Chapter 6

Exploring the weird

 

Looking beyond what exists already

It is easy to see how confusing and incomprehensible the environment of the Internet can be for newcomers to the world of e-business, but, it is not generally appreciated how even people experienced in communication technology can be equally confused and overwhelmed by the magnitude and lack of stability of the knowledge base. There is too much to know and everything is constantly changing. This view point has been endorsed over and over again in the many different areas of e-business that I've explored.

An even bigger problem is that most people approach the e-business environment with the idea that they should adapt this technology to what they know already. They hate the idea that this is a new environment where they have to forget the past and start from scratch. They seldom accept that this represents a totally new experience where they have to look for opportunities which currently doesn't exist. This is probably why so many young people succeed in this environment: they are not handicapped with attitudes and conceptual frameworks that they have inherited from the pre Information Age.

At the start of writing this trilogy, even though I'd been involved in the industry for many years, I certainly didn't understand or even know about all the complexities involved in e-business technology. However, I did have enough sense to realise I didn't know everything and, more importantly, that I couldn't even hope to be able to learn it all. This left me with the choice of choosing a narrow area of specialty where I could have complete and authoritative knowledge of specifics, or, working at a higher level of system organisation where I'd need a firm grasp of the general.

My preference was to look at the general rather than the particular. After all, this had been my preference over many years as an entrepreneur. However, I'd spent the previous few years in the world of the specialists – specialising in multimedia programming – and I knew that most of the more successful businesses coming out of the information environment were based upon exploiting and developing niche areas of technology.

This state of affairs represented a paradox because although niche technical specialists might have to use strategies to become successful in their chosen areas, they were fundamentally tacticians whose activities are ordered up by strategists working at a higher level of organisation – the business level. In this way, these technical niche specialists are at the same level of system organisation as store keepers, who supply picks and shovels to gold-miners: reliant upon the exploration and initiatives of others.

For this system of dependency to be maintained, there has to be profitable outcomes for at least some of the explorers and initiators, otherwise the whole system breaks down. This is the area I personally find most interesting – at the business level: finding the gold not providing the picks and shovels

To work at the business level, it is necessary to use conceptual models rather than hard facts. However, the problem with e-business is that the field is so new and so changeable that no generally accepted conceptual models have yet emerged. Conventional conceptual models used for businesses in the pre Internet, industrial world don't seem to apply in the environment of mass connectivity.

For me, this meant starting from basics: using the fundamental building blocks of business and applying them in new ways. Firstly, in "The Entrepreneurial Web", creating an abstract framework to think about e-business. Secondly, in "The Ultimate Game of Strategy" to create conceptual tools.

Many readers of the chapters in these two books were impatient with this approach because it wasn't dealing with what they were really interested in, which was to be able to get started straight away to create practical, real life, e-business ventures. They saw my approach as too theoretical and scholarly, with little relevance to what was happening in the real and practical world of e-business.

They did seem to have a good point at the time because those first two books were written at the time of the dot-com bubble, when many people were making fortunes without bothering to take into account any of the more esoteric aspects of the new communication environment. People were just plunging in, with traditional, Industrial Age concepts, and making lots of money.

However, the bursting of the dot-com bubble justified the time I'd spent considering the more theoretical implications of the new information environment. Those who had plunged in during those early days – trading on other people's ignorance and misconceptions – were stopped dead in their tracks and left wondering where to go next. On the other hand, I was armed with many useful conceptual tools that allowed me to look beyond the day to day activity towards a more pragmatic future of the e-business environment.

Perhaps the most significant effect this theorising had on my thinking was to see e-businesses quite differently from the way businesses had been viewed in the past. Instead of seeing e-businesses in terms of structured forms, fixed physical locations, managed organisation and definable assets, I began to see e-businesses as more nebulous entities: as functions within a rapidly changing, universal dynamic system.

From this perspective, it becomes apparent that the most likely route to creating any successful e-businesses wouldn't be about adapting the new technology to established business solutions, but, to use the communication environment to produce solutions that have no parallel in the everyday world of bricks and mortar. This means using the imagination to explore not the businesses that are already in existence today, but, to look for opportunities that might emerge from the more bizarre and unusual properties of the Internet environment

This chapter is about seeing e-business in this light. We are not going to look at conventional business practices and investigate how we can put them on the Web, we are going to explore the unusual and the weird, looking for a breakthrough that might lead us to discover a completely new approach to solving problems.

Instead of looking to these old world business solutions for inspiration we are going to use a green frog approach and start from scratch, seeing e-business as a function of indefinite form in a system space. It is only by looking at e-businesses in this abstract way that it will be possible to create a viable e-business that is likely to survive and prosper in such a fast changing, competitive world.

