Contents
Preface
Acknowledgments
Section I: Foundations
Chapter 1: Introduction
Cognition
Innovation
The Macro Picture
Earthquakes Every Year
Themes
We’ve Seen This Movie Before
Notes
Chapter 2: Demographics
Is There a “Net Generation”?
Digital Natives
Millennials at Work
Behavior and Expectations
Looking Ahead
Notes
Chapter 3: Behavioral Economics
Challenges to Economic Man
Behavioral Economics in a Networked Age
Looking Ahead
Notes
Chapter 4: Information Economics
Information Goods
Pricing Information: Versioning and Bundling
Network Effects
Lock-in
Looking Ahead
Notes
Chapter 5: Platforms
Strategic Levers
Looking Ahead
Notes
Chapter 6: Power Laws and Their Implications
A Bit of History
Long-Tail Successes
Cautionary Tales
Facts of Life
Implications
Looking Ahead
Notes
Chapter 7: Security and Risk
Landscape
Information Space Is Neither Average nor Normal
People Systematically Misestimate Risk
Doing It Right
Looking Ahead
Notes
Section II: Work and Organization
Chapter 8: A Brief History of Organizational Innovation
1776: Division of Labor
1860–1890: Railroads and the Rise of Administration
1910: Scientific Management and the Further Division of Labor
1930s: Alfred Sloan at General Motors
1937–1981: Transaction Costs
1980s: Economies of Scope and Core Competencies
1995: Linux as “Commons-Based Peer Production”
2000: Offshore
Looking Ahead
Notes
Chapter 9: Firms, Ecosystems, and Collaboratives
Emerging Nonfirm Models
Distributed Capital
Looking Ahead
Notes
Chapter 10: Government
The Biggest Employer
Government Hiring at a Crossroads
Inevitable Downsizing
Government on the Technology Landscape
Looking Ahead
Notes
Chapter 11: Crowds
Crowdsourcing: Group Effort
Information Markets and Other Crowd Wisdom
Varieties of Market Experience
Looking Ahead
Notes
Chapter 12: Mobility
Bottom Up
Search Costs
Supply Chain Efficiency
Mobile Phone Industry Impact
Risk Mitigation
Apps for Change
Looking Ahead
Notes
Chapter 13: Work
The Big Picture: Macro Trends
Where
Outputs
Skills
Work
Looking Ahead
Notes
Chapter 14: Productivity
Classic Productivity Definitions
Services Productivity
Services Productivity and Information Technology
Information Technology and Unemployment
Looking Ahead
Notes
Section III: Business Model Disruption
Chapter 15: Business Model Overview
Definition
Changing Minds, Changing Models
Disruptive Innovation
Disruptive Innovation as Paradigm Shift
Looking Ahead
Notes
Chapter 16: Data and Communications
Evolution of the Incumbent Business Model, 1877–1996
Business Model Disruption, 1996–2010
Implications of “Stupid” Networks
Looking Ahead
Notes
Chapter 17: Software Business Models
Incumbent Model Pre-2000
Business Model Disruption after 1998
Looking Ahead
Notes
Chapter 18: Music Business Models
Incumbent Model Pre-2000
Business Model Disruption Pre-Napster
Business Model Disruption Post-Napster
Looking Ahead
Notes
Chapter 19: News
Incumbent Formula Pre-2005
Business Model Disruption
Looking Ahead
Notes
Chapter 20: Healthcare
Definitions
Healthcare as Car Repair for People?
Following the Money
Where Information Technology Can and Cannot Help
Disruptive Innovation
Looking Ahead
Notes
Chapter 21: Two Disruptions that Weren’t
Retail
Real Estate
Notes
Section IV: Technology Landscapes
Chapter 22: Code
Intangibility
Fungibility
Code Embeds Value Judgments
Metadata
Social Metadata
Looking Ahead
Notes
Chapter 23: Sensors
Historical Roots
Ubiquity
Current Examples
Phones as Sensors
Looking Ahead
Notes
Chapter 24: The Internet and Other Networks
Legacy Telecom Network Principles
Defense Origins of the Internet
Internet Principles
Consequences of Internet Principles
Looking Ahead
Notes
Chapter 25: Location Awareness
Variations on a Theme
Landmarks
Location, Mobility, and Identity
Looking Ahead
Notes
Chapter 26: Clouds
Both Technical and Economic Innovation
Cloud Computing and the Enterprise
The Cloud Will Change How Resources Are Organized
Practical Considerations
Looking Ahead
Notes
Chapter 27: Wireless
Precedents
The Breakthrough
Looking Ahead
Notes
Chapter 28: Search
Why Search Matters: Context
The Wide Reach of Search
Valuing Search
Looking Ahead
Notes
Chapter 29: Analytics
Why Now?
