dr_eddie_obeng@pentaclethevbs.com

The digital revolution which began about a hundred years ago with the invention of Morse’s Code for the telegraph has finally come of age. The wireless revolution which began allowing instant transfer anywhere through cyberspace followed shortly after. The information revolution which allowed mankind to lengthen the ‘life-time’ of thoughts and ideas beyond transient noise, began centuries ago with their capture onto first stone and then papyrus and then paper. The organisation of skills and know-how which allowed the cottage industries to thrive were invented at the renaissance. The financial instruments and tools for global trade; insurance, limited liability, business ownership, shares, stocks, futures, were revolutionary when they were invented in coffee shops and physical markets several generations ago.

So what is so new? If these trends and breakthroughs date back a hundred or hundreds of years how can there be a new economy? The ‘Newness’ refers not to the introduction of the concepts but instead on their impact on the structure of the economy and of the business environment. Change has always been persistent. However, because of the scale of the global economy, at inception, even these innovations were discrete, influencing each other but each easily identifiable as step changes. In the past few decades however, they have begun to impact on one another, rather like neutrons in an atomic reaction, accelerating in their impact as more of the globe was influenced by them until the point of non-reversible, explosive chain reaction. This we have experienced as an increase in the pace of change. Alone, the explosive growth in the pace of change does not create a ‘new’ economic structure or business paradigm. The ‘new’ occurs because the cause-effect relationships which have existed cease to be completely valid. In this case the ‘New World’ starts at the point for individuals, organisations or economies when the pace of understanding, learning and therefore response to pressures of the pace of change lags behind the change itself.

The figure below illustrates what has happened. The pace and turbulence in the business sphere is represented as an exponential line curving upwards from a low starting point. The pace of learning and response shows as a less dramatic rise, being overtaken half way along by the pace of change. The diagram also represents another cross-over which has occurred in the past two years - the growth of data information flow versus voice flow. The final pair of curves takes us into the future and represents the crossover from traditional touchspace economics to cyberspace based e-commerce in its range of guises- business to business, business to consumer, intra-business, m-commerce etc.

The growth of cyberspace is phenomenal with the velocity of information increasing by a factor of ten every three years. To understand the scale of cyberspace imagine trying to read everything on your computer and watch all the videos at your local library whilst trying to listen to all the mobile phone conversations in the country. It is enormous and more importantly it works to completely different rules to touchspace.

For example, in touchspace, density is a key concept - the more people you have in your office the bigger it needs to be. In cyberspace the concept doesn’t work the same way. When you zip a file where does it all go? This means that the whole organisation can access information on an intranet without the scaling implications of trying to physically fit them all in the same space.

In touchspace finance concepts like raw material and depreciation are important. In touchspace produced goods consume raw materials. In cyberspace, when you make a copy of a file you don’t consume raw materials, furthermore the original does not wear out with copying and have to be replaced. Again the implications of this relate to sharing electronic information, and help explain why we are being deluged by e-mail.

Perhaps the most important and least well understood concept of cyberspace is exponential, self-growing information capital. In touchspace, trading is the exchange of goods or services for money resulting in the seller having the money and the buyer having the goods. In cyberspace trading means the seller making a copy of the original information ( at close to no cost), passing it to the buyer, who exchanges money. In the process the sophisticated seller captures the maximum amount of information about the buyer, demographics, name, address, reason for purchase, etc. At the end of the transaction the buyer has the information, however the seller has all their original information plus the money plus all the information they have captured (tax free!) After a second sale the seller has their original information, two sets of money, two sets of information about the buyers and as a result a relational set of information built from the correlation (information capital all tax free!) The mountain of information grows exponentially, available to be used or sold at any time. Information economics is what makes the logic of ‘clicks and mortar’ mergers, like AOL - Time Warner exciting.

The ‘e’ of e-commerce, e-enablement etc. is simply a reference to the dominance of cyberspace concepts over touchspace concepts and a focus on electronic access, processing and storage. To e-enable your business is to create interfaces and processes which use cyberspace directly to effectively manage and collect electronic information capital and knowledge.

The contribution of the ‘e’ factor simply compounds the obsolescence of the models and frameworks developed for the old world. For example, the discussions by traditional experts on the valuation of dot coms fails to differentiate those building information capital of value, such as Amazon.com, from those who are not, such as Boo.com.

