Emerald Group Publishing Limited
Copyright © 2000, MCB UP Limited
The information superhighway and its effects
We are poised to enter a new age. So today I should like to take you on a journey - a time journey - to the information age.
Some of you may feel that we are in the information age already. That is true to an extent. The growth in broadcast media has brought the whole world into our living rooms, although I am one of those who feels that four TV channels are four too many. But this is sometimes the problem of the information élite. The people who lived behind the Iron Curtain had a different perspective. It was partly due to their ability to see on television how life was beyond the curtain that helped tear it down.
Looking to computers, it is also true that an increasing number of new things can be done on the Internet today - home shopping, for example, or booking tickets. But comparing the Internet to what we shall have in the future is like comparing a bicycle to Concorde.
The Internet will give way to the information superhighway. This will bring about an industrial revolution more sweeping and transforming than the coming of the steam engine or the internal combustion engine. The information superhighway, more than roads or railways, will be the key infrastructure of our future society. The linking of computers all over the world via information highways, with users in almost every home and office, is the modern-day equivalent of the mobility resulting from the development of railways in the last century, or the personal freedom created by the rise of the motor car this century.
I would like to make one thing clear. There is no possibility of an opt-out of the information age. It will come and it will affect us all, in our private lives, in business and basically every aspect of society.
What does this mean for us here today. Well, most of us are in business in one way or another. The information age will have a profound impact on the way we do business in the future. The sooner we realise this, the sooner we can prepare not just to cope with the problems it will bring, but also seize the opportunities it will bring as well.
The impact on business
Let me give you an example.
I spent a summer holiday in Sweden. There I met a young Swede who was a sailmaker. He came from a family of sailmakers going back seven or eight generations. He let me have a glimpse into how his business works. To start with, all the different sails his company offers are on a computer. When he gets an order, the computer will put a complete sail together. This information is then sent to the UK, where a company with high-tech laser equipment cuts the material; the material is then sent back to Sweden within a week. His job is to put the sails together.
However, he has now found out that, by buying the same sails from China, the costs would only be a third, and it would work exactly the same way. All the information for the individual parts of the sail are being e-mailed to Hong Kong, and the sails themselves are being cut and made up in China. The material is exactly the same, since China, like every other country, has access to the same sources. His father used to employ 140 sailmakers; now, he has only seven. Out of these seven, two or three will be made redundant as a consequence of buying from China. This would all have been impossible without computers and modern communication networks.
The key aspect of this little story may apply to many, many other businesses and not to manufacturing businesses alone.
I just read in a German paper that a dentist is offering his services through the Internet. Since dentists in Germany are not allowed to advertise, this was seen as a means of advertising. But the judge who allowed the dentist to continue showed some foresight. Because, in the future, I am quite sure doctors will treat their patients through the Internet. The house call, though in a different form, will come into fashion again. I have to say, however, that I see very limited scope for a dentist. But for most doctors this will open up a new era or area. Also, lawyers will be affected. Law firms located in London seem to have a competitive advantage in this country because that is where most of the action is. In future, locations will be less of a factor since distances will be reduced to zero. Banking is another area that may change dramatically. With the information superhighway, you will access your bank account directly and initiate transactions with no need to go to the branch office. Martin Taylor, previously at Barclays Bank, once said that Barclays is rapidly moving into cyberspace and finds it increasingly difficult to take its 100,000 employees with it. This is just the tip of an iceberg.
Renato Roggiriero, the previous head of the World Trade Organization, sees a geopolitical revolution. He, like many others, foresees a new multinational age; an era that will present many threats but also opportunities.
Many will work from home because their work can be done from home using e-mail, media phones or video-conferencing equipment and all the other facilities that are available at their workstations. There are predictions, for example, that in the year 2000 in Germany those working from home through the information highway will increase to almost one million people. But if they can work from home in Germany for a company in Germany, they can work from home anywhere in the world for that same company.
We can assume, therefore, that many jobs will actually move to lower-cost countries. This will, of course, be services to start with. Many companies - and my company is no exception - already have software centres in India, where the skill levels are high, but the costs low. In reality, these are production facilities. But once the information superhighway is in place, why should not services such as accounting or payroll not come from countries where the costs are a fraction of ours?
