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Introduction: What Is the Information Age?

Introduction: What Is the Information Age?

To count is a modern practice, the ancient method was to guess; and when numbers are guessed they are always magnified.

—Samuel Johnson

The term "Information Age" has now been in so much use in recent years that you are expected to know what it means. It conjures up images of people who make their living solely by pushing information about, such as lawyers and teachers, or programmers and stockbrokers. Others argue that what makes today the Information Age is the fact that so many people rely on computers, especially since the advent of the personal computer and the Internet. Sociologists would have us believe that the Information Age is one in which people are networked together through technology and rely on such things as television, radio, and computers with which to conduct their lives, creating a culture different from that which came before it. Economists write that the Information Age is one in which either the computer sector of the economy is massive or the number of office workers doing knowledge work has been growing, providing an economy with more than its Gross Domestic Product. But here are you and I, having to make sense of what the Information Age is about. I describe many of the features of the Information Age in this book, yet I focus only on those elements of the new age that most directly affect businesses.

Complicating our understanding of the Information Age are the changes this age has experienced over the years. Yet a clear understanding of its structure is crucial if you want to be successful in this Information Age fishbowl. Beginning in the late 1950s, business professors (such as Peter Drucker) and economists (such as Princeton University's Fritz Machlup) began talking about an emerging era in which information and knowledge were becoming increasingly the gold of the new period. By the early 1970s, Alvin Toffler, author of Future Shock, and Daniel Bell began to talk about a Post-Industrial Society. By the end of the 1980s, the phrase Information Age, or Age of Information, became popular as titles of articles and books. By my calculation, that means the Information Age as a concept has been around for a quarter of a century. A great deal has happened in that time. For one thing, the Information Age today is not what it was when professors and writers began to label our time as something different than the Industrial Age.

Having the wrong image of what it is would repeat the problem Saddam Hussein had in 1991 when he thought U.S. Marines would land on his beaches just the way they invaded islands in the Pacific during World War II. He was most surprised when, instead of wading to shore out of beach landing craft as depicted in so many news films from World War II, they flew over the beaches in large helicopters and landed behind his forces. They seized large parcels of territory in a matter of days, while Marine pilots bombed and strafed his positions. Had Iraq's dictator had a more current view of how U.S. Marines assaulted enemy positions, he might have implemented different defensive strategies that would have allowed him to block the Americans. Instead, he lost tens of thousands of soldiers. The analogy of the Persian Gulf War works in suggesting that the same risk exists for those managers whose definition of the features of the Information Age are wrong. Before I can discuss how managers are operating in this emerging new era, we need to understand a few of its salient features. These include understanding social and economic issues, and simultaneously, how technology and management practices influence each other. While this book will focus on management issues, this introduction has as its purpose to present some key elements of the "big picture," the economic and social fishbowl in which you and I live and work.

Economists looking at the U.S. situation, beginning in the 1950s, first observed the notion that something was changing. Essentially, what they began and continue to document is how an increased portion of the Gross National Product is being generated by such things as education, computers, media, information, and so forth, and also how the percentage of the work force involved in these activities is growing. While economists debate the numbers, they are nonetheless significant, with some experts today arguing that over 60 percent of the U.S. economy is involved in the creation and use of information as value added activities.[1] The argument goes that a similar process, although less extensive, is evident in other economies, particularly in Western Europe. The rise of the Information Economy—what I prefer to call the New Digital Economy--has been described in many ways, but mainly as a response to the need to control operations of large corporations and government agencies. The argument holds that this need led to the use of more information tools, while proliferation of PCs and the Internet, along with telecommunications, created new economic opportunities. In time, the increased complexity of research and development, products, and use of technology so evident today became a major byproduct of the new era. These are just a few of the explanations.

[1] For an introduction to the history of this subject see James W. Cortada, Rise of the Knowledge Worker (Boston: Butterworth-Heinemann, 1998): 3-21.