The changes to the business environment are structural and redefine the competitive position of every organisation. Sometimes when I’m working with senior executives who are finding it difficult to grasp the implications of the crossover I suggest an analogy. "Imagine the Old World as operating your business in a swimming pool. You could try to make progress by walking through the water, however it’s quite difficult to walk through water so you can make some progress, drive through some change, but it is slow. So, of course not being dumb, you think, swimming pool - I should swim. So you start to swim. Then someone in the organisation recognises that an efficiency improvement can be made by providing snorkels to avoid you having to turn your head to breathe as you swim - and then another improvement a pair of goggles so that you can keep your eyes open under water to see where you are going. And then the ultimate productivity accessory, a large pair of black flippers. Soon anyone who joins the organisation is issued with a set of corporate goggles, snorkel and flippers and in no time at all they fall in at the back of a streamlined hierarchical pack, a triangle of dynamism and efficiency led from the top, cutting through the water in smooth synchrony. And then the New World happens - it is the equivalent of someone sneakily draining the water out of the pool. As the last few inches of water drain out of the pool what happens?...."

Any business enterprise wishing to survive the structural change described above must transition. There are a four positions which can be taken.

The organisation can continue to provide its old world offer using the same processes and systems. Alternatively it can look to provide New World offers, which require innovation and learning but can deliver them using the same

relevant and their status and kudos have to be earned all over again. Cultural change is notoriously difficult to deliver successfully especially since the New World can demand such wholesale change.

The clear sense of relief of many ‘Old World’ organisations at the recent fall in technology and New Economy stock prices is a sign that as the last few inches drained out of the pool some swimmers lie on the bottom, arms flailing saying ,‘The water will come back you know. I’ve seen it all before.’ Ignoring the New World, though fashionable, is not wise. Organisations have a number of other responses to the challenges posed by the New World. One common strategy is to increase in size through mergers and acquisitions with businesses in the same industry to gain a global reach and market dominance. Scale though tends to reduce speed and flexibility. If you were unable to compete in speed at half the size it is unlikely that the larger organisation will be more successful. Instead the strategy is to gain market dominance in an industry. The issue though is that as the technologies available in the New Economy increase most industry boundaries are becoming blurred with competition arising from other industries or from new entrants.

Furthermore, in implementing the new strategy it is common to use old world concepts and approaches. This in addition reduces the chances of success. The net result is a reduction in the organisational effectiveness.

The combination of the rapid information velocity around the world and the exponential increase in access and usage of cyberspace technologies creates several key issues.

Firstly, customer ignorance ceases to be a source of profit - usually mistaken for commoditisation, the problem is that in the old world the slower information velocity limited the choice available to customers to a small number. With a net result that if the suppliers in the market knew each other’s prices and could pitch close prices (even without price fixing) the customer came to believe that the average price on offer was probably realistic. At the higher velocity the customer can discover and compare globally. and as a result the ‘ignorance premium’ disappears.

For comparison the frameworks the organisation must grasp before e-enablement will be effective in the New world are shown below.

e-volving the Stakeholder interface: Supplier interface

A similar model can be applied to the supplier interface. Here the goal is to encourage suppliers to offer you their best and latest ahead of the competition or to dramatically reduce their costs of servicing your needs. For example, Dell provides customer specific websites where the client organisation can buy direct, saving both customer and seller costs.

A second implication of the effect of information velocity and access is that the flow of information in the business-sphere surrounding the organisation is probably far greater than the flows into the organisation. Most organisations have structured functions, market research, customer service, procurement who have a specific role of capturing information. However, these functions are usually tasked with gathering specific information focused on the current business model. This data capture is often via traditional media. The net result is that the organisation becomes out of touch with its key stakeholder groups. It becomes critical to ensure that all members of the organisation capture data directly electronically.

could happen next and how it might come about is critical

solution to the difficulty of being able to create a cast iron decision.

E-enablement of the strategic process is the key method for ensuring that the strategy remains valid during implementation.

e-volving key processes: Budgeting and planning

In order to operate in the New World it is necessary to not only alter the frameworks and processes of the organisation but also to support the implementation with significant e-enablement.