On Civil Servants and Pirates,

Inventors and Entrepreneurs: Strategically Together

After the Present Economic Depression

 

By Dr. Andreas Eppink

 

Introduction

 

Let us start by going back in time. We do this in order to understand the future all the better. Because once upon a time leadership, management and large organizations scarcely existed. And we are now at the beginning of a new era in which leadership, management and large organizations will be necessary less and less! Strategy will take their place.

 

What happened? Since around 1970 a complete culture change has been taking place, while at the same time groundswell economic changes are occurring, similar to the changes which took place after the end of the Middle Ages. Virtually any cultural or economic changes can be explained by the model of “Hidden Goals” (hereafter to be referred to as HG's) and the adjustments in the combined interplay of the various components of this model. (See diagram 1, opposite/next page). Whoever supposes that the ups and downs in the economy are mainly dependant upon external circumstances is as equally wrong as those who believe that economic (governmental) measures are able to keep an economy under control. Any control that may be successfully exerted is purely dependant upon the degree of Stability existing within the culture of the particular region where control is attempted.

 

Economy is a matter of people, and as such the psychological factor has a formidable say in the matter. In a global economy certain incidents can cause a much bigger impact than in a Stability culture which is scarcely influenced by external factors, and where the majority of the people will react more or less in the same general manner.

 

For centuries, Western Europe has been dominated by a Stability culture -- politically and economically. Now this Stability culture is beginning to show cracks. Two prominent “hidden goals,” Information and Communication, have been pushing the Western economy forward with tremendous force during the last two centuries. In the first instance this boosted the Stability culture. Then the core H.G. Stability was slowly being surpassed by another core H.G.: Expansion.

 

The decades preceeding 1870 were an era of big new inventions such as railroads, electricity, telegraph and telephone -- and the resulting economic expansion was of a dimension the world had never before experienced. Economic expansion means enlargement of scale and diversification of products and markets (Chandler: “Scale and Scope”).

 

The result is an economic globalization and a worldwide economical growth.

 

One of the most important features of this development is that not only Stability and Expansion grew -- thanks to more Information and Communication -- but that also all other hidden goals thrived.

 

The Consuming/ Ego/ Instant-satisfaction H.G. exceeded all of the others and in our current era appears to practically have enough influence as to determine the success or failure of the economy. As such, this brings great changes and uncertainties, for Consuming/ Ego/ Instant-satisfaction -- by definition -- produces an unstable market.

 

Even more essential is the increase of the core H.G. Independence/ Autonomy/ Freedom, which again we see influenced by Information and Communication. It is again by definition that Independence and Stability are not each other’s best allies.

 

This means there is more at play than just a few ups and downs of economic cycles. The rise of Independence/ Autonomy/ Freedom -- of which the free market is one aspect -- has become more and more visible since 1970. Notably in the U.S. -- but also in the Asian countries -- Expansion/ Ambition and Independence/ Autonomy/ Freedom appear not to be such bad partners. What the result will be is of less importance than the conclusion that the West-European Stability culture -- and their local economies -- cannot, in the meanwhile, neglect to take serious note of the increasing influence that the core H.G. Independence/ Autonomy/ Freedom has on the world economy. A typical manifestation of this core H.G. is, as it happens, trade, and in its most pronounced form, wild trade.

 

A short retrospective into Western history shows a clear change of culture more than once, first from (religious) Order to (feudal) Stability, then to (class) Stability + Information + Communication + Expansion, finally to global Expansion (+ Consuming/ Ego-/ Instant-satisfaction). The fact that we now again experience a culture shift (in this case to more Independence/ Autonomy/ Freedom), therefore does not necessarily appear unlikely.

 

A totally new perspective of management, organizations, leadership and strategy will prove necessary, not only to conquer a few economic dips of an organization, but also to work at more than survival: continuity and sustainability.

 

A Short Historical Review

In the Middle Ages the core H.G. (religious) Order took a dominant position. Economically speaking the Church was an enormous power that even managed to persuade the man and woman with a small purse to donate pennies towards the building of cathedrals. And cathedrals did materialize.

 

Perhaps the Church was the only exception as for leadership, management and large-scale organizers. However, lacking clear targets one could not compare the church to a modern organization.

