TITLE : SECOND CURVE: MANAGING THE VELOCITY OF CHANGE, THE

PREFACE

YOU'VE DONE EVERYTHING RIGHT in business. You've searched for excellence and found it. You've stuck to your knitting and focused on what works. You've reengineered your business processes and developed the discipline of a market leader. But, even with all of that, You're worried-and with good reason. If you're not at least a little bit paranoid about your future, you're going to be blindsided by the second curve.

Here's what I mean by that. Say a company-maybe your company-is going along quite nicely, doing what it's always done, on a course of business that represents the vast majority of its revenues and profits. Call that its first curve. But everyone has a sneaking suspicion that in the long run, that curve is going to play, out and be replaced by a new business-a second curve, if you will.

If you're lucks, there may be signs, but maybe all you have to go on is that feeling in your gut. Or maybe revenue growth is flattening out, even declining slightly. maybe new players are showing up, guys with a new technology and a slightly different way of doing things, and they're making inroads into what you thought were secure markets. Maybe new geographic markets are springing up like gopher holes, and there are just too many to deal with. What do you do? You could stay where you are playing that first curve, maybe put a little bit more into R&D for the next generation of products or cut costs in your in-ternal processes. Not bad ideas, and there's nothing wrong with them; there's just not enough right with them. And, by not at least acknowledging those second curves, you might miss that Big Opportunity and end up kicking yourself for the next ten years. But maybe you're feeling lucky, or smart, or (on a good day) both. You could go fot it, abandon ship and jump to that second curve. Gutsy but also risky. You might jump too soon.

Welcome to the world according to two curves. It's a world in which the present is hard, but the future is doubly difficult-and the only certainty is change. Managing in this world is a lot like playing three-dimensional chess where you've got to see both near and far at the same time as you prepare to move up, down, across, and sideways.

To start with, you must understand the sources of the second curve, a phenomenon that is fucied by massive forces of change over which have no control: new technology, new consumers, and new markets. As such, the second curve will fundamentally change the threats and opportunities you face. To survive, not to mention succeed, you have to learn to anticipate these changes. We live in a world where new technology means that everything has to happen better, faster, cheaper. Where new consumers demand anything, anytime, anyplace. Where growth in massive emerging economies likc China, India, and Brazil will create new markets and new compatitors. You have to be able to put these changes in context-and, in addition to understanding where the second curve comes from, you have to understand the pace of change and how the changes will play out in various sectors of the economy. We look at three areas: retail and distribution, where the second curve has already come in a hig way; health care, which is in the midst of a supposed second- curve transformation; and financial services, where a massive second curve is building.

The second curve isn't limited to large organizations; individuals are affected too, and are forced to face second-curve realities in their Own careers. You'll have to confront second-curve career choices. Do you hang on to the perceived stability of a dying first curve? Do you jump to the second? We'll help you judge the pace of change and provide some clues about when and where to jump, because even what was once a second-curve Camelot can falter. You're thirty- something. You work for Apple in 1985. You have the world by the tail. The place becomes first-curve in its thinking-all about margins, not about magic. The crazies have, the magic goes, and eventually so do the margins. So ask yourself this: Are you working for an Apple of 1985? Or a Kmart of 1980, or an IBM of 1970? A Sears of 1960?

Staying put may be a mistake, but jumping too soon to a premature second curve can also get you in trouble. You have to balance the risks and rewards with the pace of change. Do you go with Steve Jobs to Next Computer when he leaves Apple? What about when he goes on to Pixar? Next stumbles despite Ross Perot's help. Pixars makes Jobs a billionaire (albeit briefly) all over again. Be ready to jump, but don't live in the future before it happens.

This book is based on my tell years of experience at the Institute for the Future (IFTF) working with large organizations, both public and private, as they think about their long-term prospects. IFTF is a nonprofit research and consulting group founded in 1968 and dedicated to a systematic evaluation of social, technological, and business trends and their consequences for organizations and citizens. This book draws on the lessons learned from working with corporations, from those as large as Fortune 100s to nonprofit organizations, as they confront the fundamental structural changes of the second curve. What has continued to strike me over the years is the consistent applicability of the second-curve model to organizations, regardless of their size or profit orientation, and to individuals, regardless of life stage or career path.

All business books (this one included) are basically a rewriting of common sense. This was written to help you develop a healthy sense of paranoia about what's around the corner fog lights for the road ahead. By knowing where the second curve has come from and what it means for you and your business, you'll get a jump start on the future. You can formulate strategies-both personal and professional-that will help you deal with change, whether you're a CEO or among the ranks of the recently reengineered. Because the biggest mistake-the fatal mistake-is to do nothing.