as we begln Lo pursue our passlon, we naLurally seek ouL
places LhaL can help us Lo lmprove our performance more rapldly. ln parLlcular, we focus
on creaLlon spaces - an emerglng seL of physlcal and vlrLual envlronmenLs LhaL aLLracL
performancedrlven Leams and help Lhose Leams Lo lmprove performance even more
rapldly by fosLerlng rlch lnLeracLlons boLh wlLhln and across Leams. 8y encouraglng Lhe
formaLlon of Leams and supporLlng Lhose Leams as Lhey Lackle dlfflculL performance
challenges, creaLlon spaces make lL easler for parLlclpanLs Lo form deep LrusLbased
relaLlonshlps LhaL can be helpful ln accesslng LaclL knowledge - Lhe knowledge shaped
by our experlences LhaL we ofLen have dlfflculLy ln arLlculaLlng buL LhaL drlves our
acLlons on a dally basls. AL Lhe same Llme, Lhese spaces prove hlghly scalable because
Lhey make lL easler for parLlclpanLs ln lndlvldual Leams Lo communlcaLe wlLh
parLlclpanLs ln oLher Leams and obLaln addlLlonal lnslghL ln how Lo Lackle challenglng
problems. More and more Leams Lherefore have an lncenLlve Lo come LogeLher ln Lhese

17
creaLlon spaces and engage ln a broader seL of lnLeracLlons as Lhey seek Lo drlve
performance Lo new levels.

While many elements of these creation spaces emerge over time as a result of the
interactions among participants, key elements are carefully designed from the outset by
the organizers of these creation spaces to ensure that performance improvement
initiatives are productively focused and that a critical mass of participants can be
mobilized quickly. 1hese creaLlon spaces are carefully crafLed Lo lnLegraLe Lhree
elemenLs: parLlclpanLs, lnLeracLlons, and envlronmenLs. lor example, Lhese spaces are
deslgned wlLh very low barrlers Lo enLry and parLlclpaLlon as well as Lhe poLenLlal for
rapld advancemenL ln Lhe early sLages. 1he envlronmenLs effecLlvely lnLegraLe deep
lnLeracLlons wlLhln Leams wlLh a much broader seL of lnLeracLlons as parLlclpanLs reach
beyond Lhelr Leams for addlLlonal help. Whlle Lhe envlronmenLs do lnclude exLernal
lncenLlves and repuLaLlon mechanlsms, much of Lhelr success hlnges on belng able Lo
appeal Lo Lhe powerful lnLrlnslc moLlvaLlons LhaL drlve people Lo challenge Lhelr llmlLs.
1hese envlronmenLs also sLrlke a careful balance beLween challenglng parLlclpanLs Lo
geL beLLer fasLer whlle noL overwhelmlng Lhem on Lhe one hand and borlng Lhem on Lhe
oLher. Cur forLhcomlng book on ull: Pow Small Moves, SmarLly Made, Can SeL 8lg
1hlngs ln MoLlon, explores early experlences wlLh creaLlon spaces ln much greaLer
deLall.

CreaLlon spaces emerge Lo serve Lhe needs of lndlvlduals seeklng Lo lmprove
performance more rapldly buL Lhey are also ofLen drlven by smaller, more
enLrepreneurlal flrms LhaL are seeklng new ways Lo learn LogeLher. Larly forms of
creaLlon spaces are already emerglng ln such dlverse domalns as exLreme sporLs, onllne
vldeo games, dlglLal muslc and sofLware developmenL. SA's SofLware ueveloper
neLwork ls one example of an emergenL creaLlon space LhaL aggregaLes 1.4 mllllon
parLlclpanLs and fosLers Lhe emergence of Leams Lo Lackle dlfflculL sofLware deslgn
lssues. *"%2# )"#0# 9/#.)%35 0@.9#0 ./# 0)%22 %5 .5 #./2+ 0).&# 3( 7#A#23@:#5)E #A%7#59#
08&&#0)0 )".) 2#./5%5& .57 @#/(3/:.59# %:@/3A#:#5) .99#2#/.)# .0 :3/# @#3@2#
@./)%9%@.)#B ,5 (.9)E 9/#.)%35 0@.9#0 ".A# )"# @3)#5)%.2 )3 )8/5 )"# F#22G53F5
7%:%5%0"%5& /#)8/50 #?@#/%#59# 98/A# 35 %)0 0%7# V 7#2%A#/%5& %59/#.0%5& /#)8/50
@#/(3/:.59# %:@/3A#:#5)B