 

In general, it was not knowledge but superstition which prevailed; the priests were uneducated, and the theologian students were more of a side-phenomenon. They diligently studied the composition of the universe. The spin-offs of those studies were philosophy, in particular, logic and physics. The last two broke away from theology, which slowly led to a genuine avalanche of knowledge producing in the next centuries discoveries and inventions that would completely change the world.

 

As ideas are the result of the H.G. Order, so are inventions, with the difference that practical inventions also indicate some rising influence of the H.G. Information/ Knowledge. Exactly because Information/ Knowledge leads to such practical results and to new practical techniques, this H.G. acquired an ever bigger influence on doing and thinking, and by extension, on the general economy. The first industrial revolution in the 18th century was a triumph of the H.G. Information/ Knowledge.

 

In the wake of the H.G. Information the influence of the H.G. Communication also increased. Thus in England the first daily newspaper (1702) and the first publishing house (1724) issued, just to mention a few examples.

 

By then the Middle Ages have long been left behind and the H.G. Order has dropped on the priority list, while the core H.G. Stability has risen due to the feudal politics that had structured social relations, and by consequence had limited economics chiefly to agriculture.[1]

 

What we know as the first industrial revolution was actually the reshaping of an economy based mainly on agriculture (core H.G. Stability) into an industrial economy, which implied that Stability was enlarged by Information/ Knowledge. The culture in Western Europe, where this revolution took place in the 18th century, was in essence a Stability culture. In social and economic relations this showed itself in hierarchical classes and ranks (which were, in fact, closed circuits). There the economic tone was set to the music of family businesses, coupled to local establishments of one not much different from the next.

 

Merchant-Families

An important group within this economy, based on the H.G. Stability, were the merchant-families. Their establishments were older than the industrial family enterprises, but fundamentally they operated identically: hierarchically and paternalistically, backed by ties of family and in-laws. Their networks spread into the administrative machinery; and they even delivered the “regents,” and by these contacts they managed to reinforce their trade interests.

Trade is an exponent of a combination of the HG's Independence and Communication. As for the merchant-families, these HG's were surpassed by Stability.

 

The Stability factor prevented the merchant-families from taking too many risks in their ventures, but within that framework they were flexible. Their HG's fitted superbly into the industrial era and many merchant-families noiselessly converted their businesses into modern enterprises or let themselves be bought out by others.

 

Three New Economic Stability Niches: the Army, the Workers, and the Civil Servants.

Along with industrialization and urbanization, the extent of organization in society increased. Far-reaching social changes resulted without the Stability-culture itself being affected. On the contrary, the Stability-culture in Western Europe appeared to prosper more under the influence of Information and Communication.

 

Three new Stability niches of employment came into existence: the working class, the army and the corps of civil servants.

 

Armies had always existed, only previously they had been mercenary armies. In the 18th century however they became well-organized forces, well-oiled machines. Countries like Prussia (with Frederick the Great and later Bismarck), France (with Napoleon[2]) and England (mainly getting its experience in India) took the lead. In the same period nationalism came into being. The army and nationalism are both exponents of the core H.G. Stability, but the growing impact of a second core H.G. Expansion/ Ambition is undisputable.

 

The army was a breeding ground for organizational talent, logistics and strategy. Next there was room for skill and even for new inventions. One of these successful new inventions was canned food. To be able to feed Napoleon’s men on their campaigns, the state organized a contest to find a method to preserve food for extended periods.[3]

 

One army unit was actually called the Corps of Engineers; the French word ingenieur was derived from “genius,” i.e., someone possessing genius thinks up inventions, he becomes the “engineer” (a combination of the HG's Information/ Knowledge and Order). In the military the engineer was originally the master builder (architect).

 

These are all exponents of the H.G. Information/ Knowledge within the framework of the core H.G. Stability.

 

Economic Growth after 1850: the Rise of (4) Expansion/ Ambition

Electric lights, motorized transport, small engines for agriculture, office and home, pre-packaged food, chemical and pharmaceutical products -- just how significant are these developments?

If we imagine they do not exist yet, but are being invented and taken into production at top speed, then we find ourselves in about the second half of the 19th century. Without doubt, we can call this period the second industrial revolution.

