The Shift Index: MethodologyThree waves of deep and overlapping change |
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The Shift Index seeks to measure three waves of deep and overlapping change operating beneath the visible surfaces of today’s events. In brief, this theoretical model suggests that a first wave of change in the foundations of our business and society leads to expanding flows of knowledge in a second wave. These two waves will intensify competition in the near-term and put increasing pressure on corporate performance. Later, institutional innovations emerging in a third wave of change will harness the unique potential of these foundations and flows, improving corporate performance as more value is created and delivered to markets.
First Wave: Foundations Index
The first wave involves the evolution of a new digital infrastructure and shifts in global public policy that have reduced barriers to entry and movement, enabling greater productivity, transparency and connectivity. This wave, the Foundations Index, quantifies the rate of change in the foundational forces taking place today. In this sense, it is a leading indicator because it shapes opportunities for new business practices to emerge in subsequent waves of change as companies seek to master the new potentialities.
Second Wave: Flow Index
The second wave of change, represented in the second index in the Shift Index , the Flow Index, is characterized by the increasing flows of capital, talent, and knowledge across geographic and institutional boundaries. In this wave, intensifying competition and the increasing rate of change precipitated by the first wave shifts the sources of economic value from “stocks” of knowledge to “flows” of new knowledge.
The metrics in the Flow Index capture physical and virtual flows as well as elements that can amplify a flow, including social media use and the degree of passion with which employees are engaged with their jobs. Given the slower rate with which social and professional practices change relative to the digital infrastructure, this index will likely serve as a lagging indicator of the Big Shift, trailing behind the Foundation Index.
Third Wave: Impact Index
The final wave reflects how well companies are exploiting foundational improvements in the digital infrastructure by creating and sharing knowledge, and what impacts those changes are having on markets, firms, and individuals.
Differences in approach between top performing and under performing companies are telling. As some organizations participate more in knowledge flows, we should see them break ahead of the pack and significantly improve overall performance in the long term. Others, still wedded to the old ways of operating, are likely to deteriorate quickly.
Knowledge Flows
This conceptual framework for the Big Shift underscores the belief that knowledge flows will be the key determinant of company success as deep foundational changes alter the sources of value creation. Knowledge flows thus serve as the key link connecting foundational changes to the impact that firms and other market participants will experience.
To respond to the growing long-term performance pressures described earlier, companies must design and then track operational metrics showing how well they participate in knowledge flows. Success against these metrics will provide early visibility into how well companies will perform later as the Big Shift continues to unfold.
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The Shift Index
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