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TECH TALK: Business to e-Business: 10 Transformations: The Information Economy

January 16th, 2001 · No Comments

The 20th century was all about manufacturing and distribution. Well, at least most of it. Goods had to be produced, they had to be stored in warehouses, then they had to be distributed across a chain into the hands of the end-consumer. Over the years, manufacturing technology has grown to just-in-time, so as to reduce the bane of profits, inventory. The change which has made this possible has been the flow of information across the chain.

When a customer buys a shampoo at a retailer, that information is now sent across to the distributor (and perhaps the manufacturer) so that when levels fall below a trigger point, re-stocking can take place. Even though goods need to be manufactured (you cannot have virtual shampoos — perhaps you could if you had virtual hair!), competitive advantage in business today becomes from the management and analysis of information. Somewhere towards the end of the last century, thanks to the combination of computers and networks, we transitioned from the Manufacturing Economy to the Information Economy.

Write Philip Evans and Thomas Wurster in “Blown to Bits”:

The physical world of manufacturing is shaped by information. Information dominates processes as well as products. It is hard to imagine how even low-tech manufacturers could compete without such information-intensive functions as market research, logistics and advertising. Inventory is merely the physical correlate of deficient information.

When we picture value and supply chains, we tend to visualize a linear flow of physical activities. But it is information, in the broadest sense of the word, that flows across these activities and binds them together. Information flows ultimately determine what is inside and what outside the business unit, value chain, supply chain, consumer franchise, and organization.

Whatever business you are in, the key differentiating factor is going to be how information “ores” can be refined into knowledge, and how this knowledge can empower decision makers. One can never eliminate change — the aim is to anticipate change, and be on top of it. We must learn to thrive in a world of chaos.

Perhaps the biggest change that the Internet has made to our lives is in access to information. Email and the Web have ensured that it does not really make a difference whether we are living in Mumbai or San Jose. Yes, the buzz and hyper-activity of the Silicon Valley may not be there in Mumbai, but the ability to access information in real-time has given an entire generation in India the courage to think of markets beyond the borders of a city, state or even country. Today’s competition is not limited by geography, so why should one’s imagination and business?

For corporates, it means that technology is enabling action – in real-time. Writes Christopher Meyer in “Relentless Growth: How Silicon Valley Strategies Can Work In Your Business”:

In traditional organizations, information becomes currency that is hoarded at each succeeding level of hierarchy. [But] in an economy based on knowledge, those without information can’t contribute responsibly. Those with information find themselves compelled to act.”

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