 

We can easily imagine the immense size of the potential market during the decades from 1870 through 1930. In those six decades demand boomed, and more was taken into (mass) production than in all the years of the previous millennia. It is then that we also realize the enormous investments that must have been necessary to serve the market of the 1870-1930 era. Moreover, the money rushing through the economy as the result of these investments had to be controlled.

 

Family businesses were too small to finance the necessary investments, and had too little professionalism to be able to control them. Until 1850 the family business was the economic motor upon which the Stability culture rotated. After that, Expansive pioneers got their chance. Sometimes they sprung from the family businesses themselves, but mostly they were outsiders, and only in a few cases were they inventors.

 

 

The Origin of “Management” from Army and Civil Servant Corps in the Stability Culture: the Executive

Napoleon and Bismarck had used the army for jobs that would, today, be done by civil servants, tasks which were, by the 19^th century, taken over by a separate civil servant army. Civil servant army and civil servant corps, these terms again convey that a military structure ran throughout the entire organization, complete with strict hierarchy and ranks, as thus possessing the typical characteristics of a Stability Culture.

 

It is interesting to see that, forced by the new technological developments, after the mid-1800's businesses began to attract new types of professionals from outside: engineers, financial controllers and accountants, the so-called “white collar” workers. The civil servant corps[4] and the army again served as models, thus the civil servant organization structure was copied, including the new function of staff manager, next to the foremen and “the boss” in the production line. As in the army, the staff managers’ task was to plan and to organize.

All this did nothing to harm these companies, for organization and planning were the core competences, and were indispensable in this era of a strongly growing economic market.

 

Stability: “The New American System of Manufacturing,”and Organizations like Machines

The second industrial revolution started a period of building and advancement: of structures and organizations, of workers’ armies, and of an enormous Expansion.

 

However, let us not overlook the fact that Expansion was not the starting point, but actually the rationalization of processes (H.G. Information/ Knowledge) with reduction of costs as its goal (once again, the core H.G. Stability!).

 

Everything seemed to confirm Descartes' Stable world-picture: universe, man and organizations like machines. The most beautifully constructed machine was the clock -- one of the earliest mechanical inventions. Just like a clock, one imagined, so the organization also should run.

 

“The new American system of manufacturing,” mass production using standardized components, beautifully fit that image. Fitting also is the fact that the mass production system was an invention of the weapons industry, devised to produce rifles from a series of standardized replaceable parts.

 

The picture of the organization as a machine was also copied in the field of jobs: in other words, people, like machines and their parts, were “replaceable”. And so Taylor could write his book on “The Principles of Scientific Management”.

 

The Combined Influence of Expansion and Communication: Mobility, Marketing and Distribution

In the pioneer phase of the second industrial revolution completely new inventions had been developed; however, they still had to be exploited and entire new markets had to be created.

After the pioneer phase (from c. 1850), we see -- apart from the still increasing influence of the H.G. Information/ Knowledge -- a strong upward movement of the H.G. Communication. The combination of Communication and Expansion is always the engine of mobility. Mobility now reached unprecedented heights as new inventions, particularly the internal combustion engine and revolutionary new forms of communication, were applied. As a result, previously unexplored possibilities of distribution were conceived.

 

The Growth Market

The market grew fast for a number of reasons:

1)      By the second revolution, i.e. because of the new inventions -- the steamship, the railways (initially engines run on coal, by the end of the 1800's electrically), electricity, telegraphic and telephonic communications -- marketing and distribution became easier.

2)      New technologies (particularly motor-driven machines) facilitated mass production at relatively low costs. The new mobility (an exponent of Expansion + Communication) made possible by the technology of motorized vehicles did the rest.

3)      The technique developed by the arms industry to manufacture weapons from series of replaceable parts proved to be eminently suitable for producing small light machinery (and was later also used in the automobile industry). Arms factories like Remington and Singer were pioneers -- and first movers -- with the mass manufacture of devices such as typewriters and sewing machines. An excellent example of diversification.

4)      The “white collar” workers succeeded in linking products to the market in a rational way (production, marketing, and distribution).

