The Old Solutions Have Become the New Problems

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That's what Henry Ford did when he figured out how to make a car that could be sold for $260. It's time for a reinvention of business that is just as radical. There is no detailed map of the territory ahead, but here are some rules that can act as a compass.

New Rule No. 1: Race to I-Space
The old rules assumed economic value. That's why Harvard Business School students have been trained for a century in the "administrative point of view." The manager's job was to oversee and control what was inside organization space, or what they were trained to view as "my company." Everything else was a distraction. The "administrative point of view" reflects a simpler time when business was about selling a product. It teaches you to operate from the perspective of organization space—how to maximize your company's efficiency and serve its interests. It's a world of boundaries: who's inside and who's out; who's up and who's down. It's a world of producers vs. consumers, my company vs. your company, us vs. them.

Business is no longer just about the product. Now it's about solutions for the individual. Economic value is hidden in consumers' unmet needs and is released by providing people with the means to fulfill those needs. But in order to release new value, you need to get out of organization space and into the subjective space where individuals live. I call it "I-Space." This means shedding the "us-them" mentality. Now everyone is an insider.

Amazon (AMZN) and eBay (EBAY) moved into I-space and realized billions of dollars in new value in just a few years. Apple (AAPL) headed for I-space with iPod/iTunes and released massive quantities of value by giving people what they wanted on their own terms in their own space. Meanwhile, music industry executives were busy throwing tantrums in organization space and suing their most passionate customers. Microfinance achieved extraordinary results by reinventing banking from the vantage point of the people it wanted to serve, a model that is spreading from the third to the first world. The single most radical—and most lucrative—move today is to reevaluate everything your business does from the perspective of I-space. Once you head down that road, nothing will ever be the same.

New Rule No. 2: Advocate, Don't Alienate
The old rules taught you to ask, "What is my product or service, and how can I sell it to you?" With that question, adversarialism was baked into the DNA of the buyer-seller transaction.

The new rules ask, "Who are you? What do you need? How can I help?" This creates a dynamic of advocacy and mutual accountability. The more trust you build, the more value you release, and the more wealth you create.

These new principles are essential in I-space, but old attitudes die hard. Enterprises trying to operate in I-space—such as Facebook, Apple, eBay, or MySpace—have each felt the sting of big blunders that violated this new rule. But President Barack Obama gets it. In his proposed overhaul of financial regulations, brokers will be compelled to put their clients' interests first. Trained in the administrative point of view, Wall Street executives are already preparing to fight the very changes that would put them on a path to new wealth creation.

New Rule No. 3: Collaborate and Federate to Compete
When you're in I-Space, you need to collaborate and federate to provide the support individuals need. You can't do it alone because the needs of individuals don't conform to existing organizational and industry boundaries. This means learning how to manage what you don't control or own. These economies of trust are becoming even more important than economies of scale.

The emphasis shifts from contracts and legal sanctions to trust and transparency as companies work together, aligned with their customers' interests—sharing core values, business practices, infrastructure, and systems. Amazon's marketplace and eBay's webs of buyers and sellers are early prototypes of these federated networks. Apple and Facebook are struggling to understand the rules of engagement that should govern relationships with their applications developers. You can see them climbing a new learning curve through trial and error as they figure out how to build and sustain economies of trust.

Are You Ready to Let Go?
After decades of working with adults on the challenges of transition, I know that letting go of the old rules won't be easy. No one gives up what they know without a fight. We like to think that a big shake-up like this economic crisis will unstick us, but typically crisis makes us crawl deeper into our hole and decisively assume the fetal position. Breaking free of the gravitational pull of the familiar requires the equivalent of an asteroid collision.

Letting go is a Catch-22. You don't want to let go until you have something new to cling to, but you can't discover the new thing until you let go. In between, you must cross a mystery zone. Eventually you get to the point where you can't stand the feeling of things not adding up for one more minute. That's when you take a leap of faith, and the questions start to feel more important than the answers. You're in a new place. The bad news: There are no maps. The good news? You are the mapmaker.

Shoshana Zuboff is the author of The Support Economy: Why Corporations Are Failing Individuals and the Next Episode of Capitalism. She was the Charles Edward Wilson Professor of Business Administration at Harvard Business School.

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