This is a cross-post from the HBR Complexity Serieswritten by John Hagel, and is one of the perspectives relating to the 2013 Drucker Forum Theme (“Managing Complexity”).
Throughout his life, Peter Drucker strived to understand the increasing complexity of business and society and, most importantly, the implications for how we can continue to create and deliver value in the face of complexity. I have long been influenced by Drucker’s work. In the 1960s and 1970s, he was already anticipating some of the implications of the Big Shift just beginning to emerge: the transition to an information economy, the centrality of knowledge work, and the transformative impact of digital technology on all types of work.
Around that time, two forces coincided, each amplifying the disruptive capacity of the other. First, the deployment of the digital microprocessor and packet-switched networking marked the beginning of the rise of the digital infrastructure that would eventually span the globe, driven by exponential performance improvements in computing, storage, and bandwidth technologies. Digital technology unfolded on top of a second force that had been building for a few decades: a global movement in public policy towards economic liberalization which was systematically reducing barriers to the movement of goods, money, people, and ideas across the boundaries of nations and industries.
The combination of these two forces created enormous opportunities but also enormous challenges. They have systematically and significantly eroded barriers to entry and movement on a global scale. The result is relentlessly mounting performance pressure. Evidence of this pressure is starkly captured in the return on assets (ROA) for all public companies in the US since 1965. Over this period, there has been a sustained and dramatic erosion in performance: ROA has collapsed by 75 percent.
The full blog post can be found at: http://blogs.hbr.org/cs/2013/06/how_drucker_thought_about_comp.html