“One day,” the French diplomat said, “we changed the regulations and said that any boat that had a handicapped person on board could not be turned back [from European shores].” Very soon, he said, boats everywhere started arriving with people in wheelchairs. “It was that fast.”
In April 2016, I went to the West African state of Niger to do a documentary for the Years of Living Dangerously series on the National Geographic Channel. Our crew was following the route of migrants from West Africa, through Niger, across the Sahara to Libya and over to Europe. We were in the northern Niger town of Dirkou, about one hundred miles south of the border with Libya, and we were interviewing men from Niger who had gone to Libya, failed to making the crossing to Europe, and returned home penniless. They were standing alongside a large semitrailer truck overloaded with dry goods. After we finished filming them, I asked if I could take a picture of them with my iPhone. They all nodded yes. And then they all took out their cell phones and started taking pictures of me. So I have a picture of me taking pictures of them taking pictures of me.
I doubt that any of them had much money in their pocket, but they all had camera phones and they were going to use them now to participate in the global flows, even at just a rudimentary level. Drawing on the power of the supernova, everyone, no matter how poor, now can be a subject, not just an object, not just an ornament to some Westerner’s trip to Africa, but the author of their own narrative to a global audience. And that is a good thing—impossible just a decade ago.
When you look at how the diffusion of these digital flows keeps accelerating, it boggles the mind to think about how interdependent the world will be in another decade. Consider just a few indices. The McKinsey Digital Flows study noted that back in 1990, “the total value of global flows of goods, services, and finance amounted to $5 trillion, or 24 percent of world GDP. There were some 435 million international tourist arrivals, and the public Internet was in its infancy. Fast-forward to 2014: some $30 trillion worth of goods, services, and finance, equivalent to 39 percent of GDP, was exchanged across the world’s borders. International tourist arrivals soared above 1.1 billion.” But here’s what’s even more interesting:
Cross-border bandwidth [terabits per second] has grown 45 times larger since 2005. It is projected to grow by another nine times in the next five years as digital flows of commerce, information, searches, video, communication, and intra-company traffic continue to surge …
Thanks to social media and other Internet platforms, individuals are forming their own cross-border connections. We estimate that 914 million people around the world have at least one international connection on social media, and 361 million participate in cross-border e-commerce … On Facebook, 50 percent of users now have at least one international friend. This share is even higher—and growing faster—among users in emerging economies.
As a result, all of this connectivity is vastly expanding “instantaneous exchanges of virtual goods”:
E-books, apps, online games, MP3 music files and streaming services, software, and cloud computing services can all be transmitted to customers anywhere in the world there is an Internet connection. Many major media websites are shifting from building national audiences to global ones; a range of publications, including The Guardian, Vogue, BBC, and BuzzFeed, attract more than half of their online traffic from foreign countries. By expanding its business model from mailing DVDs to selling subscriptions for online streaming, Netflix has dramatically broadened its international reach to more than 190 countries. While media, music, books, and games represent the first wave of digital trade, 3-D printing could eventually expand digital commerce to many more product categories.
And forget the fact that so many “friends” are connecting on Facebook. How about all the “things” getting to know one another? You want to see flows—wait until the “Internet of Things” gets to scale and machines start talking to machines everywhere and always! “Only 0.6 percent of things are connected today,” Plamen Nedeltchev, distinguished IT engineer at Cisco, wrote on Cisco.com in an essay entitled “It is inevitable. It is here. Are we ready?” on September 29, 2015. “There were 1,000 Internet-connected devices in 1984,” said the article, a million in 1992, and ten billion in 2008. Fifty billion devices “are expected to be connected by 2020. In 2011, the number of new things connected to the Internet exceeded the number of new users connected to the Internet.”
Today, data flows are “exerting a larger impact on growth than traditional goods flows,” McKinsey found. “This is a remarkable development given that the world’s trade networks have developed over centuries but cross-border data flows were nascent just fifteen years ago.” This is sure to grow, it noted, because originally “the largest corporations built their own digital platforms to manage suppliers, connect to customers, and enable internal communication and data sharing for employees around the world,” but now “a diverse set of public Internet platforms has emerged to connect anyone, anywhere,” via mobile phones—including Facebook, YouTube, WhatsApp, WeChat, Alibaba, Tencent, Instagram, Twitter, Skype, eBay, Google, Apple, and Amazon.
Some messaging apps—such as Facebook Messenger and WeChat—are not only exploding in popularity but also replacing e-mail as the preferred means for communicating and becoming the preferred carriers of more and more interactive capabilities. They are becoming platforms for e-commerce, e-banking, reservations, and rapid-fire communication. The phenomenon has been dubbed “conversational commerce,” and it promises to weave the world together even tighter and faster by simplifying and accelerating more and more complex interactions. With Venmo, for instance, young people today not only seamlessly split the bill for a dinner through their banks using their cell phones but also share thoughts on the food and conversation, with the same billing message.
