The Firm of the Future

Revamping a business model is not easy; it requires visible, consistent commitment from the top. It takes time. First, the more established an industry’s norms, the more difficult it is to innovate business models. Everyone has a big stake in preserving the status quo, but it is critical to resist the temptation to do so.

—A.G. Lafley and Ram Charan, The Game-Changer, 2008

Only a theory can replace a theory. If we reject our old notions of the way the world works, we need a new place to go. Certainly we can make incremental improvements to the old business model presented in Chapter 1. Indeed, business books are full of such ideas—Total Quality Management, Lean, Six-Sigma, reengineering, benchmarking, and so on. But if we endeavor to make significant improvements in performance and effectiveness in today’s intellectual capital economy, we have to move beyond tactics and techniques. We have to work on our theories. Doctors used to believe in leeches and bloodletting, and no matter how efficiently they executed those therapies based on those theories, they simply were not medically effective. There is no right way to do the wrong thing.

In the previous chapter, I described the flaws in the traditional professional firm business model. I want to be very specific about the charge I am making. I am not arguing that the old business model is not profitable. That would defy the reality of many profitable firms. Instead, I am saying it is suboptimal. Engineers, ...

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