New growth engines. New paradigm. new Korea. New Growth Engines’ Convention & Expo Tom Peters/26 May 2009

1. New growth engines.New paradigm.new Korea.New Growth Engines’ Convention & ExpoTom Peters/26 May 2009

2. NOTE:To appreciate this presentation [and ensure that it is not a mess], you need Microsoft fonts:“Showcard Gothic,”“Ravie,”“Chiller”and“Verdana”

3. Slides at tompeters.com

4. Palo Alto/Silicon Valley/1969-2004

5. Bedrock/Transformations ***Gold Rush (California Dream, “bet the farm,” immigrants, entrepreneurs, optimists, latecomer-start afresh/1850-SF) ***Union Pacific Railroad (Chinese labor) ***WWII (return via Golden Gate Bridge—immigrant state) ***Stanford (Sterling) (3 of 10 worldwide) ***Defense ***San Francisco “flower children” ***Reagan, Schwarzenegger (entrepreneur, immigrant, optimist) ***HP (electronic tools) ***Semiconductors (Shockley, Fairchild Semi-conductor) ***3000 Sand Hill Road (WORLD’s largest concentration of VCs) ***Memory chips (Intel, AMD) ***ICs (Intel’s 180-degree flip)) ***Computers/Big (HP, Sun) ***Computers/Small (Apple) ***Consumer stuff (Atari) ***Biotech (Stanford, UCSF, CA, Genentech) ***Software/Big (Oracle) ***Software/All ***Software/Search (Netscape, Yahoo, Google) ***Green/Energy

6. ***Can giant enterprises maintain competitiveness? What are the limits to scale (e.g., Is a GE too big to manage, or still a paragon of RADICAL DECENTRALIZATION?)? ***MIXED MODEL = Productive-"winning” economy: Giants and SMEs. ***Think, in particular, “MITTELSTAND” (Remember: Germany is #1 exporter!) ***Critical mass in several population centers, each a little different. ***Toward an "entrepreneurial society"— CHINA (ALIBABA.COM, 32M OF 40M) and INDIA[and USA] "get it,' Japan doesn't. (YUNUS: entrepreneurial “flair” widespread if encouraged.)

7. “Mr. Foster and his McKinsey colleagues collected detailed performance data stretching back 40 years for 1,000 U.S. companies.They found that none of the long-term survivors managed to outperform the market. Worse, the longer companies had been in the database, the worse they did.”—Financial Times

8. ***Can giant enterprises maintain competitiveness? What are the limits to scale (e.g., Is a GE too big to manage, or still a paragon of RADICAL DECENTRALIZATION?)? ***MIXED MODEL = Productive-"winning” economy: Giants and SMEs. ***Think, in particular, “MITTELSTAND” (Remember: Germany is #1 exporter!) ***Critical mass in several population centers, each a little different. ***Toward an "entrepreneurial society"— CHINA (ALIBABA.COM, 32M OF 40M) and INDIA[and USA] "get it,' Japan doesn't. (YUNUS: entrepreneurial “flair” widespread if encouraged.)

9. Germany #1: Mittelstand!!

10. ***Can giant enterprises maintain competitiveness? What are the limits to scale (e.g., Is a GE too big to manage, or still a paragon of RADICAL DECENTRALIZATION?)? ***MIXED MODEL = Productive-"winning” economy: Giants and SMEs. ***Think, in particular, “MITTELSTAND” (Remember: Germany is #1 exporter!) ***Critical mass in several population centers, each a little different. ***Toward an "entrepreneurial society"— CHINA (ALIBABA.COM, 32M OF 40M) and INDIA[and USA] "get it,' Japan doesn't. (YUNUS: entrepreneurial “flair” widespread if encouraged.)

11. ***Toward a "creative society”— long term "economic value- added” starts at AGE 6 in the classroom. ***CULTURAL STIGMA MUST BE REMOVED FROM FAILURE—SMALL OR GRAND. ***Extraordinary role of RESEARCH UNIVERSITIES; nexus of research universities-funds sources. ***SILICON VALLEY: Big and SME; critical mass; mfg and “cool”; incredible diversity; venture money, legal resources; university (3 of world’s Top 10); attitude; tolerance for failure. ***Cornerstone of “creative society”: DIVERSITY! (Of every sort.) ***Immigrants!