Toffler and Bell did much to bring the attention of the American and British public to the notion that a new era was upon us in the 1970s with their bestselling books.[2] I will have more to say about their work in Chapter One. However, what a person needs to understand is the observation made by sociologists and economists that there is a direct link between the emergence of an information-centric economy and the expansion of the service sector of the same economy at the expense of the agricultural and industrial sectors. In other words, as a percentage of the total economy of an advanced industrial society, providing services increased regardless of whether or not the economy as a whole grew in size. Again, depending on whose numbers you consult, in the U.S., for instance, the service sector is sometimes recorded as high as 75 to 80 percent of the Gross National Product, with lower percentages for Western Europe and East Asia. The shift to a service economy and culture has been underway all through the twentieth century. Sociologists like Bell described what society is about today using such models as a postindustrial form. Common features of this new world include the fact that economic growth and expanded productivity are increasingly emerging from the creation of new knowledge. Employment increases in nonagricultural and nonindustrial sectors. Some of these service sector jobs, for example consultants and software programmers, also are paying extraordinarily well, thereby verifying the economic value of such activities. This does not mean that manufacturing is going away. Far from it. It just means that as a proportion of the total economy it increasingly is contributing a smaller amount.

[2] Alvin Toffler, Future Shock (New York: Random House, 1970) and Daniel Bell, The Coming of Post-Industrial Society (New York: Basic Books, 1976).

Information-rich jobs emerge as crucial in this new setting, not just service jobs with low information content. One image of service sector jobs conjures up a picture of millions of people working in fast food restaurants, or clerks stuffing papers into file cabinets. That is an old and increasingly inaccurate image of the service sector, one that would have been of greater use in the 1950s than it is today. Now we have the situation where the amount of knowledge, education, skill, and experience needed by an individual to generate economic value is sharply rising. It is why Bill Gates—a knowledge worker—is worth billions of dollars. It is why companies like IBM, EDS, Ernst & Young, and others employ hundreds of thousands of college-educated consultants, generating billions of dollars in revenue. Economists measure the change primarily by shifts in the structure of employment, in changes in career and job categories, and by tracking the increased requirements for formal education.[3]

[3] The leading student of the sociology of the Information Age is Manuel Castells. For an introduction to his view of the features of the new age see his book, The Rise of the Network Society (Oxford: Blackwell, 1996): 201-231.

I discuss the consequences of such changes throughout this book, but I want to point out a few just to stimulate your thinking and advance our understanding. For one thing, new products and services increasingly require better-trained people. When a skill is in great demand there is not enough of it to go around, with the result that a person's ability to expand a business initiative may be constrained by a lack of sufficient arms and legs to do the work. For another, the evolution to a new age is going on now, so managers have to deal with a spectrum of problems and issues that can be summarized as a combination of living simultaneously in the old (the Industrial Age) and in an emerging one (the Information Age, or more precisely, in the Digital Economy) making it difficult to construct a business model based on one or the other.

This duality of cultures, both economic and social, also plays out in policies and practices of governments rooted in the Industrial Age but trying to figure out when to do things differently in the Information Age. For example, should a government tax goods where they are made and physically sold (Industrial Age thinking) or do you tax transactions consummated on the Internet (Information Age)? Does a government in a highly industrialized country such as Canada, Great Britain, or the United States support free trade and risk low-skilled manufacturing jobs migrating to less developed economies, putting voters out of work in the more advanced nations? What does a policy maker or a government regulator do in countries like France or Japan, where the evolution to service sector economies is picking up steam but the manufacturing sectors are still strong? These are difficult questions, but as every senior executive understands, the answers public officials arrive at have profound implications for the successes and opportunities businesses face.

Besides economic and sociological implications, there is the most obvious feature of the Information Age to deal with: technology. By technology I mean more than simply computers, or even the ubiquitous computer chip, which is popping up in all manner of products and services. I include in this category such things as complex equipment, advanced processes (e.g., modern open-heart surgery), and the knowledge required to use these.

Scientific and engineering knowledge expanded so much and so rapidly in the past century that nothing seems the same. If I had to pick a single driver of change in the Information Age, it would be this combination of newly developed and applied knowledge of scientific and engineering principles, and the growing faith and reliance on them for economic growth. That is why in this book I argue that both modern managers and their staffs must be students of the nature of technology.