So, why does Lhls maLLer? erformance lmprovemenL has always been deslrable and,
slnce we flrsL emerged from Lhe foresLs, we have been on a quesL Lo achleve Lhe
poLenLlal LhaL each of us belleves ls wlLhln us. WhaL's any dlfferenL now? Cnce agaln,
we musL reLurn Lo Lhe 8lg ShlfL Lo provlde conLexL for why Lhls Lhlrd level of pull ls
acqulrlng new urgency and value.
?ou'll recall LhaL Lhe flrsL Lwo waves of Lhe 8lg ShlfL caLalyze lnLenslfylng compeLlLlon
and growlng pressure. 1he second wave ls shaped by Lhe prollferaLlon of knowledge
flows, especlally wlLhln emerglng edges and across edge and core boundarles. ln Lhe
Lhlrd wave of Lhe blg shlfL, we as lndlvlduals and as parL of broader lnsLlLuLlons begln Lo

18
flnd ways Lo more effecLlvely parLlclpaLe ln Lhese knowledge flows Lo drlve performance
lmprovemenL. Cur lnsLlLuLlons, faclng growlng compeLlLlve pressure and shrlnklng
reLurns, wlll become much more recepLlve Lo explorlng and embraclng new lnsLlLuLlonal
forms LhaL offer Lhe poLenLlal Lo lmprove performance more rapldly. 1hese lnsLlLuLlonal
lnlLlaLlves wlll ln Lurn help Lo relnforce and ampllfy Lhe efforLs of lndlvlduals Lo learn
fasLer. *%)"38) )"%0 )"%/7 F.A#E &/3F%5& @/#008/#E .:@2%(%#7 D+ @/32%(#/.)%5&
G53F2#7&# (23F0E F%22 /.@%72+ 3A#/F"#2: 80B *%)" )"%0 )"%/7 F.A# F# ".A# )"#
@3)#5)%.2 3( )/.50(3/:%5& )"# &/3F%5& 9".22#5&#0 )".) F# .22 #?@#/%#59# %5)3
93:@#22%5& 3@@3/)85%)%#0 )".) 9.5 "#2@ 80 )3 9/#.)# .57 9.@)8/# :3/# .57 :3/# A.28#B

The journey ahead

As we reflecL on Lhese Lhree levels of pull, one Lhlng becomes clear. *"%2# F# :.+ D#
@8/08%5& #.9" 3( )"#0# 2#A#20 3( @822 )3 03:# 7#&/## )37.+E )"#/# %0 .5 #53/:380
7%0).59# D#)F##5 F"#/# F# ./# )37.+ .57 F"#/# F# 5##7 )3 D# %5 3/7#/ )3 (822+
"./5#00 )"# @3F#/ 3( @822 .57 )"# 3@@3/)85%)%#0 9/#.)#7 D+ )"# $%& '"%()B
-.G# 53 :%0).G#B !"%0 F%22 53) D# .5 #.0+ Y38/5#+ B 1he paLh ls only beglnnlng Lo
emerge and Lhere are many rlsks along Lhe way. lf we do noL approach Lhe paLh wlLh
some real fear and heslLaLlon, lL slmply means we haven'L fully undersLood Lhe
magnlLude of Lhe challenges.