5)      The market was virtually inexhaustible: the fabricated mass products -- innovations without alternatives and thus without rival! -- simplified life and labor to such an extent that demand was enormous. Through rising prosperity the demand was able to keep increasing.

6)      The continuous growth of the population did the rest.

The Stability Culture is Slowly Surpassed by Expansion

Managers as (Stability-) Civil Servants

In modern enterprises the H.G. Expansion/ Ambition automatically increased by attracting ambitious managers. As mentioned above, these enterprises were still caught up in the Stability culture.

 

This sounds strange when we look at the Expansive growth of industrial enterprises. We must realize however that these ventures were managed by an expanding upper-level management system -- this in a period when Expansion in production and distribution was a “natural” phenomenon so to speak, because in the market of that time only the sky was the limit. Still, each modern industrial enterprise rested on the H.G. Stability: i.e. the (multidivisional) hierarchical organization structure, and the staff; that is to say, leadership by the management augmented by staff members who do the planning.

 

Planning or Strategy

Mintzberg has sufficiently proved the weak correlation between planning and actual results. Planning had to be adjusted on an on-going basis, and this adjustment and readjustment became the real task of the planning departments, coupled with the responsibility for explaning why things ran otherwise than what was originally planned. Not incomprehensible, if we realize the following:

 

1)      The increasing globalization (the fruit of the rising influence of the core H.G. Expansion over that of Stability) has not only made the Western world and economy less Stable, but through the spreading influence of Information/ Knowledge and Communication other cultures have moved closer and closer together. In these “other” cultures the core H.G. Stability certainly did not dominate.

 

2)      Planning is not strategy. In practice, planning is an exponent of Stability. He who plans presumes he already knows the most important factors with which he will get involved and also presumes that these factors will stay more or less stable. Therefore planning is most apt for matters that stay constant, such as production processes and distribution where logistics are essential. The production of car parts and their assemblage requires planning, certainly not strategy.

As for strategy one supposes that the factors one has to deal with will undergo constant change. One collects as much information as possible to recognize possible changes so as to be able to anticipate them tactically. Strategy is a creative process (and displays the combination of the HG's Information and Order of ideas).

 

The Stability Culture is Slowly Surpassed by Expansion

The Stability culture of ranks and classes was solidly built on families: families of peasants, skilled workers, small shopkeepers, merchants and industrialists, and eventually on laborers (and their families) and civil servants.

 

As the working and middle classes slowly grew together, workers took on the customs of the middle class[5], a sign of Stability but at the same time an indication of the slow decline of this same H.G.  This decline was due to the rise of the H.G. Expansion / Ambition. This core H.G. grew on all fronts. Machinery and artificial fertilizers brought record-high agricultural yields, eventually leading the sons of farmers to find work in factories. During this same era skilled workers (Stability + Information/ Knowledge) usually acquired a better social position within three generations, e.g. from carpenter to cabinetmaker and then to proprietor of a firm selling furniture or providing furnishings.

 

Better and more accessible education (again Stability + Information) contributed a great deal to Expansion/ Ambition. The substance of education was adapted to the technological development. At the same education remained (and remains) behind the social economical progress, not only in method, but in subject matter as well. This is not surprising, as education was traditionally the stronghold of the Stability culture.[6] But for how long?

 

The increasing prominence of Information/ Knowledge, combined with Expansion/ Ambition, clears the way for greater influences of another core H.G.: Independence/ Freedom. This will be the subject of the next chapter.

Economic Instability: The Rise of the Core H.G. Independence/ Autonomy/ Freedom

Globalizing and Uncertainty

Globalizing is the result of the HG's combination Information/ Knowledge + Communication + Expansion/ Ambition, plus as a good fourth Independence/ Autonomy/ Freedom.

 

In many of the ancient regions of Western Europe Stability was never quite displaced by Expansion. In the U.S. the core HG's Expansion/ Ambition and Independence/ Autonomy/ Freedom beat the Stability of the West European immigrants, although the influence of this core H.G. is not insignificant at all.[7]

 

In other words, in areas where the influence of the core H.G. Stability is great, like in the Netherlands, Belgium and Germany, not the same HG's are dominant as in the globalizing economy, which will lead to social and economical uncertainty in the future.

