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Deloitte Center for the Edge
John Hagel III, John Seely Brown, and Lang Davison
Core Research Team
Duleesha KulasooriyaTamara SamoylovaBrent DanceMark AstrinosDan Elbert
Measuring the forces of long-term changeThe 2009 Shift Index
 
Foreword
A seemingly endless stream of books, articles, reports,and blogs make similar claims: The world is flattening;the economy has picked up speed; computing power isincreasing; competition is intensifying.Though we’re aware of these trends in the abstract,we lack quantified measures. We know that a shift isunderway, but we have no method of characterizingits speed or acceleration or making comparisons. Arerates of change increasing, decreasing, or settling intostable patterns (e.g. Moore’s Law)? How do we compareexponential changes in bandwidth to linear increasesin Internet usage? Without times series data and amethodology for integrating those data, we cannotidentify, anticipate, or plan for change.The Deloitte Center for the Edge – led by John Hagel III,John Seely Brown, and Lang Davison—fills that void. Inthis report, they describe their Shift Index. The Shift Indexconsists of three indices: Foundation, Flow, and Impact,and 25 metrics that together quantify the stock, pace,and implications of the shift. The Shift Index speaks metricto metaphor. The index enables analysts to anticipatechanges, identify bottlenecks, and guide strategy. Noteveryone will choose to monitor the same metrics or assignthem the same weights. Thus, the Shift Index is less asingle measure and more an informational playgroundthat will give rise to a diversity of models and, a strongercollective sense about the pace and nature of change.The Shift Index can be thought of as a new economyanalog of the Composite Index of Leading Indicators,an old economy index that considers hours worked,unemployment applications, orders for capital goods, newbuilding permits and the like. The Composite Index has itsplace, but its indicators don’t respond until months if notyears into a shift. Walk through an innovation sequence:Bandwidth increases creating space for new social media.Entrepreneurs formulate ideas. Venture capitalists financeprojects. Proposals prove viable. Finally, mezzaninefunding spurs a ramp up in employment. Only then, inthis last stage, does the Composite Index identify the shift.Using the Composite Index to track shifts is like driving acar by staring into the rearview mirror. In contrast, the ShiftIndex lets us look out the front windshield.As important as the index may prove for strategicapplications, it may have more impact in how it changesour conception of the economy. Interpreted through thelens of neoclassical economics, the Shift Index capturesshifts in fundamentals, particularly on the cost side wheretechnological changes allow firms to do more with less.But, the Shift Index, by name alone, calls into question theneoclassical mindset that focuses on re-equilibration.The Shift Index resonates instead with a conceptual modelof the world economy based on complex dynamics. Inthis framework, the economy can be conceptualized as acomplex adaptive system with diverse entities adaptivelyinteracting to produce emergent patterns (and occasionallarge events). If one embraces the complex, dynamicnature of the economy, then the index can be appreciatedin full – as a multidimensional measure of trends in theconstraints and opportunities within that system. Asconstraints fall away and opportunities increase, oldconfigurations become unstable and new structuresemerge.Shift happens. And, if we can measure shift, we canmanage it.Scott E. PageLeonid Hurwicz Collegiate Professor of Complex Systems,Political Science, and Economics,The University of Michigan - Ann Arbor
 
Contents
2
 
Executive Summary
6
 
Overview: Context, Findings and Implications
12
 
The Shift Index: Numbers and Trends
19
 
2009 Foundation Index
40
 
2009 Flow Index
78
 
2009 Impact Index
113
 
Shift Index Methodology
136
 
Acknowledgements
2009 Shift Index
Measuring the forces of long-term change
1
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