Social implications of Innovation

1. The great Battle (1): Knight Innovators versus Robber Barons
Author: Koen Klokgieters
Published: 2007
A new force has arisen: the neo-capitalists. These hedge funds and private
equities are trading in companies, aiming for short-term financial gains. They
are not intending to create sustainable value for the various parties involved.
Focusing on fast deals with a lot of borrowed money, they raid the world market
looking for financial profit. The process is as simple as it is effective: encouraged
by huge rewards for performance, the management aims for a short-term
increase in shareholder value. The approach consists of a sharp focus on internal
efficiency (cost reduction, reorganisation, disposal) in combination with a
hyperactive acquisition policy (take over or be taken over) – anything that will
lead to an increase in the company’s share price. As a cherry on the cake, the
company is split up and sold off piecemeal. This often gives the shareholder a
higher return than if the company is sold as a whole. Clearly, huge amounts of
money are involved. In the Netherlands alone, over 25 billion euros’ worth was
bought up by the neo-capitalists last year, and this is expected to increase
explosively. Among others, Maxeda (Hema), PCM, Corus and ABN AMRO are
currently engaged with the hedge funds and private equities.
What are the consequences?
It may be obvious that, in the hunt for short-term profit, long-term investments more
or less come to a halt. According to economics professor, A. van Witteloostuijn, the
three Os of the Dutch knowledge economy (Onderzoek - research, Ontwikkeling –
development and Onderwijs - education) are suffering as a result. The robber barons
see human capital as a cost entry. For that reason, employees are exposed to extreme
productivity demands and are marginally rewarded in comparison with their
management. Room for personal development and job satisfaction disappears. The
tightly run reorganisations that follow each other in quick succession cause severe
disintegration of the organisation. Scope for innovation is removed, while a lack of
innovation will eventually signal the downfall of an organisation.
For a sustainable economy, it is necessary for a new balance to be created between the
various interests and values of the parties involved. The Dutch ‘polder model’, in
which agreements could be made among the various interested parties via
representation, appears no longer to work. People no longer let themselves be
represented or have lost faith in those who represent them. It is as though the robber
barons are facing no strong opposition and are able to carry out their raiding parties in
complete freedom.
Is there a solution to this?
As in many cases, the legislator is looked to for action. But Dutch law, according to
Van der Zwam, has gone to great lengths of liberalisation (De Volkskrant, 5 May
2007). Because of this, the legislator no longer creates a balance between the interests
of the shareholders and those of the other stakeholders. It is high time for a change in
the law that will make it possible to veto a takeover by declaring a company to be of
strategic importance to the Netherlands. But changes in legislation take time and
sometimes lead to knock-on effects that go beyond the original evil.
If the legislator cannot act adequately and the present cloned senior managers
continue to join forces with the robber barons, a new force is called for.

2. The first impulse of this force is already apparent and will take an entirely new form
that the robber barons will be entirely unable to grasp. In his book ‘Liquid life’
Zygmunt Bauman describes a new generation of people who deal differently with the
traditional paradox of ‘safety versus freedom’. Previously, people sacrificed their
(personal) freedom to organisations, institutions and society in return for safety. They
accepted that senior managers, governments, financiers, etc., would take decisions on
their behalf and were resigned to the consequences of this. The new generation of
people are free thinkers and free doers, and no longer accept boundaries (global
players). These are the basic ingredients for innovators! Bauman warns, however,
against strong individualisation and with that a lack of social cohesion. In my view,
the robber barons belong to this new generation that Bauman so accurately describes.
Where Bauman mainly sees the darker side of developments, in their book,
‘Generatie Einstein: slimmer, sneller en socialer’ (The Einstein Generation: smarter,
faster and more social), Jeroen Boschma and Inez Groen describe the positive aspects.
The new, innovative generation solves the great complexity of the world by opting for
collectivism instead of individualism. They act on a basis of authenticity, integrity,
and sincerity. Innovation means nothing new to them. They see it as a natural
consequence of the way in which they work together. According to their perspective,
the robber barons belong to a previous generation and they feel absolutely no
connection with them. Robber barons are concerned with existing organisational
forms and institutions. The Einstein generation does not feel itself at all at home in the
existing organisational forms and creates its own new way of co-operating.
The Einstein generation will confront us with a new role distribution among those
involved in our society. Differences between consumers, manufacturers, owners,
financiers and developers will blur. Organisational forms in which managers are
appointed to take decisions on behalf of others will be replaced by forms in which
people possess knowledge and experience that are required for a specific decision at a
specific time. There are already various concrete examples of these new forms. For
example, innovation expert Charles Leadbeater in his book ‘We-think’ (Internet:
http://www.wethinkthebook.net) describes new organisational forms that are borne
up by the concept of mass participation: innovation as a social, cumulative and
collaborative process. The new organisations are characterised by linking habits from
a small-scale community on a global scale through ‘low-cost connectivity’. Linux and
Wikipedia are only the first examples of this.
It is in this new world that the knight innovators will arise. They are the leaders who
self-confidently operate from authentic values and modesty. They are very open to
mass participation for the further development of their initial range of ideas. And
people will participate, not on the basis of a need for more safety, but on the basis of
increasing their self-esteem and peer esteem. The outcomes are based on the
contribution from every participant and are also freely accessible to every participant.
Robber barons are being confronted with an entirely new battlefield and a new
opponent: the Knight Innovators!
In my following article, I will discuss in more depth the characteristics of the new
organisational forms and means whereby innovation takes place.

3. Koen Klokgieters