This may seem rabidly antibusiness. It's not. Business is just a word for buying and selling things. In one way or another, we all rely on this commerce, both to get the things we want or need, and to afford them. We are alternately the workers who create products and services, and the customers who purchase them. There is nothing inherently wrong with this setup. Except when it becomes all of life. Except when life becomes secondary and subordinate. At the beginning of the twenty-first century, business so dominates all other aspects of our existence that it's hard to imagine it was ever otherwise. But it was. Imagine it.

Storylines

A few thousand years ago there was a marketplace. Never mind where. Traders returned from far seas with spices, silks, and precious, magical stones. Caravans arrived across burning deserts bringing dates and figs, snakes, parrots, monkeys, strange music, stranger tales. The marketplace was the heart of the city, the kernel, the hub, the omphalos. Like past and future, it stood at the crossroads. People woke early and went there for coffee and vegetables, eggs and wine, for pots and carpets, rings and necklaces, for toys and sweets, for love, for rope, for soap, for wagons and carts, for bleating goats and evil-tempered camels. They went there to look and listen and to marvel, to buy and be amused. But mostly they went to meet each other. And to talk.

In the market, language grew. Became bolder, more sophisticated. Leaped and sparked from mind to mind. Incited by curiosity and rapt attention, it took astounding risks that none had ever dared to contemplate, built whole civilizations from the ground up.

Markets are conversations. Trade routes pave the storylines. Across the millennia in between, the human voice is the music we have always listened for, and still best understand.

So what went wrong? From the perspective of corporations, many of which by the twentieth century had become bigger and far more powerful than ancient city-states, nothing went wrong. But things did change.

Commerce is a natural part of human life, but it has become increasingly unnatural over the intervening centuries, incrementally divorcing itself from the people on whom it most depends, whether workers or customers. While this change is in many ways understandable — huge factories took the place of village shops; the marketplace moved from the center of the town and came to depend on far-flung mercantile trade — the result has been to interpose a vast chasm between buyers and sellers.

By our own lifetimes, mass production and mass media had totally transformed this relationship, which came to be characterized by alienation and mystery. Exactly what relationship did producers and markets have to each other anymore? In attempting to answer this blind-man's-bluff question, market research became a billion-dollar industry.

Once an intrinsic part of the local community, commerce has evolved to become the primary force shaping the community of nations on a global scale. But because of its increasing divorce from the day-to-day concerns of real people, commerce has come to ignore the natural conversation that defines communities as human.

The slow pace of this historic change has made it seem unsurprising to many that people are now valued primarily for their capacity to consume, as targets for product pitches, as demographic abstractions. Few living in the so-called civilized world today can envision commerce as ever having been anything different. But much of the change happened in the century just passed.

Economies of Scale: Mo' Bigga Mo' Betta

The Internet is often seen as a unique phenomenon that only recently burst into the economic mainstream. But looking at the Net in strictly technological terms obscures its relationship to broader economic trends that were already well underway.

By the end of the nineteenth century, the United States was poised to become the prototypical mass market. It had vast natural resources, a fast-growing population, and a contiguous geography generally unbounded by tariff restrictions. Cheap iron coupled with a voracious appetite for industrial expansion enabled a railway system capable of cost-effectively delivering goods to nearly every part of a captive domestic market.

Given the high cost of entry into such enterprises, and without appreciable foreign competition, manufacturers cared little about product differentiation. Thus Henry Ford's attitude toward customer choice: "They can have any color they want as long as it's black." More than for his wit, Ford is remembered for designing the first high-volume automotive assembly lines. The more cars Ford could make, the lower the unit cost and the greater the margin of profit. These economies of scale led to enormous profits because they enabled selling a far cheaper product to a far wider market.

Ford was strongly influenced by Frederick Taylor and his theory of "scientific management." Taylor's time-and-motion metrics sought to bring regularity and predictability to bear on the increasingly detailed division of labor. Under such a regimen, previously holistic craft expertise rapidly degraded into the mindless execution of single repetitive tasks, with each worker performing only one operation in the overall process. Because of its effect on workers' knowledge, de-skilling is a term strongly associated with mass production. And as skill disappeared, so did the unique voice of the craftsman.

The organization was elegantly simple, if not terribly humane. Atop the management hierarchy resided near-omniscient knowledge of products and manufacturing methods. In the case of Ford, product design, process design, marketing strategy, and other critical functions were chiefly the province of one man, Henry. This knowledge was translated into work orders that were executed by an increasingly layered cadre of lieutenants who directed a large but largely unskilled workforce. This style of command-and-control management worked best for single product-lines with few parts and simple processes.