What historians of technology tell us, however, is that this is a very difficult thing to do, despite the many books being published by business school professors on how to manage technology. As one distinguished historian of technology, Joel Mokyr, argued, technological progress is normally unpredictable.[4] You should not assume technological progress is inevitable or straight-lined. Mokyr means that surprises come out of nowhere with positive and negative consequences (e.g., the biology professor who invents grass that does not grow, thus putting lawn mower manufacturers out of business while creating a windfall opportunity for garden supply shops). When technologies are attacked, it is not because of a paucity of ideas or knowledge, but because of social forces at work (e.g., government policies discouraging the use of new technologies). Expansion in our knowledge of science and technology, which has occurred over the past three centuries in the West, is primarily the result of a mixture of two circumstances. First, there always was a practical materialistic approach in which people believed that they could manipulate nature for economic gain (along with the belief that such activity was acceptable behavior). Second, there existed continuous and unrelenting economic and political rivalry (competition) for hegemony. Over time, a diversity of intellectual and political creativity made it possible to increase the treasure of technological knowledge and experience, thereby causing the huge surge in the standard of living of the more advanced economies that we have experienced over the past two centuries.

[4] Joel Mokyr, The Lever of Riches: Technological Creativity and Economic Progress (New York: Oxford University Press, 1990): 301.

So, the frontiers of innovation and novelty continued to be pressed back, driven in large part by positive economic incentives.[5] Many historians and economists support the same point when they describe the success of the West as due to its form of economic structure, called capitalism, which generally was allowed by public officials to evolve with minimal constraint.[6] The bottom line is that, while technology is unpredictable, it emerges from the creative pursuit of profit.

[5] Ibid, 303.

[6] Nathan Rosenberg and L.E. Birdzell, Jr., How the West Grew Rich: The Economic Transformation of the Industrial World (New York: Basic Books, 1986).

Of course, as long as there have been economists, sociologists, philosophers, and historians looking at the issue of technology and the emerging Information Age, there has been an intense, sometimes even bitter, debate about the benefits and costs involved. While we have the wonderful historic case study of the American economy of the 1980s and 1990s to point to as a rich, positive example of the economic benefits of the Information Age, economists can also point to the same economy and show that all is not always well. For every Microsoft-like employer that has emerged, there are old manufacturing companies that went out of business. While new information workers were hired, old manufacturing jobs disappeared. The churn in employment and business opportunities shifts and changes in form and content, and often quickly, as we transform eras. That is why, in much of our discussion in the chapters that follow, I address the issue of when to jump off one era and into another.

What economists have learned, however—and this is very relevant for employees today—is that the majority of new jobs created in the second half of the twentieth century in advanced economies occurred when information workers were substituted for traditional noninformation employees in the production of economic value. This is a hard reality, but one that should not be confused during discussions about whether an economy became more or less productive as a result of the introduction of automation or computers.[7]

[7] William J. Baumol, Sue Ann Batey Blackman, and Edward N. Wolff, Productivity and American Leadership: The Long View (Cambridge, Mass.: MIT Press, 1989): 158-159.

So what is the Information Age? It is one occupied by people who live and work with a greater reliance on knowledge and technology than ever seen before in the history of the human race. It is an age in which information and technology-based products have economic value, because sufficient amounts of physical goods, shelter, and food exist in advanced economies and make it possible to leverage the new products and services of our times. It is a period in which change, caused by newfound knowledge and novel applications of existing know-how, often dictates economic success or failure. It is global, relentless, and highly unpredictable. While it exists at various levels of intensity around the world, it cuts across all cultures, civilizations, and religions.

Ironically, however, it is the unpredictability of radical innovations, when set within an economy or society that permits the pursuit of economic advantage, allowing managers to define, in part, what the immediate future should be for their firms. It is in pursuit of that immediate future that so much new knowledge is created and applied. This last notion may, in fact, be the most important concept for you to keep in mind as we struggle collectively with how to be successful in the emerging Information Age. It is not so much an issue that we are entering something called the Information Age, but rather that the change underway has certain features that present businesses with new types of economic opportunities and threats. Recognizing these opportunities and dangers, and reconciling them with fundamental business practices, is what this book is all about. These are also the central issues faced by any business moving into the business climate of the twenty-first century.

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