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Einstein and business

November 26, 2004 13:42 IST

Recently, I read a brilliant essay (Scientific American, September, 2004) comparing the genius of Isaac Newton and Albert Einstein that provided me a very interesting perspective on the challenges businesses (and societies) face and some direction on how at least some of us can handle the same.

Without going into too much detail, the essay highlighted the contribution of Newton through his very "precise, mathematical survey of all phenomenon of the physical world -- from pendulums to springs to comets to grand trajectories of planets" and in the process "invented calculus, formulated the laws of mechanics and motion and proposed a universal theory of gravitation."

However, Einstein "with his extraordinary and seemingly absurd postulates of special relativity and quantum mechanics, demonstrated that the great truths of nature cannot be arrived at merely [by] close observation of the external world. Rather, scientists must sometimes begin within their own minds, inventing hypotheses and logical systems that can only later be tested against experiment."

The world we are living in seems to be undergoing very fundamental changes. These changes are manifesting demographically, politically, technologically, and sociologically.

On account of these changes, new winners (and losers) are coming to the fore--whether in terms of countries, or companies, or even societies.

Technologically, some incredible new developments (e.g. nano technology, fuel cells, bio-technology, to name a few) are now on the horizon of making a way out of hypotheses and laboratories to commercial applications within the next 15-20 years, perhaps fundamentally changing the way we live.

As far as India is concerned, the changes are even more pronounced, be it in our demographics, education level, urbanisation, access to information, economic and social aspirations, or a desire to compete and integrate with the rest of the world.

However, it is becoming increasingly complicated to predict the impact of such changes on specific businesses (or even countries, for that matter, if we take China as one example).

Each time any effort is made using "classical" tools of observation and then applying "mathematical" models, something can change, and the result is like that of a kaleidoscope:  the situation looks very different once again.

With this rather long introduction, what is the point that I am trying to make? Essentially, it is to suggest that today's businesses need more Einsteins than Newtons. Classical management theory and marketing principles are likely to prove inadequate in the coming years for providing a direction to existing and new businesses.

The most basic challenge would be to predict consumer behaviour, and consumers' perception of value. For instance, in the US, over 80 per cent of the population now periodically shop at one of the Wal-Mart stores / formats.

At the same time, there are many in this group who splurge heavily on cosmetic surgery, personal care and stress relief therapy, luxury vacations, and gourmet dining.

In India, consumers who otherwise own and drive the so-called C and D segment automobiles do not mind flying the deep discounted, no-frills Air Deccan or taking Apex fares while splurging thousands the same evening in lounge bars or replacing their mobile phones every six months even though their current models are perfectly usable.

The same SEC A consumer households will bargain to the last 500 rupees while buying a new high-end TV or a Home Theater system, and at the same time, do not think twice when going out to watch the latest movie in an overpriced Multiplex and in the process spending many thousand rupees on a single evening out.

Likewise, the impact of advances in communication, in computing power, in bio-technology, and in applications of nano technology in our day to day life will fundamentally alter the way we would buy and consume goods and services.

Advances in computing / communication power are already creating new (and complex) product design, manufacturing, and marketing networks truly spanning the globe--for the first time in human history.

Nano-technology promises to create radically different paradigms about creating products atom by atom, potentially ushering in a new "industrial revolution". Developments in biotechnology can literally impact the human race as we have known it through evolution.

Modern-day business needs many Einsteins who can develop new postulates and invent new hypotheses and logic systems on how the consumers and the business environment would behave under these changes.

Of course, this is easier said than done. At the very least, however, companies can create an internal environment that allows challenging conventional wisdom, and encourages highly lateral thinking for hypotheses generation. Iconoclasts have to be hired and given positions of importance.

Boards have to be strengthened not with more accountants and "management" experts but with out-of-the-box thinkers and visionaries who can challenge current paradigms and prevailing management dogma.

The CEO and her/ his strategists have to redefine their existing understanding of what businesses they are currently in, and would like to be in the future, which (global) market they should focus on, which (global) competitor (country or company) would challenge them, and what kind of (global) supply chain they should develop.

Marketing professionals have to think beyond conventional market research and focus group studies. Alas, the very subject of market segments and segmentation has to be approached from a very different perspective wherein the classical determinants such as age, income, education, and profession may no longer be relevant or significant. New determinants could well come from behavioral sciences.

Can this all be done? After all, in the last millennium, we have just seen two true geniuses as per this Scientific American essay!

Probably it can--since for the very first time in human existence, it is becoming increasingly feasible to create global networks of human brains that can work in tandem and thereby possibly match or exceed the genius of an Einstein!

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Arvind Singhal