The fundamental event in a business is the purchase of a product or service by an individual customer. Margins, percentages of sales, sales trends, return and defect rates, and customer satisfaction indices are all abstractions from aggregates of events. They may prove useful diagnostic tools but they are not reality. Understanding why the discrete events occur may be more useful than any of the aggregates.
Collectivism and central planning, whether in government or in the management of a large business enterprise, embody the Nineteenth century view of the world as grand machine. One can design and improve a machine. Classical liberalism is much closer to the Twentieth century interpretation: society as an aggregation of discrete events. At most one can control incentives (as one can affect a thermodynamic system by increasing the temperature or compressing it), but attempting to prescribe events doesn't work any better than Maxwell's demon.
Since the wealth of a New Technological Corporation derives in large part from the technological leverage created by discontinuous shifts in the marketplace caused by a small number of innovations, it is essential that managers of the venture remain in touch with the low-level events that determine the destiny of their company. Turning a knob that controls an aggregate such as increasing research and development spending by 25% or shifting funds from marketing of an existing product to promotion of a new product will not have predictable results. Only by understanding the precise points at which the company's technological leverage is applied, then carefully analysing the reasons which lead customers to select the company's products (or a competitor's product) can useful strategic decisions be made. This requires that senior management receive accurate, extensive, and unbiased evaluations of the development of technologies related to the company's markets and act promptly to maintain and expand the company's leverage.
Editor: John Walker