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April 22, 2006
Eli Noam on the MacLuhanization of the Business Firm
Eli Noam of Columbia University spoke about the evolution of the business firm, from the pre-industrial era to today's networked world.
Suppose we get access to all of this information - what then? What's the impact going to be? Access will lower the price and supply will go up, so it could lead to more information production.
Business info grows at 12 percent a year, scientific information at six percent. It used to take more than 30 years for one million scientific articles to be published; now it's more like a year and a half. One typical reader can absorb about 44 bits per second when reading. Teams of four participants have lower productivity rate than one person - the committee phenomenon.
Business firms are command and control types of organizations; they exist to reduce transaction cost. The higher the costs, the greater the realm of firms and the less likelihood of competition.
Firms are structured around their most important processing tool at a given time. The earliest stage - pre-industrial - firms were basically modeled after people - families, dynastic relationships. Industry brought a new view of the firm - the machine. Firms tasks were made like a well-oiled machine, with each part having a specific task to contribute to the whole, with limited information flow.
In the 1950s, the classic business firm model was the computer - more specifically, the mainframe. Simple, rigid, centralized information, greater monitoring from a distance, hierarchical. But they didn't endure. In the 1980s, microcomputers and networks changed everything. Firms reorganized themselves to take advantage of new tools and information flow. The networked firm.
Where will the next generation of technology take the business firm? Tools like mesh networking and ubiquitous wireless, ultra broadband, sensor networks, software agents, nanopayment systems and the like. Machine to machine communications will increase, leading to greater automation of transactions, self structured and self controlling, with low oversight.
We should expect a shrinking of the realm of the firm and the increase in the market environment in which they operate. A decomposition of large firms - and large NGOs and universities too. This reaches the fifth stage - a transactional model of organization. Smaller, self-organizing bodies, moved from the inside of a large organization to the outside.
Organizational activities not only improve from information, it gets defined by its information - very much like what Marshall MacLuhan said. The media is the message, and the information is the organization.
Posted by acarvin at April 22, 2006 11:03 AM
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