Practical Considerations: Why Analytics Is Still Hard
Looking Ahead
Notes
Chapter 30: Information Visualization
Supply
Demand
Audience
Definition and Purpose
Current State
Looking Ahead
Notes
Section V: Some Big Questions
Chapter 31: Identity and Privacy
Privacy
Scale
Invisibility
Identity
Looking Ahead
Notes
Chapter 32: Communications and Relationships
Connections
Networks
Creation
Looking Ahead
Notes
Chapter 33: Place, Space, and Time
Virtuality
Organizations
Automata
Implications
Looking Ahead
Notes
Chapter 34: Conflict
Warfare between Nation-States
Non-Nation-State Actors
Emerging Offensive Weapons
Looking Ahead
Notes
Chapter 35: Innovation
Amazon
Crowds
Looking Ahead
Notes
Chapter 36: Information, Technology, and Innovation
Macro Issues
Globalization
Strategy
Organizations
Marketing
Supply Chains
The IT Shop
Implications
The Last Word . . .
Notes
About the Author
Index
Copyright © 2012 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002.
Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com.
Library of Congress Cataloging-in-Publication Data
Jordan, John M.
Information, Technology, and Innovation : Resources for Growth in a Connected World / John M. Jordan.
pages cm
Includes index.
ISBN 978-1-118-15578-3 (hardback); ISBN 978-1-118-22598-1 (ebk); ISBN 978-1-118-23930-8 (ebk); 978-1-118-26396-9 (ebk)
1. Technological innovations. 2. Information technology—Management. I. Title.
HD30.2.J673 2012
303.48’3—dc23
2011048573
For Douglas, Phoebe, and Walker
Preface
The Outer Banks of North Carolina is a chain of barrier islands located off the eastern shore of the state. Most famous for the Kitty Hawk dunes where the Wright Brothers first achieved powered flight, the Banks have a long, rich history. The pirate Edward “Blackbeard” Teach sailed out of Ocracoke Island, while the treacherous waters offshore have claimed dozens of ships over the centuries. In World War II, German submarines sunk merchant vessels there; divers recovered an Enigma decoder machine from one such German submarine in 1981. Merchant hunters once used massive shotgun-like weapons to down hundreds of duck and geese in a single outing on the 30-mile wide Pamlico Sound.
For hundreds of years, the Banks were remote and hard to get to; this quality, along with the wind and sand, was part of the appeal to the Wrights. The 1960s saw the beginning of a period of rapid growth and discovery by the outside world. Bridges and causeways replaced some of the ferries, world-record marlin were caught by Hatteras Island charter captains, and the rapid growth of such southeastern cities as Atlanta, Raleigh-Durham, Charlotte, and the Washington, DC area helped drive a rapid increase in tourism. Finally, the rise in such adventure sports as surfing, windsurfing, and kiteboarding coincided with the area’s unique combination of wind and waves to draw international attention to the area. For all the snowboarder-like attitude, however, fishing—on the sound in a skiff, in the Gulf Stream from a 50-foot “battle wagon,” or off the beach—was and remains a massive draw to the area.
Despite the modernization, the islands remain prone to hurricane damage. The fragile barrier islands are continually shifting and extreme storms can breach the thin islands. While the sunshine and miles of white sand beaches, many of them protected from development as part of a national seashore, exert their pull toward escape and relaxation, locals keep a close eye on the weather. Evacuation routes are clearly marked and frequently used. After one hurricane, renters were given flyers asking them to be patient with storekeepers and restaurant waitstaff insofar as some of them had just lost their homes.
The Outer Banks is clearly a unique locale, a barrier island ecosystem with a rich history. Inspired by the Foxfire experiment in oral history begun by a Georgia English teacher in the 1960s, the local high school interviewed longtime residents for an excellent series of recollections. As recently as the 1990s, weather information was displayed in block letters, much like old IBM text-based PCs, on local cable television. Wireline telephone coverage was spotty: some calling cards worked better than others. The New York Times, Sunday or otherwise, was impossible to obtain. Renting a house involved a mimeographed list of options and a toll-free telephone call to a property management firm. Being removed from the rat race was part of the Banks’ appeal.