8uL Lhere ls a paLh LhaL can help us make Lhe [ourney wlLh greaLer confldence and
llkellhood of success. ,( F# ./# )3 0899##7 35 )"%0 Y38/5#+E F# :80) 0).+ (3980#7 35
%5)#&/.)%5& )"/## G#+ #2#:#5)0 V )/.Y#9)3/+E 2#A#/.&# .57 @.9#B 1ra[ecLory helps Lo
orlenL us by provldlng a longLerm dlrecLlon LhaL can be very helpful ln reduclng Lhe
many LempLlng dlsLracLlons along Lhe way. Leverage helps us Lo ampllfy our own efforLs
wlLh Lhe resources and passlons of oLhers. ace ensures LhaL we wlll flnd Lools and
plaLforms Lo move as qulckly as posslble along Lhe paLh and acceleraLe our learnlng ln
Lhe process.

M52%G# )"# %50)%)8)%35.2 )/.50(3/:.)%350 3( )"# <=
)"
9#5)8/+E )"%0 Y38/5#+ F%22 D#&%5
F%)" %57%A%78.20 7%0)/%D8)#7 )"/38&"38) )"# 3/&.5%X.)%35B lf Lhe Lask ls Lo reorlenL
lnsLlLuLlons around Lhe challenge of helplng each of us Lo achleve our poLenLlal more
effecLlvely, we as lndlvlduals musL begln Lhe [ourney flrsL. lf we have noL seen Lhe
opporLunlLy creaLed by Lhe 8lg ShlfL and begun Lhe [ourney ourselves, lnsLlLuLlons wlll be
ln Lhe lncreaslngly unLenable slLuaLlon of pushlng us, when Lhey should be pulllng us. Cn
Lhe conLrary, F# .0 %57%A%78.20 :80) (%57 F.+0 )3 @822 )"# %50)%)8)%350 F# ./# %5A32A#7
F%)" .F.+ (/3: )"# :37#20 3( 09.2.D2# #((%9%#59+ %5)3 )"# :37#20 3( 09.2.D2# 2#./5%5&B

,50)%)8)%35.2 2#.7#/0 F%22 5##7 )3 @2.+ . 9/%)%9.2 /32# %5 )"%0 %50)%)8)%35.2 )/.50(3/:.)%35B
unllke prevlous generaLlons of lnsLlLuLlonal lnnovaLlon, Lhese new organlzaLlonal
archlLecLures cannoL be drlven from Lhe Lop down. Cn Lhe oLher hand, lnsLlLuLlonal

19
leaders can help Lo deflne compelllng and engaglng Lra[ecLorles for Lhelr organlzaLlon
around Lhe noLlon of acceleraLed LalenL developmenL and parLlclpaLlng ln slgnlflcanL
new growLh opporLunlLles. 1hls sense of longLerm dlrecLlon can send ouL a beacon Lo
prompL passlonaLe lndlvlduals LhroughouL Lhe flrm (and even many ouLslde Lhe flrm) Lo
ldenLlfy Lhemselves as wllllng Lo commlL Lo Lhls Lra[ecLory. 1he lnsLlLuLlonal leaders can
Lhen help Lo moblllze resources and people ln Lhe core of Lhe flrm Lo supporL Lhese
passlonaLe lndlvlduals who are more ofLen Lhan noL dlsLrlbuLed on varlous edges of Lhe
enLerprlse. owerful new generaLlons of l1 plaLforms can also be deployed Lo
acceleraLe Lhe pace of varlous buslness lnlLlaLlves organlzed by lnsLlLuLlonal leaders Lo
help provlde focus Lo Lhe energy of lndlvlduals dlsLrlbuLed across and ouLslde Lhe flrm.

ln parL, we wlll be helped by Lhe facL LhaL lnsLlLuLlons are under growlng pressure and
wlll be lncreaslngly open Lo radlcal change. As we galn more experlence and confldence
wlLh Lhese efforLs, we wlll naLurally expand our horlzons and begln Lo see opporLunlLles
Lo shape broader markeLs, lndusLrles, and soclal arenas uslng our newly dlscovered
Lechnlques of pull.