12. “Every child is born an artist. The trick is to remain an artist.”—Picasso

13. “Human creativity is the ultimate economic resource.”“The Creative Age is a wide-open game.”—Richard Florida, The Rise of the Creative Class

14. ***Toward a "creative society”—long term "economic value-added” starts at AGE 6 in the classroom. ***CULTURAL STIGMA MUST BE REMOVED FROM FAILURE— SMALL OR GRAND. ***Extraordinary role of RESEARCH UNIVERSITIES; nexus of research universities-funds sources. ***SILICON VALLEY: Big and SME; critical mass; mfg and “cool”; incredible diversity; venture money, legal resources; university (3 of world’s Top 10); att-i-tude; tolerance for failure. ***Cornerstone of “creative society”: DIVERSITY! (Of every sort.) ***Immigrants!

15. McKenna:“A lot of companies in the Valley fail.”Noyce:“Maybe notenough fail.”McKenna:“What do you mean by that?”Noyce:“Whenever you fail, it means you’re trying new things.”Source: Fast Company

16. “The secret of fast progress is inefficiency, fast and furious and numerous failures.”—Kevin Kelly“The Silicon Valley of today is built less atop the spires of earlier triumphs than upon the rubble of earlier debacles.”—Newsweek/Paul Saffo

17. “IN SILICON VALLEY …IF YOU ARE NOT STOLEN AWAY BY SOME COMPANY EVERY FEW YEARS (OR MONTHS) …YOU ARE NOT CONSIDERED A ‘HOT PROPERTY.’STABILITYISAMARKOFSHAME.”Source: Juan Enriquez/Asthe Future Catches You

18. ***Toward a "creative society”—long term "economic value-added” starts at AGE 6 in the classroom. ***CULTURAL STIGMA MUST BE REMOVED FROM FAILURE—SMALL OR GRAND. ***Extraordinary role of RESEARCH UNIVERSITIES; nexus of research universities-funds sources. ***SILICON VALLEY: Big and SME; critical mass; mfg and “cool”; incredible diversity; venture money, legal resources; university (3 of world’s Top 10); attitude; tolerance for failure. ***Cornerstone of “creative society”: DIVERSITY! (Of every sort.) ***Immigrants!

19. ***Toward a "creative society”—long term "economic value-added” starts at AGE 6 in the classroom. ***CULTURAL STIGMA MUST BE REMOVED FROM FAILURE—SMALL OR GRAND. ***Extraordinary role of RESEARCH UNIVERSITIES; nexus of research universities-funds sources. ***SILICON VALLEY: Big and SME; critical mass; mfg and “cool”; incredible diversity; venture money, legal resources; university (3 of world’s Top 10); att-i-tude; tolerance for failure. ***Cornerstone of “creative society”: DIVERSITY! (Of every sort.) ***Immigrants!

20. U.S. Historical Strength: Invest in Creativity*Foster new industries*Free & open society*Investment higher ed, R & D, culture*Immigrants (# 1!)Source: Richard Florida, The Rise of the Creative Class

21. Creativity Index:The 3 T’s:Technology(HT Index/firms & $$$, Innovation Index/patent growth)Talent(% with bachelors degrees+)Tolerance(Melting Pot Index/foreigners, Bohemian Index/artists et al., Gay Index/rel. #s)Source: Richard Florida, The Rise of the Creative Class

22. ***RICH VARIETY OF FINANCING SOURCES, from “angels” to big banks. ***Active IP bar; CYBER WARFARE capability. ***PRODUCTIVITY (AND INNOVATION) IS A 100% PROPOSITION, from 3-person business to giant. ***"Best workforce" applies as much to small service companies as to big manufacturers. ***Innovation applies to SERVICE SECTOR as much as manufacturing (every aspect—e.g. design) ***Manufacturing companies gravitate toward/race toward "SERVICES ADDED" as principal revenue-growth source—the case of GE (!!), IBM, United Technologies and others.

23. ***RICH VARIETY OF FINANCING SOURCES, from “angels” to big banks. ***Active IP bar; CYBER WARFARE capability. ***PRODUCTIVITY (AND INNOVATION) IS A 100% PROPOSITION, from 3-person business to giant. ***"Best workforce" applies as much to small service companies as to big manufacturers. ***Innovation applies to SERVICE SECTOR as much as manufacturing (every aspect—e.g. design) ***Manufacturing companies gravitate toward/race toward "SERVICES ADDED" as principal revenue-growth source—the case of GE (!!), IBM, HP, United Technologies and others.