Now we have looked at the situation from the production side or the viewpoint of a service provider. But what about the consumer side? Well, when a consumer can look at the price of goods from suppliers around the world, businesses will have to adopt a different approach to pricing. Shoppers through the information highway will have access to a much wider market. They can easily find out what the price for a certain product, such as a Rover or BMW is in Italy, for example, in Germany or in Singapore, and compare the prices with those available in this country. The market will became transparent in a way we have never seen before.
Gemini Consulting Company predicted that in ten years time one third of shopping will be done from work, home or the pub using electronic terminals and networks. It furthermore predicts that the growth in retailing through the Internet and interactive television, which is only at an intermediate step, will soon start to affect traditional retailers, forcing significant change to this particular sector.
The impact on society
Of course progress usually has a price, and so we must ensure that the price we pay is understood. Many traditional jobs may be in jeopardy, while new opportunities will be created. This process is bound to create uncertainties.
These uncertainties will be a huge challenge to our societies.
There are many who are predicting that the information society will bring about the end to centrally organised parties, associations, unions and many, many things and it may actually bring about the end of the national state. In its place, the information age will create a virtual world community in which everybody can communicate with everybody, can play games with partners on the other side of the globe, can do business with everybody. So, instead of having the big brother who is watching you, we will have a huge world community without hierarchies. Others are predicting that the information highway will be like the triumph of the enterprise culture over central planning. All this because the structure of the information highway will be very decentralised, similar to the way the Internet is being organised today. Each individual will gain influence through the information highway, which is far bigger than what we have today or what we could actually envisage. I mentioned earlier that television helped to bring down the communist world. Predictions indicate that, by the end of this century, there will be 200 million end-users connected to the Internet. Once the highway is in place it will probably be four or five times as many and all having access to the same information.
We will see new crimes. Hackers trying to get into banks, trying to steal financial transactions, get into the information exchange, attacking sole computers on the network, preventing subscribers from receiving electronic mail and disrupting online services, with the possible effect of effectively closing down large commercial sites on the information highways.
In the UK, a bank was recently targeted by Russian hackers who were allegedly able to break into its internal network and divert funds to an account they had set up abroad. This I think may give just an indication or glimpse of what crime will look like in the year 2020.
The impact on leisure
The invention of the printing press by Gutenberg was a major achievement for people of its time as well as for us today. Again, we can easily imagine that the information age will lead us to another quantum leap with equally far-reaching consequences for everybody.
I notice that many cities have already started to exploit the benefits the Internet can bring by attracting tourists. Facilities will not just be restricted to those who physically visit a city. Virtual reality will add a new dimension to our ability to discover new places, to go to new places which so far have been out of reach.
The information highway will allow us to visit distant places without going there. For example, a student here in this country will make a quick walk through the Louvre in Paris or the Metropolitan Museum in New York without actually going there. He will not only have the place to himself, he will have a personal guide explaining various pictures or giving some background information on the artist, his techniques or, you just name it, information he would normally not get by actually visiting the gallery.
I am currently brushing-up my Italian. I use a more conventional book and audio tapes. Even though the methods used in this book, incidentally from the BBC, are so much improved compared to the books which helped me to learn Italian initially, they are much more interactive, monitoring and supporting my progress. The information highway and multimedia will have a great impact on how we learn, at school, at university or, as in my case, at home.
But just as easily as one can retrieve information, one can distribute information as well. This will give rise to an increasing number of pressure groups who can quickly get their messages heard around the world - at virtually no cost.
All these changes will create a great challenge for our politicians as well. As I said earlier, this time there is no opt-out. Instead of one channel linking the UK to the continent there will be numerous links and actually much more powerful links linking the UK with all parts of the world. This is bound to have an effect on how people of future generations will feel about other countries.
The information highway will add a new dimension to globalisation, namely globalisation of services. Once that happens, national boundaries will lose their significance. As a consequence, politicians will have to get used to the idea that this will require different approaches in the way economies are being run or managed.
The information highway may well be the solution for overcrowded motorways and cities. Since more and more people will work from home this may actually stop the move into larger cities that seem to become larger and larger, with all the problems that brings with it. Life may well be returning to the traditional centres, the villages.
But then I agree such developments are very difficult to predict. Will people feel much more closely integrated into a wider community? That is one of the questions. It may be that they will react in a way that seems to be reflected so much in the current debate about whether the UK should be part of the European Union or not.
[An extract from a speech given to the German-Britain Chamber of Commerce in the UK.]
Dr Jürgen GehrelsChairman, Siemens plc