CovernmenL pollcy makers need Lo undersLand Lhe Lechnlques of pull and Lhe [ourney
LhaL Lhelr clLlzens and lnsLlLuLlons wlll have Lo make. WlLhouL Lhls deep undersLandlng,
Lhere ls a sLrong rlsk LhaL publlc pollcles wlll block or make an already dlfflculL [ourney
much more challenglng. ,5 . F3/27 F"#/# 93:@./.)%A# .7A.5).&# "%5&#0 %59/#.0%5&2+
35 @#3@2# .9"%#A%5& )"#%/ (822 @3)#5)%.2E 9385)/%#0 )".) F#/# 359# 2#.7#/0 9.5 N8%9G2+
(.22 D#"%57B J5 )"# 3)"#/ ".57E 9385)/%#0 )".) ./# Y80) 53F #:#/&%5& .0 0%&5%(%9.5)
&23D.2 @2.+#/0 9.5 .99#2#/.)# )"#%/ @/3&/#00 D+ "./5#00%5& )"# @3F#/ 3( @822B

Summary
lL ls undersLandable LhaL all of us focus on shorLLerm economlc evenLs as Lhey play
ouL-parLlcularly ln Llmes of crlsls and recesslon. AL Lhe same Llme, however, %) %0
7.5&#/380 )3 230# 0%&") 3( )"# 7##@ 9".5&#0 )".) F%22 935)%58# )3 85(327 235& .()#/ )"#
98//#5) #9353:%9 73F5)8/5 %0 . :#:3/+B We face a longLerm performance challenge
LhaL conLlnues Lo lnLenslfy. 1he sLeps we Lake now Lo address Lhls challenge wlll noL only
help us Lo weaLher Lhe currenL economlc sLorms buL wlll poslLlon us Lo creaLe slgnlflcanL
economlc value ln an lncreaslngly challenglng buslness landscape. We belleve LhaL Lhe
ShlfL lndex can serve as a useful compass and caLalysL for Lhe acLlons requlred Lo Lurn a
performance challenge lnLo a performance opporLunlLy.

8uL Lhe ShlfL lndex and Lhe broader concepLual undersLandlng of Lhe 8lg ShlfL ls only a
beglnnlng. lL helps us Lo make sense of Lhe deep sLrucLures and Lhe deep dynamlcs
playlng ouL around us, wlLh a parLlcular focus on performance lmpllcaLlons. 1hls ls
exLremely helpful Lo orlenL us and focus us on Lhe longLerm Lrends LhaL are shaplng our
buslness and soclal landscape.

20

Cn Lhe oLher hand, as we emphaslzed aL Lhe ouLseL, maklng sense ls only one parL of Lhe
challenge. WlLhouL flrsL maklng sense of Lhese longLerm Lrends, we cannoL hope Lo
make progress ln any susLalnable way. 8uL Lo make progress, we musL pursue aggresslve
lnsLlLuLlonal lnnovaLlon and masLer a new seL of pracLlces.

!"# )"/## 2#A#20 3( @822 "#2@ )3 @/3A%7# . /3.7:.@ (3/ )"# @/.9)%9#0 .57 %50)%)8)%350
/#N8%/#7 )3 "./5#00 G53F2#7&# (23F0 .57 9/#.)# 0%&5%(%9.5) #9353:%9 A.28#B -3/#
&#5#/.22+E )"# #:@".0%0 35 )"# @%A3).2 /32# 3( )"# %57%A%78.2 %5 9.).2+X%5& )"# 5#?)
F.A# 3( %50)%)8)%35.2 9".5&#0 "#2@0 )3 /#:%57 80 )".) )"# 7%((%982) D8) /#F./7%5&
Y38/5#+ ."#.7 D#&%50 F%)" #.9" 3( 80B As we dlscover and pursue our passlons, we wlll
see an lncreaslng need Lo Lransform our lnsLlLuLlons and harness Lhe power of pull Lo
change Lhe world.


