Redefining Power

In response to a question about whether he was worried what the Pope might say about his actions, Soviet dictator Joseph Stalin replied, "The Pope? How many divisions has he got?"

We now live in an age where what used to be thought of as definitive distinctions between hard power and soft power are now longer quite as clear.

Information, demographics, health connections, culture, technology, clean water, education, the rule of law. These and many other intangibles once considered soft by politicians and economists have a growing impact on the way nations, enterprises and individuals act. Supposedly hard assets like real estate, manufacturing capabilities and military weapons no longer wield quite the same influence.

Apple manufactures virtually all of  its iconic devices in China, but the greatest margins accrue to the company for its design, technical and marketing staffs in the US.

The world is co-evolutionary: we learn from our enemies, competitors and friends and we build that knowledge into our behavioral models. Information and the technologically driven capability to aggregate, interpret and share it have redefined the ways in which power and the wealth that so often accompanies it are created.

Sustainable competitive advantage has disappeared as the ways in which wealth is created, transferred and counted have evolved. Gold, paper currency or bits and bytes? The wealth of nations and of the enterprises that contribute to it, are changing. The challenge is that such disruptions are hard to identify and the very notion of change may have become secular rather than cyclical.

Power, as the following article explains, is easier to acquire, but harder to use or keep. Get used to it. JL

Greg Satell comments in Digital Tonto:

Power no longer implies climbing to the top of the heap, but edging towards the center of the circle.
Power has always been easier to recognize than to define. To many, it is simply the ability to get what you want, either through coercion or persuasion.   Although that may be accurate, it isn’t very helpful, so strategists have long sought to come up with more operative definitions.
In geopolitics, Ray S. Cline defined power as resources, such as population, territory and economic assets, multiplied by strategy and will.  In business, Michael Porter described advantage as domination of the value chain in order to project power throughout an industry.
However you define it, power is important because it enables you to get things done. Whether you are a politician or an executive, you must seek power to achieve objectives.  Yet power never stays constant, but has always been highly dependent on context and, in today’s world of rapidly shifting contexts, emerging sources of power are often the most potent.

The Power of Information

In his book, War Made New, Max Boot argues that technology shifts often bring down great powers.  The Mongols missed the shift to gunpowder.  The first industrial revolution overtook the Chinese, Turks and Indians, while the French and British failed to keep pace with the second one.  The rise of information technology signaled the end of Soviet dominance.
Today, information itself and the capability to process it has become a new source of power. As Claude Shannon, the father of information theory, made clear, information is the absence of ambiguity and therefore has always had important strategic significance.  Yet never before has there been the potential to use information itself as an element of power.
That’s why big data matters.  Companies like Google and Facebook have hundreds of thousands of servers crunching exabytes of data.  The NSA has doubled its budget since 2001. All of this investment has a purpose, to transform information itself into a hard asset, capable of multiplying the impact of other capabilities.
In the past, the phrase “information is power” was used as a metaphor.  It meant that intelligence could create leverage.  Yet today, it has taken on a much more literal meaning. Information, in vast quantities, can be a weapon or a shield.

The Increasing Significance Of Soft Power

Another consequence of modern technology is that the planet has become far more connected.  Today, we not only travel to distant lands, but communicate across the world; effortlessly and at nearly zero cost.  News outlets like CNN, BBC and Al Jazeera as well as social media like Facebook and Twitter have created a global marketplace for ideas.
Globalization and the information age have elevated the importance of soft power, which Joseph Nye has defined as the ability to get what you want without force or coercion.  As contact between cultures increases, there is more to both attract and repel and, as the speed of communication increases, so can shifts in soft power.
We saw soft power at work in the recent events in Ukraine.  While it was a trade deal that sparked the crisis, what drove the protests was the attraction of European society. Ukrainians wanted to be a “normal” country with an active civil society and the rule of law. The Maidan, Kyiv’s central square, became Euromaidan and the protesters risked their lives to defend it.
The Russian backed insurgency that followed was designed to spread across Eastern Ukraine, but was limited to the relatively small region of Donbass, because few Ukrainians found Russian society attractive.  Russia’s subsequent use of hard power to achieve its objectives, diminished its soft power further.
The jury is still out how events will unfold, but what’s already clear is that Russia’s overwhelming advantage in hard power has been severely limited by its enormous deficit of soft power.  Further, the economic sanctions levelled against it will diminish its capacity to generate and project hard power for years to come.
With the rise of social media, soft power has also taken on a new significance in the corporate world.  Scandals such as Dell Hell and Apple’s Foxconn issues created a fury and forced major corporations to change their policies.   Even innovative young startups like Uber are finding that public sentiment can trump innovation and operational efficiency.

The Power Of Demographics

New demographic trends due to advances in healthcare and birth control technologies have also created shifts.  In developed countries, increases in life expectancy, combined with lower birth rates, are creating huge shifts in worker to retiree ratios.  At the same time, a RAND study finds that demographic trends created by high fertility in less developed nations contribute to extremism.
Again, the Ukrainian crisis is instructive.  In the Orange Revolution protests ten years ago, Eastern Ukraine was united behind Viktor Yanukovych, who was then a Russian backed candidate for President.  Now however, there is a decided split between the older generation that yearns for its lost Soviet power and the younger generation with no memory of it.
Enterprises also have to wrestle with demographics.  Legacy firms with heritage brands need to keep their existing customers happy, but catering to an built-in client base can also leave a business vulnerable to disruptive innovation.  Startup firms can exploit the less established tastes of younger consumers and ride the market up as it inevitably grows.
When Facebook started, it was only available to those with college e-mails.  As the service spread, it opened up to more campuses, then to high schools and then to everybody.  The strategy was a roaring success, but the company soon found that as its user base aged, it lost credibility with younger demographics.
Facebook clearly recognized the problem and acquisitions like Instagram and WhatsApp have helped shore up its appeal and protect its business from demographic erosion.

Power Is Easier To Get, But Harder To Use Or Keep

One thing that’s clear is that power isn’t what it used to be.  The Roman Empire lasted over a thousand years.  Others lasted centuries.  The US has been a superpower for roughly seventy years and its power is already being challenged by a rising China and a multipolar world.  The Soviet empire, of course, is already becoming a distant memory.
As Moisés Naím put it in his book, The End of Power, “Power is easier to get, but harder to use or keep.”  Technology, while not the sole cause, has clearly played a significant role, because the information economy makes it possible to achieve scale without mass. Ownership of resources is not as important as access to them.
Therefore, any advantage gained through the acquisition of assets and capabilities is bound to be fleeting.  The power to attract has become more important than the power to compel or coerce.  Today, strategy has less to do with increasing efficiencies and acquiring resources and more to do with widening and deepening networks of connections.
We have to come to terms with the fact that the will to power no longer implies climbing to the top of the heap, but edging towards the center of the circle.  That’s made power far less stable, but no less desirable.