The trajectory of information technology
The ‘information revolution’ is the latest of five major technological revolutions since 1770. Its core technology is the microprocessor, which has been on an exponential growth trajectory since the 1960s. This was first described by Moore’s Law in 1965, which originally stated that the number of transistors on a semiconductor chip doubles every eighteen months, and as a result so does the potential power of computers. The main result has been vastly to increase the information intensity of society and the economy.
The ‘information economy’ is estimated to be roughly halfway through its life cycle, and is expected to mature sometime between the 2020s and the 2040s.
Historically, the first half of a major technological revolution involves the installation of new infrastructure and the transformation of productive activity, while the second half involves the transformation of socio-economic organization necessary to fully release the potential of the new technology.
Based on the characteristic trajectory of previous technological revolutions, the first half of the information revolution is now complete and the second half is about to begin. (Carlota Perez, Technological Revolutions and Financial Capital, 2002)
The second half, the stage of full deployment, involves a fundamental recomposition of institutions, for the first time enabling society fully to harness the power of the new technology.
The installation stage of the information revolution has involved an exponential increase in computing power, storage and bandwidth. This has clearly disrupted the previous institutional structure of centralized hierarchical pyramids with functional compartments. This pyramidal structure is now seen as slow moving and unresponsive in comparison with the decentralized flexible network structure made possible by information technology.
Part of this disruption is a direct result of the reduced cost of communication. In an era of expensive communications, centralized hierarchies were the logical organizational form because it was most economic to send all information to the centre where decisions were taken; in an era when the marginal cost of sending information is essentially zero, it is cheap and easy for many people to have high quality information, and radically decentralized decision-making becomes feasible.
The new institutional structure of a strategic core and high-speed peer-to-peer communications network is becoming clearer and has begun to diffuse widely. The new commercial modes and business models are gradually being devised and stabilized. Eventually this new socio-economic pattern will encompass a very wide range of institutions including those of global, national and local government, and civil society.
The deployment of the new pattern will release a new and deeply transformative wave of wealth-creation and social development which was unattainable in the previous structure.
The work of devising and deploying the new form of older institutions is now a requirement for continued viability and development.
As Stan Davis put it, ‘Today, information-based enhancements have become the main avenue for revitalizing mature businesses and transforming them into new ones.’ (Stan Davis, Lessons from the Future, Capstone 2001). Information technology is now the primary basis for revitalization and growth and all organizations now need to ‘informationalize’ or ‘informate.’
The concept of ‘informationalizing’ implies the addition of dynamic information content, features and functions to a product or service. The increase in value comes not from material changes but from new intangibles, such as choice, variety, responsiveness, intelligence and enhanced services. Often the profitability of the new features exceeds that of the original product or service. The more dynamic information capability a product has, the more it mobilizes information and the more it is likely to evolve beyond the usage patterns and scope of the original product or service.
Shoshana Zuboff at Harvard University coined the term ‘informate’. She says, ‘The distinction between automate and informate provides one way to understand how this [information] technology represents both continuities and discontinuities with the traditions of industrial history. As long as the technology is treated narrowly in its automating function, it perpetuates the logic of the industrial machine that, over the course of this [20th] century has made it possible to rationalize work while decreasing the dependence on human skills. However, when the technology also informates the processes to which it is applied, it increases the explicit information content of tasks and sets into motion a series of dynamics that will ultimately reconfigure the nature of work and the social relationships that organize productive activity.’ (Zuboff, In the Age of the Smart Machine, Basic Books, 1988)
When applied to strategy, this deep reconfiguring of the nature of offerings, organizations, and work is both a challenge and an opportunity for significant innovation.