Theory of the New Economy

By | September 9, 2014

Theory of the New Economy

As a business owner, I am interested in learning how organizations are using fewer resources to do more work. In other words, I want to learn a simple and straightforward methodology to apply in my organization that will yield long-term results. I am not looking for a shortcut, but rather a proven set of steps that I can use to improve the bottom line for my company. Like any other business leader, I am searching for a process that can be learned quickly and leads to results.

After extensive research, I arrived at the following equation: G = ME2

G (Growth) = M (Momentum) times Economy of Energy (E2)

Like Einstein’s Theory of Relativity, E = MC2, the Theory of the New Economy equation is easy to remember. However, it is not necessary to have a physics background to understand how to apply it. In short, G = ME2 is more of an applied approach to experiencing business and personal success.

M = Momentum

One important component to business success is momentum. The organization must have clear goals and objectives that are aligned with the mission statement, or the reason the company exists. In addition, the leadership team must provide a vision that is understood by all employees, and in which everyone has clear expectations. In essence, the M can also mean Money. It is critical to know how the organization is generating revenue. Inherent in the variable momentum is sustainability, or a long-term perspective. The leaders of the organization must create a strategic plan whereby the new reality is maintained.

E2 = Economy of Energy

Most successful organizations today are using business process tools that remove wasteful steps, such as Lean Management, Six Sigma, and Project Management. I heard the term Economy of Energy from a colleague who was describing his Kung Fu training. When he mentioned the importance of conserving resources while competing in martial arts, I immediately saw an application to the business environment. That is, you want to maximize the production level of your resources, and simultaneously improve the quality of the product or service given to your customers.

G = Growth

Business growth is often defined as an increase in revenue and market share. In finance, you learn that organizations exist to maximize shareholder’s wealth. In other words, higher revenues lead to an increase in stock value. Many organizations focus on gaining leverage within their industry by increasing their share of the market. An advantage to a larger market share is having influence within the industry.

The Theory of the New Economy requires both momentum and economy of energy practices. The organization must focus on generating sales and removing wasteful steps. As revenues grow, and efficiencies are realized internally, the company experiences exponential growth.

Sharing Your G = ME2 Success Stories

Regardless of your industry, many of you are using the Theory of the New Economy equation. To share the knowledge with others, I welcome your examples. I read that a life insurance company reduced the number of steps required for approval by more than 80%, resulting in a quicker decision and more sales. Some of you have created internal efficiencies that improve the quality of service, such as adding a follow-up telephone call or email to customers. You may be using technology to upsell products, and thereby increasing momentum.

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