Economies of Scope: Would You Like Fries with That?

Mass production, mass marketing, and mass media have constituted the Holy Trinity of American business for at least a hundred years. The payoffs were so huge that the mindset became an addiction, a drug blinding its users to changes that began to erode the old axioms attaching to economies of scale.

These changes were gradual at first. Even early on, "economies of scope" began to be perceived. General Motors broke Ford's run on the Model-T — an impossibly long product cycle by today's standards — by offering cars that were not black, and even came in different styles to suit different tastes and pocketbooks. Heinz discovered it could make not just, say, mustard, but "57 Varieties" of condiments in the same factory. Consumers began to have a wider range of choice, and they warmed quickly to their new options.

But things got more complicated on the management side. As more products were launched, organizations became increasingly bureaucratic and business functions more isolated from each other. This was de-skilling of a higher order: design, production, and marketing knowledge began to fractionate, and in some cases, to atrophy.

The real watershed came when offshore producers, finally recovered from the Second World War, began to penetrate U.S. markets. With the oil embargo of the early 1970s, small, fuel-efficient cars began looking highly attractive to people stalled in long gas lines. Companies like Honda, Toyota, and Volkswagen exploded into the North American market like a tsunami. The challenge to U.S. manufacturers was not to offer just trivial feature alternatives, but whole new designs. In a classic reversal, what was suddenly good for America was anything but good for General Motors. The auto industry didn't see these changes coming, and as a result lost enormous market share to offshore competitors.

Overnight, global competition turned mass markets into thousands of micro markets. Nike now makes hundreds of different styles of shoes. The Wall Street Journal coined the term sneakerization to describe a phenomenon affecting nearly every industry.

Competition is healthy, we'd been told from birth, because it breeds greater choice. But now competition was out of control and old-guard notions of brand allegiance evaporated like mist in the rising-sun onslaught from Japan, Southeast Asia, and Europe. Choice and quality ruled the day, and consumer enthusiasm for the resulting array of new product options forever undermined the foundations of yesterday's mass-market economy.

The relentless search for market niches drove a steep increase in new product introductions, which in turn required an exponential increase in design and process knowledge. There were just two problems. First, mass-production-oriented business processes had been "stove-piped" into noncommunicating bureaucratic business functions. Second, workers long told to "check your brain at the door," were ill-equipped for the dynamic changes about to wreak havoc on the corporation.

In short, command-and-control management didn't work so well anymore. Necessary knowledge no longer resided at the top. It was as if the organizational core had melted down, and companies that couldn't adjust fast enough — or that were culturally unwilling to shift gears — went belly up as a result.

Who Knows?

This sudden need for more, better, and better distributed knowledge spawned various attempts at a solution. Three are especially noteworthy.

1. Concurrent engineering: What if separate functions — say design and manufacturing — talked to each other from the outset of a product cycle? This astoundingly obvious idea hadn't yet occurred to anyone because market hegemony and mass production had made it appear unnecessary. If you made only one product, and it had a long life cycle, there was no problem. However, as products proliferated and life cycles accelerated, the need to manage widely distributed knowledge became intense. While concurrent engineering was a step in the right direction, it assumed there was sufficient knowledge in top-down control functions to specify detailed commands to thousands of workers producing hundreds of different products. Big mistake.

2. Artificial Intelligence: Announced with messianic fanfare in the 1980s, this new branch of computer science sought to automate expertise. If "scientific management" had ramped productivity through the division of physical labor, why not apply the same techniques to intellectual labor? However, if industrial automation is de-skilling, AI is akin to a frontal lobotomy. Instead of distributing knowledge, so-called expert systems made it dependent on complex and inflexible software. In most cases, these programs simply didn't work. Knowledge worthy of the name is highly dynamic. It requires deep understanding, not just rules and algorithms. While machines are lousy at this sort of thing, people are remarkably adaptive and intelligent. People learn. Real expertise is changing too fast today to lend itself to automation.

3. Total Quality Management: TQM suggested the unthinkable to companies intent on automating knowledge: why not look to your employees? The basic idea was to empower the people who actually did the work. Knowledge resides within practice — a truth that AI forgot, to its fatal detriment. In companies that adopted some form of TQM, business practices began to resemble older notions of craft instead of the brain-numbing repetition of preordained procedures. People were encouraged to share what they knew with each other, with other departments and divisions, and with the company as a whole. This exchange became a rapidly expanding conversation — a conversation that would soon populate the corporate intranet.