 

Visualising activity within a space

The idea of a system space is not easy to visualise. It is even more difficult to visualise a function within a system space, especially when it is a dynamic system that is constantly evolving. To understand this way of thinking, you might consider a game of football. Normally, it would be considered as a game played between two opposing teams on a football pitch.

A different way to look at this is to think of the pitch as a space that contains football players: a football space. The football would travel around in this space passing from one player to another. Patterns of play would be observed that involve cooperative movements of players in the football space, which influence the movement of the ball in one direction or another. Players move around in this space, changing their positions and relationships to each other. The coach can alter the patterns of play in this football space by substituting players, or, by changing the relationships between the players.

Imagine now that on this football pitch (in this football space) four games are being played simultaneously. There would be eight teams of players and four footballs in the same football space. Imagine the confusion that might be caused; it would be chaos.

Now, imagine you are a coach for one of these teams; wouldn't it make sense to talk to one or more of the other coaches to get your respective teams to cooperate and help each other rather than get in each other's way? With such arrangements being made, it wouldn't be long before other similar arrangements were being made between other coaches. Teams would form strategic alliances and structure their play so as to maximise their ability to assist each other in winning their respective games.

In this situation, it wouldn't be appropriate to think in terms of teams playing on a football pitch, it would be preferable to change the conceptual model and think of players in a playing space that could realise all kinds of innovative patterns of play. It is just this kind of paradigm shift that is needed when transferring from traditional bricks and mortar business thinking to e-business thinking.

 

An individual within an information space

In chapter two, we saw how the metamorphose of an individual into a super individual is brought about by an individual building up an appropriate group of close contacts and establishing links into various communities – becoming the centre of a network of on-demand information sources.

This can be viewed as an individual being a node in a vast system of information transference – a point in an information space. This is illustrated in figure 6.1 (Note: this is identical to figure 4.2, but, we are looking at it with an emphasis on the characteristics of the space rather than the individuals).

Figure 6. 1

Individuals in an information space, where information flows around the space through individual nodes communicating with surrounding contact nodes

In the book, "The Ultimate Game of Strategy", it was explained how individuals could enhance the efficiency by which they could acquire information by using the Internet to reach out across the information space to acquire information that was not available from their immediate physical surroundings. This is illustrated in figure 6.2.

Figure 6.2

An individual can greatly enhance their knowledge by using the Internet to reach across the information space to gather information from anywhere on the planet

This second book in the trilogy, also described how the ease and speed of communicating with many contacts in so many different areas can easily lead to an information overload. It described how it would be essential to be able to limit the quantity and control the quality of the available information.

To maximise the efficiency of obtaining information over a wide area, it was proposed that relationships with contacts should be set up so that information is exchanged only on a "need to know" basis and that contacts should be carefully chosen and selected for their appropriateness to current situations in hand.

It was proposed that the most effective way of doing this would be to limit the number of contacts, and arrange that these contacts are changed at frequent intervals according to how useful they are in current situations. This would see the diagram illustrated in figure 6.2 as a snap shot at a particular moment in time of an individual's contacts in information space – when the contacts shown would be appropriate to a given situation at that particular moment in time.

As soon as this particular individual's situation changed, it would be strategically more efficient for the individual to form different links with other contacts in different parts of information space. Seen in this way, information space would be seen as a constantly changing dynamic environment where the communication links between individuals are constantly changing as they each respond to the current demands of their local situations. Figure 6.3 illustrates the way in which some contacts might be replaced by others in the information space as a project or situation goes into a different stage.

Figure 6.3

As a project or situation changes direction, some contacts are dropped to be replaced by others in the information space

Such changes in contacts would be a necessary continuous activity for all individuals in the Internet information space, as everyone pursues different goals in the face of changing technology and fast reacting competition. In the far slower and more predictable world of bricks and mortar, the changing and casting off of contacts would be seen as neither practical nor ethical, but, in the mass connectivity of the world of e-business, establishing, dropping and reestablishing contact with people is so obviously sensible that it is regarded as normal behaviour.

 

The virtual cafe

The practical advantages of being able to rapidly change and replace contacts in the information space of the Internet has been adequately covered in the first two books in this trilogy. In "The Entrepreneurial Web", this was seen in terms of an abstract concept known as Hilbert's space. In "The Ultimate Game of Strategy" a conceptual tool was described – the virtual cafe (also described in chapter one of this book) – that can be employed to use information space more efficiently.