Eleonora Sharef, a McKinsey consultant, says that in her office messaging apps such as Slack and HipChat have taken off so fast because they are like having “a live dashboard that sends you all the relevant info on your business throughout the day, while also allowing you to talk about work in a fun environment … All these chat tools are available on your smartphone, too, so you can always be in fast contact with your employees and see metrics anytime day or night—and be a slave to the job!”
These messaging apps are going to make conventional e-mail seem to our kids what conventional mail seemed to the first generation of e-mail users. Mobile messaging apps are “the next platform and they are going to change a lot of things,” said David Marcus, who runs Facebook Messenger and used to run PayPal. “If we are successful, a lot of your life will be running on a messaging app. It is becoming the hub for everyday interactions with people and business and services. E-mail will stick around for less immediate connections.” When we talked in May 2016, Facebook Messenger was about to cross one billion users a month. When one billion people are using anything, you should pay attention.
“Think about it,” Marcus elaborated in a blog post about the rise of these messaging platforms:
SMS and texting came to the fore in the time of flip phones. Now, many of us can do so much more on our phones; we went from just making phone calls and sending basic text-only messages to having computers in our pockets. And just like the flip phone is disappearing, old communication styles are disappearing too. With Messenger, we offer all the things that made texting so popular, but also so much more. Yes, you can send text messages, but you can also send stickers, photos, videos, voice clips, GIFs, your location, and money to people. You can make video and voice calls while at the same time not needing to know someone’s phone number.
Messaging apps, of course, are phone number–based, but Marcus’s vision for Facebook Messenger is to make phone numbers disappear. You will just click on the names of people and companies in your Facebook graph and never have to remember a phone number again. “Over time,” he remarked, “it will make phone numbers obsolete.” Imagine what that will do to intensify the flow of flows.
As
all of these tools scale, the cost of cross-border communications and transactions keeps declining, so starting a business that is global from day one is now incredibly cheap. McKinsey noted that by 2016, there were fifty million small businesses on Facebook. “That’s twice the number of two years ago … Alibaba in China has ten million small and medium-sized enterprises that sell products to the rest of the world through its platform. Amazon has two million small businesses … Some 900 million people have international connections on social media, and 360 million take part in cross-border e-commerce.”
For the same reason, added McKinsey, “products can go viral on a scale that has never been seen before. In 2015, Adele’s song ‘Hello’ racked up fifty million views on YouTube in its first forty-eight hours, and her album 25 sold a record 3.38 million copies in the United States in its first week alone, more than any other album in history. In 2012, Michelle Obama wore a dress from British online fashion retailer ASOS in a photo that was re-tweeted 816,000 times and shared more than four million times on Facebook; it instantly sold out.”
Meanwhile, all of these macro and micro flows are fundamentally shifting how we think about economic power—what it consists of and who has it.
The Big Shift
Which is why the management experts John Hagel III, John Seely Brown, and Lang Davison coined the term “the Big Shift.” The Big Shift, they argue, is that we’re moving from a long period of history in which stocks were the measure of wealth and the driver of growth—how much of every resource imaginable you could stock up on and then draw down and exploit—to a world in which the most relevant source of comparative advantage will be how rich and numerous are the flows passing through your country or community and how well trained your citizen-workers are to take advantage of them.
“We are living in a world where flow will prevail and topple any obstacles in its way,” Hagel said to me in an interview. “As flow gains momentum, it undermines the precious knowledge stocks that in the past gave us security and wealth. It calls on us to learn faster by working together and to pull out of ourselves more of our true potential, both individually and collectively. It excites us with the possibilities that can only be realized by participating in a broader range of flows. That is the essence of the Big Shift.”
Hagel, Seely Brown, and Davison elaborated on this theme in a coauthored essay in the January 27, 2009, Harvard Business Review entitled “Abandon Stocks, Embrace Flows.” “Where’s the money?” they asked:
Used to be the answer was simple: in stocks of knowledge. If you knew something valuable, something nobody else could access, you had, in effect, a license to print money. All you needed to do was to protect and defend that knowledge and then deliver products or services based on that knowledge as efficiently and as broadly as possible. Think of the proprietary formula for Coca-Cola, or the patents protecting blockbuster drugs in the pharma industry.
The power, simplicity, and success of this model explain why it is so deeply engrained in the minds of executives …
This doesn’t just apply to firms. As individuals, we expect to go through structured educational programs in the early stages of our lives. Then we enter the workforce secure in the belief that the skills and knowledge we have acquired will serve us well throughout our careers. Sure, we will acquire new knowledge as we work, but the key is to effectively leverage the knowledge stocks we acquired as we passed through the educational system.
But what if the rise of the supernova has made that whole model obsolete? What if, as the authors put it,
a different source of value is becoming more powerful? We believe there’s good reason to think that value is shifting from knowledge stocks to knowledge flows. Put more simply, we believe that flows trump stocks [italics added] …
As the world speeds up, stocks of knowledge depreciate at a faster rate. As one simple example, look at the rapid compression in product life cycles across many industries on a global scale. Even the most successful products fall by the wayside more quickly as new generations come through the pipeline faster and faster. In more stable times, we could sit back and relax once we had learned something valuable, secure that we could generate value from that knowledge for an indefinite period. Not anymore.
