“Louis Pasteur’s theory of germs is ridiculous fiction.”

(Pierre Pachet, Professor of Physiology at Toulouse, 1872)

“The abdomen, the chest and the brain will forever be shut from the intrusion of the wise and humane surgeon.”

(Sir John Eric Ericksen, Surgeon Extraordinary to Queen Victoria, 1873)

“This telephone has too many shortcomings to be seriously considered as a means of communication. The device is

inherently of no value to us.”

(Western Union memo, 1876)

“I think there’s a world market for maybe five computers.”

(Thomas Watson, Chairman of IBM, 1943)

“I have traveled the length and breadth of this country and talked with the best people, and I can assure you that data processing is a fad that won’t

last out the year.”

(Editor in charge of business books for Prentice Hall, 1957)

“We don’t like their sound and guitar music is on the way out.”

(Decca Recording Company rejecting the Beatles, 1962)

“But what is it good for.”

(Advance Computing Systems Division of IBM commenting on the micro chip, 1968)

“640k ought to be enough for anybody.”

(Bill Gates, Microsoft ,1981)

Penicillin was just mold inhibiting the growth of a lab culture

Lasers were first thought to be a useful form of radar

The Internet was conceived as a military communications network

Chemotherapy was a side effect of mustard gas

They are difficult to predict

They are highly consequential

They are explained by “experts” in retrospect, usually incorrectly

We are in the midst of a Black Swan economic crisis

9/11 was a Black Swan

Michael Jordan was a Black Swan

Google was unpredictable 15 years ago

The Ipod and Iphones were unpredictable 10 years ago

Technology

Economics

Political Science

Social Science

Financial Markets

Medicine

• A turkey is fed for a 1,000 days

• The turkey has every reason to think he/she will be fed on day 1,001.

• The turkey is butchered on day 1,001.

• The turkey’s death was a Black Swan to the turkey, but not to the farmer.

What you think you know or what you feel you know-

What you know

=

Black Swan Vulnerability

Knowledge is the Parent of intuition…

In the long run, you cannot achieve or maintain success if you are vulnerable to change.

In The 21st Century:

The only long term competitive advantage a firm may achieve is the ability to learn faster than the competition

We compute the probability of success by focusing on winners. One must look at the full sample, winners and losers to truly separate luck, circumstance and serendipity from cause and effect.

For every bestseller that succeeds, 10,000 fail.

For every game changing advertising campaign, 100 do little or nothing

For every new product that succeeds, 9 fail.

We tend to look for evidence that confirms a pre-existing point of view

If our point of view leads to a negative outcome, we tend to blame ‘unusual

circumstances’ rather than the potential that our point of view is incorrect.

Information that is more salient in your memory is weighted more in your analysis.

You are in sales management and link all problems and solutions to sales force issues.

You buy an HP Printer over a Samsung printer because you presume its salience reflects its popularity and market share.

You just read a magazine article about successful line extensions and therefore over weight its relevance to your firms’ marketing strategy.

Collect opportunities and threats – diagnose their importance and integrate their implications into your planning

Maximize your ability to align your firm with the environment.

Maximize your ability innovate technically and administratively.

The era of the strategic plan is over….we are in the era of strategic vision.

Experimentation and innovation to enhance the resources and capabilities required to realize this vision is the path to competitive advantage.

The Collapse of the Soviet Union opens the world to free market capitalism.

Worldwide data, voice and audio connectivity becomes possible.

The dot.com boom makes it happen through $1 trillion of underground and undersea fiber optic cable.

Software that automates intra and inter business processes and systems becomes universally available (e.g., supply chain management, inventory control, sales management, CRM)

First, IT infrastructure (Linux and Apache), but subsequently all forms of digital products and services (e.g., Wikipedia, Firefox) are made smarter and cheaper through mass collaboration.

For the first time in history, individuals have the same potential reach as the largest communication organizations.

“Back room” business functions flow to the most efficient, most effective, lowest cost sources WHEREVER they may be (IT administration, customer service, accounting, document management, customer records)

2006-2007

Manufacturing flows to the most efficient, most effective, lowest cost sources WHEVER they may be.

Firms buy from the highest value suppliers WHEREVER they may be, deliver through the highest value transportation sources and sell through the highest value distributors

Sales forecasting becomes less necessary as supply chains can almost instantaneously react to changes in demand.

Rather than outsource, firms come through the front door and takeover basic functions

Google-Like intelligent information searches and knowledge management software speed the flow and loosen the control of ‘expert’ information.

““The Steroids”The Steroids”1. Computing capacity, storage capacity and transmission capacity are all subject

to Moore’s Law.

1. File Sharing speeds the diffusion of music, video, documents and data.

1. VOIP dramatically lowers the cost of voice transmission.

1. Video conferencing dramatically lowers the cost of meetings.

5. Wireless mobile data communications ties it all together in the 24/7 virtual office.

Shift #1: Competition Collaboration

Shift #2: Command and Control Collective Intelligence

Shift #3 Nations Go Global Companies Go Global Individuals Go Global

Since the world is flattening competitive advantage will be for those firms that can:

1.Build and enhance a firm around a superior core competency.

1.Create superior brand identity, integrity and resonance.

2.Merge logic and imagination

1.Manage change