Understanding, learning, exploration, curiosity, collaboration — qualities that had been bred out of workers by industrial management — were now being desperately elicited by the All-New, Culturally Revolutionized Organization. Many spouted the new religion, but secretly tried to hedge old bureaucratic bets. A handful walked the talk, but it was tough going. A central tenet of TQM was W. Edwards Deming's dictum: "Drive Out Fear" — a challenge that went to the heart of the corporation. Conversations among workers were finally seen as critical to the spread of valuable knowledge — "best practices" in the still-current jargon. Conversations are where intellectual capital gets generated. But business environments based on command-and-control are usually characterized by intimidation, coercion, and threats of reprisal. In contrast, genuine conversation flourishes only in an atmosphere of free and open exchange.

Enter the Internet

Our whirlwind historical tour has focused on manufacturing because that sector was first to experience these changes. Later, the same forces began to reshape service and information industries. The Internet not only arrived into the context of a newly globalized economy, it has been profoundly shaped by it. Companies installing intranets are seeking to capture and preserve critical knowledge. Individuals coming onto the Internet are seeking the same range of choice that was first offered by imported cars and stereo equipment.

However, most "e-commerce" plays today look a lot like General Motors circa 1969 — looking for that next lucrative mass market just when markets have shattered into a million mirror-shard constituencies, many asking for something altogether different from the mindless razzle-dazzle of the tube. Marketeers still drool at the prospect of the Net replicating the top-down broadcast model wherein glitzy "content" is developed at great cost in remote studios and jammed down a one-way pipe into millions of living rooms. TV with a buy button! Wowee!

Today, many large companies offer flashy bread-and-circus entertainments on the Web. These offerings have all the classic earmarks of the mass market come-on: lowest-common-denominator programming developed to package and deliver market segments to mass merchandisers. This is not what most people want, or they would have stuck with television, the Yellow Pages, and 800 numbers. And they don't have to accept it since the Internet came up with the concept of infinite channel-surfing.

The Net represents cheap natural resources (data), cheap transport (the pipe itself), and most important, cheap and efficient access to global know-how. The barriers to entry have fallen so low that a huge number of companies can now compete for a niche — an influx that echoes the entry of Asian and European competitors into U.S. markets. But this is more like an invasion from outer space: ten thousand saucers just landed and they're merely the advance wave.

Just as GM mistook the Hondas and VWs for a passing fad, most corporations today are totally misreading this invasion from Webspace. Their brand will save them. Right. Their advertising budget will save them. Uh-huh. More bandwidth will save them. Sure. Well,...something will save them. They're just not too sure what it is yet. But the clock is now ticking in Internet time. Maybe they should get a clue. And quick.

Border Crossings

To most large traditional companies, the notion that workers might actually know what they were doing was a huge insight. (Duh!) But it takes hard work to implement the changes required to elicit knowledge from employees. In most cases, that work is not only incomplete, it hasn't even begun. "Drive out fear"? Dream on.

Knowledge worth having comes from turned-on volitional attention, not from slavishly following someone else's orders. Innovation based on such knowledge is exciting, inflammatory, even "dangerous," because it tends to challenge fixed procedures and inflexible policies. While collaboration has been paid much lip service within corporations, few have attempted it beyond their own boundaries. Ironically, companies that remain "secure" within those boundaries will be cut off from the global marketplace with which they must engage in order to survive and prosper.

And this engagement must be fearless and far-reaching. Workers must become fully empowered and self-directed. Scary. Suppliers must become trusted allies in developing new products and business strategies. Scarier still. Markets must come to have faces and personalities in place of statistical profiles. Flat-out panic!

For many, the new landscape is barely recognizable, online or off. Where business is headed there are no roadmaps yet, and few comforting parallels with the past. The landscape has little to do with mass production, mass merchandising, mass markets, mass media, or mass culture.

Instead, the future business of businesses that have a future will be about subtle differences, not wholesale conformity; about diversity, not homogeneity; about breaking rules, not enforcing them; about pushing the envelope, not punching the clock; about invitation, not protection; about doing it first, not doing it "right"; about making it better, not making it perfect; about telling the truth, not spinning bigger lies; about turning people on, not "packaging" them; and perhaps above all, about building convivial communities and knowledge ecologies, not leveraging demographic sectors.