The virtual cafe is a method by which people can optimise a strategy of creating and maintaining a constantly varying contact base. The population of an individual's cafe of contacts is constantly reviewed and reconfigured at frequent intervals in order for the total information available to an individual to continuously evolve and according to their current aims and interests.

Using the metaphor of a cafe, it is possible to supercharge the relationship of an individual with their contacts by arranging for the contacts to virtually socialise with each other and so cross fertilise ideas. This involves bringing specific groups of contacts together in mini e-mail discussion forums of short duration. The metaphor being that these are the equivalent of short discussions at a table in a cafe where selected contacts are invited (or paid) to take part.

It is easy to see how an individual working with an evolving virtual cafe of contacts and at the same time belonging to a number of e-mail forums can access to a wide variety of information and ideas on demand. It is this ability of an individual to use information space intelligently that can transform the individual into a super individual.

The trick now is to employ this same intelligent use of information space to create a superior Web presence.

 

Web presence as a system

A virtual cafe, centred on an individual, can be thought of as a system of interacting components (people) that change and reconfigure as the system (cafe) responds to the needs of that central individual. Such a system cannot be planned, it has to be grown in order for it to adapt and evolve.

In trying to use a similar approach to building a Web site identity, the question becomes, "Where do you start?" The answer has to be "With a green frog". The solution has to emerge without preconceptions and free of any stereotyped ideas.

In the last chapter, the green frog approach got as far as creating a Web name. But, when it came to going on from there – to give the name and address a purpose and functions – there appeared to be a confusion of technology. By asking around, to see how other people are faring in their efforts to create Web identities, the way seemed fraught with pitfalls and knowledge gaps.

It would seem that many owners of Web sites, their advisors and technicians are not really understanding what they were doing. They are following the lead of each other in a blind attempt to get involved in what they conceive as a potentially beneficial business environment. They follow the latest trends and fashion: from novelty to content, from content to eyeballs and click throughs. It is like a treasure hunt where the clues are in the form of the latest buzz words.

Vast sums have been spent on sites that attract mainly other Web site designers who are eagerly searching each other's sites looking for new ideas. The mystery isn't that some people are getting it wrong: it it is that most people were getting it wrong. It seems incredible that so many Web sites are bleeding the core businesses dry while contributing very little, if anything, to the bottom line.

At the time of writing this chapter, an Internet statistics report was published by Pegasus Research International, who had analysed the current burn rate (rate at which companies are spending their capital base) of 339 prominent Internet companies. Out of those 339, eighty percent of them were found to have a negative cash flow and between them they were burning up cash at the rate of nearly two billion dollars every three months. Analysis of the cash flow projections of these companies showed that at least a third of them would probably run out of cash within a year.

The alarming reality is that this was not an analysis of the progress of amateur hopefuls and hastily formed startup companies: it was a report on most of the leading Internet companies of the day. These companies were large and had passed through the traditional avenues of funding where there were safeguards and gateways that were designed to filter out all but the most promising prospects. The inference is that each of these companies must have received their funding after careful screening, after submitting detailed business plans and providing convincing evidence of strong, sound and capable management.

This report then is clear evidence that there is no reliable screening process available. People do not know what elements make up a successful Internet company. All the report shows is that the current method of assessment – a seemingly sound business plan, accompanied by strong management – is not only fallible, but, has a very high chance of failure.

Given this high failure rate, of companies using the conventional and traditional benchmarks for predicting success, we need to find another way: a way that avoids the possibility of cash burn out before reaching viability. This will almost certainly involve using a strategy that spreads risk and would have to include the ability to rapidly change direction at any time and be able to quickly eliminate any parts of the business that are haemorrhaging cash.

In the first book of this trilogy, "The Entrepreneurial Web", it was suggested that the best approach to e-business would be to create a system consisting of many small components that interacted with each other. This approach is modeled upon OOPS (object oriented programming systems) used to design highly complex software programs.

It was further suggested that instead of being concerned with the detailed technology of individual system components, attention should be paid only to their functions and the human designers of the components. In this way, a system could be controlled and engineered through interaction with people rather than the underlying technology. Then, all that any system architect would need to be concerned with would be the observable functioning of the components and the messages that are needed to be sent to them to get them to perform.

This makes sense because it would allow fundamental business considerations to become dominant and prevent decision making becoming clouded over with technological issues. Components could be judged only on the basis of whether or not they functioned efficiently. If they do: fine. If not: out of the door, next case.

Such a strategy, when applied to the design of a Web presence, would see a Web site and all its functions being broken up into many separate components with each component being under the responsibility of a specific, named and identified designer (see figure 6.4).

