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6 New Rules of Business for the Next Industrial Revolution

The Huffington Post The Huffington Post 23/10/2015 Alan Murray
ALAN MURRAY FORTUNE © Rob Kim via Getty Images ALAN MURRAY FORTUNE

The world is in the midst of a new industrial revolution.
This morning, we release several important stories from the November issue of Fortune magazine, which provides an in-depth look at The 21st Century Corporation. It is our belief that the world is in the midst of a new industrial revolution, driven by technology that is connecting everyone and everything, everywhere and all the time, in a vast and intelligent network of interactive data that is creating an economic dynamic increasingly characterized by low or zero marginal costs, massive returns to scale and platform economics.
Fortune's Geoff Colvin has a fascinating piece here that lays out what this means for modern companies. I strongly recommend it. But for the time-pressed, here are my six big takeaways:
1. You don't need a lot of physical capital. You've probably heard it before, but it's true: Alibaba BABA -2.10% is the world's most valuable retailer and holds no inventory; Airbnb is the largest provider of accommodations but owns no real estate; Uber is the world's largest car service but owns no cars.
2. Human capital will matter more than ever. With less physical capital, employees become more important. You need to identify the ones critical to the company, and recognize that increasingly, they are the company.
3. The nature of employment will change. For the rest of your employees, gig work will grow. Former Cisco CSCO -0.11% CEO John Chambers predicts: "soon you'll see huge companies with just two employees -- the CEO and the CIO." An exaggeration, perhaps, but not by much.
4. Winners will win bigger, and the rest will fight harder for the remains. New business models often make fortunes for their creators, but destroy whole industries in the process. Or as the McKinsey Global Institute puts it: "tech and tech-enabled firms destroy more value for incumbents than they create for themselves."
5. Corporations will have shorter lives. The average life span of companies in the S&P 500 has already fallen from 61 years in 1958 to 20 years today. It will fall further.
6. Intellectual property knows no natural boundaries. A must-read this morning is a fascinating story by Brian O'Keefe and Marty Jones about Uber's "double dutch" corporate tax structure, which you can read here. As more of the value of modern corporations comes from intellectual property, income can easily be shifted to tax havens (...at least until authorities wise up and fix the global tax system).

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