What happened to the information economy?
Posted by Grant Brewer on 01 Aug 2005
This year marks a e-business milestone that many people never thought would be reached – the tenth anniversary of Amazon. Other industry veterans such as Yahoo! are also demonstrating that they can survive for the long term – and survive profitably. When all these organisations burst onto the scene in the heady days of the nineties, there was a real sense that the economics of the internet enabled world were changing forever.
The recent surge in Google's share price making it the most valuable media organisation in the world would suggest that the speculative expectations of investors hasn't changed! Google's market capitalisation is about US$80bn making it more valuable than traditional media giants such as Time Warner.
But has the world, or at least the economic rules that govern it, changed at all over the last fifteen years? It has changed, but perhaps not in the ways that we all thought it would ten years ago. For example, the outsourcing of manufacturing and business services, in particular, to emerging markets is a direct outcome of the information age. And this trend hasn't yet run its full course since a very small share of the services market has been outsourced to date. Interestingly, Amazon has opened an outsourced development centred in South Africa. Browse za.amazon.com.
This year marks a e-business milestone that many people never thought would be reached – the tenth anniversary of Amazon. Other industry veterans such as Yahoo! are also demonstrating that they can survive for the long term – and survive profitably. When all these organisations burst onto the scene in the heady days of the nineties, there was a real sense that the economics of the internet enabled world were changing forever.
The recent surge in Google's share price making it the most valuable media organisation in the world would suggest that the speculative expectations of investors hasn't changed! Google's market capitalisation is about US$80bn making it more valuable than traditional media giants such as Time Warner.
But has the world, or at least the economic rules that govern it, changed at all over the last fifteen years? It has changed, but perhaps not in the ways that we all thought it would ten years ago. For example, the outsourcing of manufacturing and business services, in particular, to emerging markets is a direct outcome of the information age. And this trend hasn't yet run its full course since a very small share of the services market has been outsourced to date. Interestingly, Amazon has opened an outsourced development centred in South Africa. Browse za.amazon.com.
The Information Age or the Knowledge Economy was a real transformation that economies around the world experienced; and it has created a chasm between established economies and the emerging markets since access to the technology and skills necessary to compete in the information age are hard to come by. In Africa, we will still be dealing with closing the so-called digital divide to enable African countries to leap frog into the information age from their current positions. Dealing with the digital divide is a subject worth a column all of its own. Financing, literacy and telecommunications deregulation are all part of the solution but those things alone will not transform farmers into outsourced call centre workers. However, the developing understanding of information and innovation are changing perceptions even here, where there is new sense of creativity about using digital technology to solve problems in emerging markets. Against initial expectations, crossing the digital divide isn't only about PC penetration or access to broadband services – it is mostly about the simpler uses of technology in everyday life, best epitomised by the penetration of mobile phones in emerging markets and the growing evidence that mobile phone penetration shows a greater link to GDP growth than PC penetration. Mobile phones are providing a way for people in emerging markets to share information, communicate and engage the economy – all activities that lead to growth, making cell phones a bridge across the digital divide.
The Chinese have a proverb that says "may you live in interesting times" – and surely we are. The Information Age is giving way to the Creativity Age. The age of creativity is about design, emotions, experience and usability rather than quality or six-sigma style reliability. Creativity in business in this decade is about putting the people back into the business: its about executing strategy through people; its about recognising that emotions and the connections between people are as important as functionality and reliability. Today, a product with a reliable high build quality might still falter compared to a product that recognises how it is used and embraces that very human nature of the way in which we use things. Companies such as Apple, Motorola and IDEO are leading the way in design led product strategies.
Good design doesn't replace excellent quality, efficient business process and information rich products or services; these things still matter. In a previous column, we explored how product design was becoming a board room conversation. This is part of the equation. The thinking will need to grow beyond product design to encompass business process design, rethinking the customer experience of the company and its services or products.
A recent Business Week article explored the new organisations that outsource product manufacture, but insource product or service design because the design itself can become a competitive advantage. This is often contrary to the cost cutting drive to efficiency that believes that a company should stick to its core competency and outsource specialist activities such as design. The smart companies at the moment are recognising that the core competency of the modern business is the design of its product or service experience. It's the manufacturing that can be outsourced.
So what happened to the information age? The information age is developing into something new. This is happening while of us or our organisations will still be struggling to deal with an economy where information is the key business enabler – even in manufacturing centric economies. The design centred innovation flowing through companies today is built on of the success information age transformation – it's almost like a rite of passage; we can't ignore the transformation brought on by the information age. But we must move on to recognise the creativity flourishing in leading organisations and understand that this creativity is on its way to becoming a mainstream competency.
Adapting to the increasing value of design and creative strategies
Organisational leadership isn't easy – you and your organisation are required to adapt to continuous change. A starting point is to understand the trends and then decide whether they will have a real affect on your business. Good leaders pick their battles and adapt to the major forces that will affect their organisations rather than trying to deal with every change or management trend.
One idea is to make sure you treat your customers differently. This is about going beyond the age old market segmentation that is included in marketing 101. It requires a refresh of your understanding of your customers and recognition that each user of your product or service may use it differently. Get inside your customers' lives to understand how they experience your products or services and how they specifically use them. Take your management team out to the marketplace and experience strategy at work amongst your customers and the communities around your organisation.
Another perspective is to step outside the day to day technology enabled information deluge – turn off instant messaging or e-mail or your blackberry. Experience. Although this may sound like a zen buddhist strategy, it is about reminding ourselves that our customers are people – real people with emotions and human failings, and they need to be able to use our products or services. so it is about time that we designed some of that human interaction and character into our strategies.
What happened to the information economy? was published as Strategym #29 in August 2005
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