 

Figure 6.4

A complex Web site – a Web presence– can be built up a component at a time, with each component being designed by a different designer

Viewed in this way, the design of a Web site, can be seen as a process of communication between people rather than a matter of high technology. This will allow the cafe concept to be used, to arrange the addition of components suitably appropriate for the evolving system. Figure 6.5 illustrates this arrangement with the auteur (the architect of the Web presence for the core business) shown as the cafe owner, dealing with the principal designers of a ten component, Web presence system..

Figure 6.5

A virtual cafe used as the communication framework for the running of a system to provide a Web presence that adapts and evolves

By using the virtual cafe as a conceptual device for organising emails, an auteur, as a system architect, can localise discussions concerning the overall requirements of the Web presence. Individual components and their functions can be discussed with their designers and the auteur can bring designers together when necessary (at virtual table discussions), to discuss interactions and messaging between components.

Such discussions have no need to be very technical. Technical aspects (and more importantly, technical terms and vocabulary) are best confined to the separate worlds of the component designers. The auteur, or architect of a Web presence, will have enough concerns and matters to attend to without needing to learn the technicalities of several totally foreign worlds. All they need is to have their Web presence capable of performing certain functions efficiently. The details, of how this might be done, should be the concern only of the technical designers of the components: not the auteur or architect of the full system.

Note: This idea of an organising level not being concerned with the internal workings of any component at a lower level of the system is one of the principle tenets of object oriented design. Interaction is confined strictly to message passing - which triggers appropriate functional responses to the messages.

System components can easily be added or removed, simply by changing communication links to by-pass or replace them. Similarly, component designers can be included or excluded by including or removing them from the cafe. The cafe can also be used to communicate in all kinds of ways with various advisors, consultants and other useful contacts. These can also be brought in and taken out of the cafe as needs arise or results dictate.

In this way, a Web presence can easily be manipulated and tweaked, so that it adapts and evolves quickly enough to cope with fast changing technology, customer preferences and competitive initiatives. Simply by adding or replacing components, or changing the population of the cafe, an auteur will have full control of the system – ensuring that it performs efficiently to fulfill the fundamental requirements of the core business.

A complete system – a core business, a collaborative group with a common identity or a single individual – interfacing with a Web audience though a Web site, is outlined in figure 6.6.

 

Figure 6.6

The total system consisting of a core business with an interface to a Web audience. The interface is a Web identity that is made up from components that are organised from within the environment of a virtual cafe

 

The magic of a virtual world

Without any knowledge of the way in which the Internet works, it might be assumed that all the components that make up a Web presence would have to be based around a single server: namely, the computer that hosts the domain name of the core business. However, the statelessness of the Internet data packets means that is doesn't matter where the components of a Web presence are located on the Web. Each separate component can be on a different computer and these computers can be spread all over the planet and each use different servers. It is only the client that needs to view them all in the same place.

It has to be remembered that Web sites (and total Web presences) are assembled as a complete whole by a viewer's browser on the client side. It is only in a client's RAM space that complete Web sites exist in their viewable forms.

(Note: Web sites are just a number of computer files on the server side, with absolutely no connection between them. Connections are only provided by a browser on the client side when it reads the instructions embedded in the files that are downloaded onto a client machine).

Providing the correct hypertext links are in place, it doesn't matter where the components reside. As far as the audience is concerned these files are viewed as a single seamless Web presence. Any geographic separations are transparent and the viewer isn't even aware they exist. Such an arrangement is illustrated in figure 6.7

(Note: Although in theory it doesn't make any difference where any component of a Web presence is located, routing and traffic congestion can greatly affect the arrival times at a client location. This is a design consideration that would have to be taken into account by a component designer to make sure the server chosen to host a component has adequate bandwidth, suitable load balancing facilities and a direct connection to the Internet backbone.)

Figure 6.7

A Web site can consist of many components, each located on different computers in different parts of the world. As far as the audience sees them, they are all part of a single Web presence as if they were located on a single server.

 

How odd this must seem to the mind set of a business executive from the bricks and mortar world of the last century. A web presence that is spread over a number of different computers that might be anywhere in the world? It would seem an incredulous state of affairs; a perverse use of the medium, introducing unnecessary complication where all kinds of things could go wrong. There would seem to be no way to control the system: it would appear to be a manager's nightmare.

It may well be a manager's nightmare, but, managers have no place in object oriented systems. It is through all the components being separated out that provides the necessary framework to allow the system to be easily controllable, more adaptable and capable of complex evolutionary growth. Components are not managed, they are simply judged on their performance. If they do their job they stay in, if they don't they are thrown out and replaced.