21

\3"5 ].&#2 ,,,
439".%/:.5E
1#23%))#^0 4#5)#/ (3/ )"# 67&#

!ohn Pagel lll has nearly 30 years experlence as a managemenL
consulLanL, auLhor, speaker and enLrepreneur, and has helped
companles lmprove Lhelr performance by effecLlvely applylng
lnformaLlon Lechnology Lo reshape buslness sLraLegles. !ohn
currenLly serves as cochalrman of Lhe Slllcon valleybased
uelolLLe CenLer for Lhe Ldge, whlch conducLs orlglnal research and
develops subsLanLlve polnLs of vlew for new corporaLe growLh.
8efore [olnlng uelolLLe, !ohn was an lndependenL consulLanL and
wrlLer. rlor Lo LhaL, he held slgnlflcanL poslLlons aL leadlng
consulLlng flrms and companles. lrom 1984 Lo 2000, he was a prlnclpal aL Mcklnsey &
Co., where he was a leader of Lhe SLraLegy racLlce. ln addlLlon, he founded and led
Mcklnsey's LlecLronlc Commerce racLlce from 1993 Lo 2000. !ohn has also served as
senlor vlce presldenL of sLraLeglc plannlng aL ALarl, lnc., and earller ln hls career, worked
aL 8osLon ConsulLlng Croup. Pe ls Lhe founder of Lwo Slllcon valley sLarLups.

!ohn ls Lhe auLhor of a serles of besLselllng buslness books, lncludlng +)% ,-#'. +)%
/01%". 23% 0$ %") 4ox and 5") 2'67 !38%-#'-96) :(;). Pe has won Lwo awards from
<-1=-1( 438#')88 >)=#)? for besL arLlcles ln LhaL publlcaLlon and has been recognlzed as
an lndusLry LhoughL leader by a varleLy of publlcaLlons and professlonal servlce flrms.

uelolLLe CenLer for Lhe Ldge
1he 8lg ShlfL 8log
!ohnPagel.com
LdgeerspecLlves
LdgeerspecLlves 8log

22

\3"5 '##2+ $/3F5
,57#@#57#5) 439".%/:.5E
1#23%))#^0 4#5)#/ (3/ )"# 67&#

!ohn Seely 8rown ls Lhe lndependenL cochalrman of Lhe Slllcon
valleybased uelolLLe CenLer for Lhe Ldge, whlch conducLs orlglnal
research and develops subsLanLlve polnLs of vlew for new corporaLe
growLh. ln addlLlon, he ls an Advlsor Lo Lhe rovosL and a vlslLlng
Scholar aL Lhe unlverslLy of SouLhern Callfornla, a poslLlon he has held
slnce 2003. 1hls poslLlon followed a lengLhy Lenure aL xerox
CorporaLlon, where he served as chlef sclenLlsL (19922002) and
dlrecLor of Lhe xerox alo AlLo 8esearch CenLer (A8C) (19832000).
Whlle head of A8C, !ohn expanded Lhe role of corporaLe research Lo
lnclude such Loplcs as organlzaLlonal learnlng, complex adapLlve sysLems, mlcro
elecLrlcal mechanlcal sysLem (MLMS) and nanoLechnology. Pls research lnLeresLs
lnclude dlglLal culLure, ublqulLous compuLlng, servlceorlenLed archlLecLures, global
lnnovaLlon neLworks and learnlng ecologles.