To succeed now, we have to continually refresh our stocks of knowledge by participating in relevant flows of new knowledge.
But you can’t just tap flows one time. You have to contribute to them as well to really be “in the flow.” “We can’t participate effectively in flows of knowledge—at least not for long—without contributing knowledge of our own,” the authors note. “This occurs because participants in these knowledge flows don’t want free riding ‘takers’; they want to develop relationships with people and institutions that can contribute knowledge of their own.”
You can see this clearly in the open-source software communities, such as GitHub, but it is true more widely. “While there are certainly risks associated with knowledge sharing, the damage from IP theft diminishes as the rate of obsolescence increases,” they argued. “At the same time, the rewards from knowledge sharing go up substantially.”
Case in point—General Electric. When GE is looking to invent a new product part, it no longer calls on just its own engineers in India, China, Israel, and the United States—now it is increasingly supplementing those engineers by tapping the flows, by running “contests” to stimulate the best minds anywhere to participate in GE’s innovations.
Every aircraft engine has key components that hold it in place—such as hangers and brackets. Making those components both stronger and lighter is the holy grail, because the lighter they are, the less fuel the plane consumes. So in 2013 GE took one bracket, described the conditions under which it worked and the particular function it performed, and posted online the GE engine-bracket challenge. GE offered a reward to anyone in the world who could design that component with less weight, using 3-D printing. They advertised it in June 2013. As I wrote in a column, within weeks they had received 697 entries from all over the world—from companies, individuals, graduate students, and designers.
According to the GE website:
In September [2013], the partners picked 10 finalists who received $1,000 each.
Aviation 3D printed the 10 shortlisted designs at its additive manufacturing plant in Cincinnati, Ohio. GE workers made the brackets from a titanium alloy on a direct metal laser melting (DMLM) machine, which uses a laser beam to fuse layers of metal powder into the final shape.
The team then sent the finished brackets to GE Global Research (GRC) in Niskayuna, New York, for destruction testing. GRC engineers strapped each bracket to an MTS servo-hydraulic testing machine and exposed it to axial loads ranging from 8,000 to 9,500 pounds.
Only one of the brackets failed and the rest advanced to a torsional test, where they were exposed to torque of 5,000 inch-pounds.
None of the finalists were Americans, and none of them were aeronautical engineers. The best design, GE told me, actually came from Ármin Fendrik, a third-year university student from Hungary. This entry was among his first 3-D printing designs. But it turned out that he had been interning at GE’s office in Budapest and therefore could not take the prize. So the first-prize money, seven thousand dollars, went to M. Arie Kurniawan, a twenty-one-year-old engineer from Salatiga in Central Java, Indonesia. Kurniawan’s bracket, said GE, “had the best combination of stiffness and light weight. The original bracket weighed 2,033 grams (4.48 pounds), but Kurniawan was able to slash its weight by nearly 84 percent to just 327 grams (0.72 pounds).” GE officials noted to me that the manager who ran the challenge had worked at GE longer than that kid had been alive.
Kurniawan was quoted by GE as saying, “3D printing will be available for everyone in the very near future.” Kurniawan, who, GE tells us, “runs a small engineering and design firm called DTECH-ENGINEERING with his brother,” added: “That’s why I want to be familiar with additive manufacturing as soon as possible.”
&
nbsp; GE ended up offering the Hungarian intern a job. Although he clearly had enormous talent, that Hungarian student had failed his engineering structural analysis class, said Bill Carter, a senior mechanical engineer in GE’s Additive Manufacturing Lab: “So it shows that if you get young people excited about something, they feel and can relate to, they get excited—and instead of being in class and studying, he went out and [entered our contest]. And he went and learned from people he never would have talked to.”
Discussing this whole project two years later, Prabhjot Singh, manager of the Additive Manufacturing Lab, explained to me just how much these global flows are being leveraged by a company such as GE today: “When you are looking for new ideas, you can now bring in a diversity of responses worldwide, and you engage the community to drive speed. I can rapidly scale and descale my team depending on how much I want to leverage the community. This helps us to stay up-to-date on things.”
But all of this also means that with all of these energy flows in all of these directions, competition can now come from so many more directions, individuals, and companies. Historically, noted James Manyika, one of the authors of the McKinsey report, companies kept their eyes on competitors “who looked like them, were in their sector and in their geography.” Not anymore. Google started as a search engine and is now also becoming a car company and a home energy management system. Apple is a computer manufacturer that is now the biggest music seller and is also going into the car business, but in the meantime, with Apple Pay, it’s also becoming a bank. Amazon, a retailer, came out of nowhere to steal a march on both IBM and HP in cloud computing. Ten years ago neither company would have listed Amazon as a competitor. But Amazon needed more cloud computing power to run its own business and then decided that cloud computing was a business! And now Amazon is also a Hollywood studio.
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