The rapid growth of the Sun Belt, combined with the real estate bubble of 1995 to 2008, encouraged building and more building. Houses grew bigger. Pools became the norm, even for oceanfront houses. Real estate firms multiplied, and moved from mimeograph to black-and-white offset printing to thick, slick full-color catalogs. The Washington Post and Sunday New York Times infiltrated the islands, as did upscale restaurants. Cell phone service improved; high-speed Internet access became a routine feature of the rental properties.
As of 2011, the Outer Banks feels less isolated than ever before. Some property managers have dispensed with paper catalogs altogether, moving instead to online guides that feature Google Earth aerial imagery, video walk-throughs of the properties, and extensive photo galleries. The New York Times, the BBC, and Al Jazeera are all equally and easily available. Weather channels and resources have proliferated.
Cell phone coverage can extend up to 20 miles offshore. It’s great for the fishing guides but just as useful for making the BlackBerry work. Wi-Fi in many rental houses makes tuning out an act of will rather than a default state of affairs. Anonymity becomes less common: A colleague of ours was on the same island as we were on a recent visit, a fact we discovered through Facebook. His page even told us what music he listened to while there.
Local retailers of everything from books to kiteboard gear to fishing tackle now ship worldwide from online storefronts. Fishing guides and restaurateurs look to Match.com for a social life, claiming that “It’s hard to develop a relationship with people who are only here a week at a time.” Political organizers have turned to the Web as court decisions to protect nesting birds and sea turtles have restricted beach access for fishing and other recreation. One of the main bridges connecting the islands is in need of substantial repairs, and there are online petitions and other resources devoted to that cause as well.
Relentless improvements in electronic connection have brought many changes to life on these islands. Personal safety during extreme weather, health care, and retail selection, particularly in the off season, have increased by a sizable extent. At the same time, the Outer Banks is no longer unique: In a highly connected world, anyplace can to a degree become everyplace. Getting CNN, and Twitter, and e-mail just as easily in an island paradise as in an airport Hilton also has consequences.
This book attempts to explore the intersection of our connecting technologies and our institutions, and the changes that come to business as a result. For a variety of reasons—not all of them related to the Internet—making a living, finding a partner, and other essential, defining pursuits are changing. Just as with life on the Banks, the changes are happening fast, but often invisibly, particularly for the young. The book began as an undergraduate class on global information technology strategy, an exercise in looking closely at the ways in which information and technology alter the business landscape. My objective is neither to be a cheerleader for IT nor to lament the lost glories of years gone by. Rather, I hope to identify both the imperative and the resources for still-deeper innovation as we extend the impact of the information revolution to more strata of society, more areas of the globe, and ultimately more workers.
This book’s argument has five phases. First, some basic facts about technology, management, and economics are examined to set some context. The second section is concerned with how humans organize resources and do work in the changing landscape. Business model disruption and innovation is the focus of seven case studies in Section III. A number of particular technologies that can serve as innovation resources—building blocks, as it were—are discussed in Section IV. Finally, the last section sketches out five broad areas of rapid change in the foreseeable future.
Acknowledgments
Many people have contributed to this book with extraordinary intellectual generosity. It is a pleasure to thank as many of them as I can recall. To anyone I left out, my apologies.
Stu Abraham, Lawrence Baxter, Gary Bolles, Brian Geffert, Raghu Garud, Heather Jordan, Tom McGlaughlin, Dave Robertson, and Don Shemanski each read sections of the book and made helpful suggestions. My students, both current and former, have provided assistance with suggestions, corrections, and fresh insights: in particular, to Chao He, Amanda Hahnel, Jamie Joung, Terrence Kim, Tushar Shanker (who did wonderful work on the graphs), and Mike Waldhier, my sincere appreciation. In the heavy lifting department, Lee Erickson, Dave Hall, John Parkinson, Jamie Taylor, and Richard Weddle made substantial suggestions and/or edits after reading one or more versions of the complete manuscript. Each of you made this project better; where it has flaws, those are mine.
At John Wiley, Tim Burgard got a green light for the project and handed me off to the capable team of Stacey Rivera, Natasha Andrews-Noel and Helen Cho who made the production process feel smooth and positive.
Financial support came from the Smeal College of Business at Penn State, with thanks to my department chair, Gene Tyworth, and to Arvind Rangaswamy, our senior associate dean. Thanks also go to the College of Information Sciences and Technology, also at Penn State, for financial support granted by Dean David Hall.
SECTION I
Foundations
For all the breadth of today’s technology and business landscape, a surprisingly small number of general principles underlie many patterns of behavior. These principles, however, derive from several areas of the social and behavioral sciences that are usually considered in parallel rather than jointly. At base, the paradox of information technology lies in how much more potential remains to be explored, particularly in the economic realm.