ln 2009, !ohn was elecLed as a member of Lhe Amerlcan Academy of ArLs & Sclences ln
Lhe fleld of CompuLer Sclences. Pe ls also a member of Lhe naLlonal Academy of
LducaLlon, a fellow of Lhe Amerlcan AssoclaLlon for ArLlflclal lnLelllgence and a LrusLee of
Lhe MacArLhur loundaLlon. Pe serves on several corporaLe and advlsory boards. !ohn
has publlshed more Lhan 100 papers ln sclenLlflc [ournals and auLhored or coauLhored
flve books, lncludlng "1he Soclal Llfe of lnformaLlon" and "1he Cnly SusLalnable Ldge."
Pe holds a bachelor's degree from 8rown unlverslLy, a docLoraLe from Lhe unlverslLy of
Mlchlgan and honorary docLoraLes from 8rown, Lhe unlverslLy of Mlchlgan, ClaremonL
CraduaLe unlverslLy, Lhe unlverslLy of London's 8uslness School and norLh Carollna
SLaLe unlverslLy.

1he 8lg ShlfL 8log
!ohnSeely8rown.com


23

_.5& 1.A%035
6?#98)%A# 1%/#9)3/E
1#23%))#^0 4#5)#/ (3/ )"# 67&#

Lang uavlson ls Lhe execuLlve dlrecLor of Lhe uelolLLe CenLer for Lhe
Ldge, whlch conducLs orlglnal research and develops subsLanLlve
polnLs of vlew for new corporaLe growLh.
ln Lhls role, Lang deflnes and guldes Lhe markeLplace poslLlonlng and
developmenL of Lhe cenLer's plaLforms and key acLlvlLles, and helps
represenL uelolLLe wlLh selecL cllenLs. Pe ls also responslble for
dlscoverlng and developlng dlsLlncLlve lnLellecLual caplLal and
dlsLrlbuLlng lL Lo audlences ln new and meanlngful ways.

Lang [olned uelolLLe from Mcklnsey & Company, where he was edlLor of lLs flagshlp
publlcaLlon, 5") @AB#'8)7 C3-1%)167. uurlng hls 14 years aL Mcklnsey, Lang served ln a
varleLy of senlor communlcaLlons, conLenL and medla roles, leadlng Lhe developmenL
Leam for mcklnseyquarLerly.com, whlch he edlLed from 1998 Lo 2003. Pe was Lhe
collaboraLlng wrlLer for Lhe besLselllng and crlLlcally acclalmed books +)% ,-#' and +)%
/01%" and for more Lhan 300 arLlcles ln 5") @AB#'8)7 C3-1%)167. <-1=-1( 438#')88
>)=#)?. D#'-'A#-6 5#E)8 and 5") /-66 !%1))% F031'-6 by LhoughL leaders llke SLanford's
8oberL SuLLon, Parvard's anka[ ChemewaL, Mcklnsey's Lowell 8ryan and Lrlc
8elnhocker, and lnLernaLlonal lnsLlLuLe for ManagemenL uevelopmenL's hll
8osenzwelg. under hls own byllne he has publlshed ln <-1=-1( 438#')88 >)=#)?. 5")
G0'$)1)'A) 40-1( >)=#)?. H)60#%%) >)=#)?, and oLher publlcaLlons.

1he 8lg ShlfL 8log


24

1hls absLracL ls parL of a larger research efforL around Lhe ShlfL lndex conducLed by
uelolLLe CenLer for Lhe Ldge under Lhe leadershlp of uuleesha kulasoorlya and
1amara Samoylova wlLh Lhe supporL of 8renL uance, Mark AsLrlnos, and uan LlberL.
1he perspecLlves on Lhe Lhree levels of pull wlll be presenLed ln much rlcher deLall ln
a forLhcomlng book, I366J <0? !E-66 @0=)8. !E-1%67 @-(). G-' !)% 4#; 5"#';8 #'
@0%#0' (8aslc 8ooks, 2010), by !ohn Pagel lll, !ohn Seely 8rown, and Lang uavlson

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ohn Seely 8rown, and Lang uavlson SepLember 2009

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