24. IB“M”: $60B

25. HP + Style + EDS

26. “We want to be the air traffic controllers of electrons.”*—Bob Nardelli, GE Power Systems (10% to 50%+ in about 5 years)*Immelt: Environment, Energy, Healthcare–“Systems Integrator”

27. UTC/Otis + UTC/ Carrier:boxes to “integrated building systems”

28. “THE GIANT STALKING BIG OIL: How SchlumbergerIs Rewriting the Rules of the Energy Game.”:“IPM [Integrated Project Management] strays from [Schlumberger’s] traditional role as a service provider and moves deeper into areas once dominated by the majors.”CEO: “just about anything an oilfield owner would want, from drilling to production” Source: BusinessWeek cover story, January 2008

29. “UPS wants to take over the sweet spot in the endless loop of goods, information and capital that all the packages [it moves] represent.”—ecompany.com (E.g., UPS Logistics manages the logistics of 4.5M Ford vehicles, from 21 mfg. sites to 6,000 NA dealers)

30. ***Only a small fraction of “manufacturing workers” work at manufacturing. ***Innovation is a product of PRODUCER-USER INTERACTION (service companies as sophisticated users—think UPS, FedEx—are as important as producers); much of it local. (Bhidé.) ***Innovation in government services—a significant part of economic growth. ***THE WORLD IS NOT ENTIRELY "FLAT." (ABB’s 125 of 300,000.) ***The "DESIGN ADVANTAGE”—an essential source of value- added. ***Equal innovation mandate in 100% of the firm (HR, IS, Logistics, etc.)

31. ***Only a small fraction of “manufacturing workers” work at manufacturing. ***Innovation is a product of PRODUCER- USER INTERACTION (service companies as sophisticated users— think UPS, FedEx—are as important as producers); much of it local. (Bhidé.) ***Innovation in government services—a significant part of economic growth. ***THE WORLD IS NOT ENTIRELY "FLAT." (ABB’s 125 of 300,000.) ***The "DESIGN ADVANTAGE”—an essential source of value- added. ***Equal innovation mandate in 100% of the firm (HR, IS, Logistics, etc.)

32. Sustainable Innovation: Systemic. Very complex. The NECESSARYCOMBINATION (very dense network) of EVERYTHINGfrom the development of the Basic Science to numerous INTERMEDIATEStages to Sales Recruiting and Training and Ads. Essential: Clever and numerous AGGRESSIVECONSUMERS(“venturesome consumption”). Path to success or failure … UNPREDICTABLE. FYI: The World is NOTFLAT. Source: Amar Bhidé, The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World

33. Sustainable Innovation: Systemic. Very complex. The COMBINATION (very dense network) of EVERYTHING from theBasic Science*to Sales Recruiting and Training and Ads. Essential: Clever and numerous PIONEER CONSUMERS (“venturesome consumption”). Path to success or failure … UNPREDICTABLE. *Of modest value [& origin mostly irrelevant] unless theENTIRE INNOVATION CHAIN is in place and aggressively interacting-competing. Source: Amar Bhidé, The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World

34. ***Only a small fraction of “manufacturing workers” work at manufacturing. ***Innovation is a product of PRODUCER-USER INTERACTION (service companies as sophisticated users—think UPS, FedEx—are as important as producers); much of it local. (Bhidé.) ***Innovation in government services—a significant part of economic growth. ***THE WORLD IS NOT ENTIRELY "FLAT." (ABB’s 125 of 300,000.) ***The "DESIGN ADVANTAGE”—an essential source of value- added. ***Equal innovation mandate in 100% of the firm (HR, IS, Logistics, etc.)

35. ***The essential role of the LOCAL CONSUMER. (The U.S. consumer CANNOT BE/WILL NOT BE the “engine of Asian growth”!) ***"New" marketplace demographics: Primary purchasers (Europe, North America, Japan, etc.) are Women and "Boomers"+ (members of the aging population). ***Maintaining Korea's historic "BIAS FOR ACTION” (success factor #1 from In Search of Excellence). ***Commitment to EXCELLENCE as national attribute- "brand" (think Germany-mfg, Italy- design). (I repeat: such a commitment applies to 100% of the work force and to every enterprise.)

36. ***The current economic “situation” does not change the fundamentals of this necessary strategic, tectonic shift. “DISRUPTIVE TECHNOLOGIES” ARE PICKINGUPSTEAM—FLURRIES OF ACTIVITY, BUBBLES, CONSOLIDATIONS, ETC WILL BE THE NORM FOR THE FORSEEABLE FUTURE!. ***AS “CREATIVE” NEEDS GROW— WIDESPREAD ENTREPRENEURSHIP WILL BE A REQUISITE FOR TRANSFORMATION-SUCCESS.