So, what's the revolution?

Citation

Henry, C.D. (2002), "So, what's the revolution?", Strategy & Leadership, Vol. 30 No. 3. https://doi.org/10.1108/sl.2002.26130cae.003

So, what's the revolution?

So, what's the revolution? Craig D. Henry

The Company of the Future: How the Communications Revolution is Changing ManagementFrances CairncrossHarvard Business School PressCambridge2002272 pagesTiming makes all the difference in the world. Had this work appeared two years ago, it would have been a welcome contribution to our understanding of the "new economy." Its virtues would have been outsized while its flaws would have seemed minor. In fact, they would not have deserved to be called flaws in 1999. But from our current vantage point, the book's title promises much more revolutionary thinking than it delivers.

Cairncross is a talented journalist with The Economist and the author of The Death of Distance: How the Communications Revolution Will Change Our Lives. She is familiar with the ground she is covering.

The Company of the Future is free from the arrogance that dripped from the pages of so many "digital revolution" books and magazines before April 2000. She does not beat the reader over the head with a narrow personal vision of the inevitable future. Nor does she hint that a disagreement with her is a sign of hopelessly outdated thinking from fogies who are "tired" and "just don't get it." Her civil tone is a refreshing change.

But there may be a reason for her lack of revolutionary conviction: many of her observations are hardly radical. For example, she opens the book with "Ten rules of survival." The first one begins: "Manage knowledge. A company is the sum of what its people understand and know how to do well." This is neither a controversial nor visionary statement. In fact, innocuous prophecies of this type sold millions of magazines during the Internet boom/bubble. After the shakeout, however, we deserve and demand something more substantial.

Cairncross is prone to make sweeping statements that are not developed in a serious fashion. For example, she says, "Internet technologies have the power to transform the collection and accessibility of knowledge and information." The reader waits in vain for her to show what the transformation is likely to look like. Nor does she offer an example of a company that has already started to leverage this transformation for competitive advantage. Instead she offers sincere pieties such as "corporate knowledge is an asset whose value will be determined at least partly by how skillfully it is harvested and structured."

The Company of the Future ranges over a large number of subjects: brands, innovation, purchasing, leadership, corporate structure, corporate culture, recruiting, training and decision-making. The author covers this broad canvas gracefully, with clean prose, short examples, and the occasional statistic. Unfortunately, she does not attempt analytical rigor or historical perspective. Her work will not be confused with that of Clayton Christensen or Michael Porter.

Like many journalists, Cairncross is casual in using "revolution," "transformation," etc. But for nearly 50 years theorists have predicted that computers would have an earth-shattering impact on how we work and how we manage. The results have not fully lived up to those predictions. The clearest evidence of this is the "productivity paradox" that bedevils economists. While they can track the increase in technology spending, they cannot find clear evidence that this investment has yielded increases in economic output.

A work promising us another "revolution" from technology can only be persuasive if it deals with these earlier false promises and failed predictions. Because we now know that technology per se is no magic bullet, we expect an explanation for why this wave of technology is different from its predecessors. The Company of the Future would have been a stronger book if the author had brought some historical perspective to her subject and addressed just that question.

Instead, the author begs most of the questions that a jaded manager might ask. For example, one might ask for an explicit description of what this communications revolution really represents. Not what it "means," just what we can now do that earlier generations of managers and professionals could not. Cairncross offers that "first, the new technologies are driving down the cost and speeding up the rate of processing, transmitting, and storing information." While this is true, the revolutionary significance of this technological achievement is not clear.

As Larry Crockett points out "Information is not just lots of data." For data to become information they require an "interpretation." Further, Crockett argues, "information requires an epistemologically complex ingredient, namely theory, in order to become knowledge." IBM's Stephan Haeckel concurs. In his epistemological hierarchy he argues that information is created when context is applied to data. Only then are patterns and relationships discerned and meaning inferred.

Computers and networks let us amass and retrieve torrents of data but in themselves do not provide context, interpretation, or theory. For those, human thought is required computers, so far, have shown limited leverage over these matters. The barrier to this seems to be insurmountable. As Haeckel argues, the very act of codifying knowledge so that it can be exploited by computer systems and communications networks changes knowledge into information.

Peter Drucker has observed that corporations' new capability to capture and report on rivers of data now has a dark side. Almost all of the data relate to internal operational matters of the business. This rich trove of internal information and focus "on costs and efforts, rather than outward on opportunities, changes, and threats can seduce managers."

The insights of Haeckel, Drucker, and Crockett are a powerful argument against the explicit thesis of this book: that the rapid and enormous advances in computing power and communication technologies must transform how we do business. Cisco's recent woes provide a concrete example.

Cisco was a paragon of the emerging Internet economy. Not only did they make routers and other products that were the very backbone of the Internet itself, their performance and operations seemed to pioneer the way we would all do business in the future. The company was awash in a flood of real-time information on orders, inventory, and shipments. Their "CEO dashboard" defined the state of the art for sales forecasting and executive information systems. They were able to be responsive to customers and yet keep inventories to an absolute minimum. Yet at the end of 2000, Cisco was slammed by a series of unexpected business reverses: orders dried up, customers defaulted on credits Cisco had extended to them, inventories skyrocketed and then depreciated rapidly. The company declared a loss of some $2 billion in excess inventory! For a short time in 2000 Cisco was the most valuable company in the world. Then it lost over 65 percent of its value in a few months' time.

Cisco's problems were foreseeable, but not from the data that populated their forecasting and planning systems. What those systems missed were critical errors and assumptions about markets and customers. Cisco was hurt by the exuberance of the Internet bubble: their sales were juiced by the explosive growth of dot-coms. When many dot-comes became dot-bombs, sales dropped and orders were canceled. Companies that once looked like sound credit risks went bankrupt. Struggling companies sold almost new equipment for a fraction of its original price, which put pressure on Cisco's pricing for new equipment. Understanding these risks required the subjective rationality of a human: the computerized systems were blind to them.

After finishing this book and even after rereading it one comes away disappointed. After all the promises of radical thinking, the actual conceptual content is quite bland. The Company of the Future reads more like a series of Economist magazine articles from 1999 than a serious scholarly effort to grapple with the meaning of our new communications technology or a serious program for executives to wish to exploit it for competitive advantage.