 

Uncertainty all the more, as the present world economy is in essence quite unstable. The increasing influence of the HG's Information/ Knowledge and Communication did not only support expressions of the core H.G. Expansion but also those of all the other HG's, even those of the so-called “obstructive” HG's.

 

Economic Instability by “Obstructive Hidden Goals”

 

·        Approbation/ Approval/ Status

·        Inviolability/ Invulnerability

·        Consuming/ Ego- / Instant-satisfaction

They are the three so-called “obstructive hidden goals”.

 

“Obstructive” is meant to be not moralistic but descriptive: these generally human HG's by definition tend to obstruct economic progress, continuity and “sustainability”. Economists overlooking this keep holding on to the machine-world image of the Stability culture. An image of the world as a huge octopus -- or better a labyrinth of sponges -- would be more relevant to our times.

 

While the influence of one or more of the obstructive HG's increases, the effect of the other HG's weakens. (Otherwise the effect of especially the core HG's increases if the influence of the “supporting hidden goals” rises).

 

 

“Obstructive Hidden Goals” and Stagnant Economies: Some Examples

The influence of the obstructive HG's explains why in certain periods, cultures or regions the economic developments hardly advanced or even came to a standstill, as the next examples will show.

 

1. The “Arab”[8] culture (900-1300) was in all aspects a globalizing culture, comparatively in no way inferior to the present modern culture. It brought forth a worldwide economy based on Order (Islamic thinking) + Information/ Knowledge (science) + Independence (trade) combined with Communication (exchange). “Arab” science contained everything to bring about a first industrial revolution.[9] Nevertheless, that did not happen. Why?

This culture did not succumb to invading tribes from East and South, but to the immense forthcoming thought on doctrinal purity (i.e. the H.G. Inviolability/ Invulnerability) combined with a striving for “honor” (i.e. the obstructing H.G. Approbation / Status). Eventually Information/ Knowledge and Communication got stuck.

 

2. In the European Culture of the Middle Ages Order (religion), Stability (feudal system) and Expansion (wars and freedom of religion) “competed”. Order was degenerated as it were by ideas of Inviolability / Invulnerability, preventing a rational attitude (Information/ Knowledge). Through superstition and fear every (economic) setback was seen as a punishment of God. The answer was invariably: doing penance and rejecting everything material (i.e. Inviolability/ Invulnerability. The nobility rejected Information/ Knowledge, because one could gain more credit through courtly manners and by building pretentious castles – allegedly not for defense but for prestige! (Approbation/Status). Nobility and clergy suppressed Independence /Freedom and let the people starve to death (the HG Goodness was left to charitable people).

 

3. The communist economy – once started on the basis of Order (social justice) – soon got overtaken by Expansion, and was in many respects comparable to that of the European Middle Ages. It consisted of one powerful party producing sham five-year plans, and rejecting any influence from outside from an enormous need for doctrinal Inviolability/ Invulnerability thus weakening Information/ Knowledge and Communication and suppressing Independence/ Freedom. The people perished under despots (reducing influence of the H.G. Humanitarianism).

 

In short, the obstructing H.G. 's always distort the view on reality. They create their own -- often delusive -- reality, only producing a limited kind of economic activities.

 

“Obstructing Hidden Goals” in Modern Economy

Under the influence of “obstructive HG's” -- in particular Approbation -- economically impractical prestige projects are common, from conspicuous consumption to gigantic office towers and other status symbols. Think also of deceptive bookkeeping constructions holding out false hopes of auspicious business and stock-market results.

 

Another obstructive H.G., Inviolability, deludes people with false hopes of ultimate safety. Thus, sudden fears break out following unexpected events, like September 11 or unknown illnesses, like SARS, and may lead to “unpredictable” behavior of the market and (exaggerated or ineffective) safety measures, greatly affecting the economic market.

 

Add to that the fact that the market itself is extremely unstable because of the all-dominant influence of fashion, and simply by consuming, fun and entertainment, in other words the influence of the obstructive H.G. Consuming/ Ego-/ Instant-satisfaction.

 

All are causes for “unexpected” events putting a spoke in the wheels of planning and economy.

 

Pirates and Hijackers

Much more essential is the ever-growing impact of the core H.G. Independence/ Autonomy / Freedom on the globalizing economy. This core H.G. always includes an element of “chance.” Being able to take advantage of offered chances belongs to the core competences in trade and commerce, at all levels: of small shopkeepers, tradesmen, merchants, wholesalers, and trading companies. The history of European trade (of each of these levels) shows that the margin between trade and piracy was often very flimsy. “Bounty” is a word with many connotations indicating the result of different economical activities: hunting, purchasing, brigandage, piracy.

 

* Take the Vikings; thanks to them the German merchants found the way open to the Baltic. Trade centers such as London and Bruges owe the flourishing of their commerce to the Vikings.

* The knights of the German Orders took up arms to found their trade centers in the Baltic area: the basis for the later Hanseatic towns. The present-day German towns Hamburg and Bremen still profit from it.

* The well-to-do merchants of Majorca made a hobby of hijacking ships now and then, an exercise about which they would brag during their dinners. The merchants from Pisa, Genoa and Venice were no better.

 

All that took place in the Middle Ages. The Golden Age was no different. In the beginning the V.O.C.[10] (Vereenigde Oost-Indische Compagnie, the Dutch East India Company) and the British East Indian Company -- initially founded with state funds -- even received orders from their respective governments to capture Portuguese ships. Only as this type of “trade” turned out to be not profitable, did they change to “real trade” in spices (but did so using equally questionable methods). We could continue with many more similar examples. Privateers held “letters of marque” allowing them officially, by a certain government, to capture enemy ships. Today’s hijackers rob mankind of its natural sources; to a great extent they too hold such official letters.

 

From the perspective of the pure core H.G. Independence/ Freedom, certainly in combination with the core H.G. Expansion/ Ambition these practices would be considered allowed. However, from the perspective of other HG's like Stability, Order, Goodness, Inviolability and Approbation they certainly are not.

 

Chance, Bounty and Risk: Always Looking for New Niches

 

The Stability culture has its written and unwritten codes; these are effective as long as there are sanctions on violating them.

 

As in the modern economy the core H.G. Independence/ Freedom has gained much influence, pity rules, strict (organizational) structures, trusts and the (Stability) moral saying “this is not done” etc, etc. are not generally accepted within the globalizing economy any more.

 

That explains phenomena like the free market, and especially wild take-overs, the gambling trade of the new economy, but also U.S. president George Bush surpassing a (Stability) institution like the United Nations. The future will have many more such phenomena in store.

 

Without wanting to break a lance for piracy the conclusion must be that companies wishing to survive in this era must embody a certain piratical bent. With piratical bent I think of key-words like daring to take chances, bounty, and risk and therefore flexibility; or in modern terms: always looking for new niches.

 

Western Europe	Core HG's	Obstructive HG's	Supporting HG's
Middle Ages	High: 1.Order (Church) 2.Stability (feudal politics) Middle: 3. Expansion (religious and political) Low: 4. Freedom	High: Inviolability (superstition) Middle: Approbation   Low: Consuming/ Ego Satisfaction	Middle: Goodness Low: Information/ Knowledge (but rising) Communication
Modern History	High: Stability Falling: Order Middle: Order (inventions instead of religion) Middle: Expansion Low: Freedom	Slowly falling: Inviolability (superstition)	Rising influence: Information/ Knowledge Communication
First Industrial Revolution	High: Stability		High: Information/ Knowledge
Second Industrial Revolution	High: Stability surpassed by Expansion	High: Consumption/ Ego Satisfaction	High: Information/ Knowledge Communication
Globalizing Economy	High: Expansion Rising: Independence / Freedom Falling: Stability Middle: Order (ideas, creativity)	High: Consumption/ Ego Satisfaction Rising: Approbation Inviolability (ultimate safety)	High: Information/ Knowledge Communication Middle: Goodness

 

Dr. Eppink is also the author of Cross-Cultural Communication in the Age of Globalization, as well as Modern Globalizing Culture (various chapters). Dr. Eppink presented his insights on Modern Globalizing Culture during his presentation as Closing Speaker at the 2002 International BWW Conference in Saint Germain-en-Laye, France in August 2002.