There is simply no time for a system architect to get involved with anything that goes wrong with a component. The similarity is with the servicing of a modern television set when it develops a fault. The service engineer doesn't spend hours working through all the circuitry to find the problem, it is far more efficient to just locate the fault to a single module and then replace that whole module. In this way, television service engineers don't have to know anything at all about electronic engineering: all they need to know is how to associate any problem with a particular module of the system.

 

Modules can have a life of their own

It is easy to visualise how a television set can consist of different plug-in modules and how the modules can easily be replaced when something goes wrong. It is not too much of a step further to imagine each module being made by a different supplier – and all brought together for a final assembly.

Take this one stage further. Imagine a new company inventing an improved version of one of a television set's modules. This improved module could replace the inferior module – improving the overall performance of the television set. If this kept happening over and over again, with new and improved modules being developed, the performance of the television set would continuously improve with every module change.

It could be that an improvement in a module would be made by the company already supplying that module. At other times a new company might come along, with an innovative design and so become the new supplier of that module – replacing the previous supplier.

Imagine now a situation where the technology was constantly changing and there were continuous opportunities for modules to be improved. Imagine keen competition between several television set manufacturers. Wouldn't this create a pressure for more and more improvements in modular designs as each manufacturer strives to get ahead of the others?

Into this scenario, imagine a progressive company developing a new kind of module that could significantly enhance the picture quality of television sets. Wouldn't all the television set manufacturing companies have to include that module in their design? Wouldn't this make the module supplier independent of the television set manufacturers: able to set up a specialist niche?

Imagine this happening over all aspects of a television set, with various module design companies coming up with all kinds of different innovations and improved designs. Would the television set manufacture need to get involved in any of the detail that went on inside any of the modules? Couldn't the manufacturers save themselves the cost of employing designers and engineers and the costs of all the development and testing? Would they need to get involved with the design at all?

Surely, the core product producers would end up as mangers of a system of modules that was evolving autonomously? Their function would be to test the modules and gauge customer reactions. Instead of being designers involved in the technology of television manufacture, the television set manufacturers would become customer relations experts, providing the feedback that influences the way in which the system of modules evolves.

It doesn't happen this way with televisions because there aren't many television set manufacturers and the technology is changing relatively slowly. But, what if there were as many television set manufacturers as there are Web sites? What if the technology involved in television sets changed as much as the technology changed on the Web? Wouldn't this breed hosts of module design companies who would be in keen competition with each other to produce new and improved modules?

The trick now is to see a virtual Web presence in this same way. It too can consist of modules made by different developers. These Web presence modules can be improved or replaced by a multitude of different developers and in this way allow Web presence systems to evolve and adapt quickly to a fast changing, competitive environment. It is this situation we are in now and it is a fertile landscape in which to create viable e-businesses either as system designers or component developers.

 

A bottom up approach to design

Looking at figures 6.4 and 6.7, it would seem to be illustrating a complete Web presence solution that has been broken up into different sections to create the components. This process is known as decomposition and is associated with top down approaches to object oriented design.

The idea of a top down design approach is that you carefully plan out what you want to achieve and the way you are going to go about getting the desired results. Costs and time scales are entered into his plan to produce a model that is then used to monitor and control the progress of the construction. By splitting the project up into different components – object oriented design (OOD) – different parts can be given to different specialist teams so that they can work simultaneously on the same large project without getting in each others way or conflicting with each other's designs.

This top down approach to object oriented design is used by most large companies and major contractors because it facilitates efficient organisation and control as well as meeting the requirements of most traditional funding or investment bodies.

Most people's idea of object oriented design doesn't extend beyond this top down approach: with its decomposition of a master plan into components. Unfortunately, a top down approach is totally unsuited to the volatile environment of the Internet environment because rapidly evolving technology and fast competitive reactions often cause master plans to be out of date even before they are finalised and approved.

The only realistic way to work in such a volatile environment as e-business is to use object oriented design techniques with a bottom up approach. With this approach there is no master plan; solutions are grown, one component at a time. Each component is integrated sequentially into an expanding whole: added separately to a dynamic design that is constantly adapting and evolving.

To the business mind set of the Industrial Age, such an approach is unthinkable because without a master plan such a system would seem to be disorganised and liable to spin out of control. Yet, in the volatile and unpredictable environment of e-business, the reverse is true. It is the master plan that is liable to rapidly become unstable and the gradually evolving system that is most easily controllable.

This state of affairs throws many conventional business into total disarray. This is typified by the following post that was sent in by one of the readers in the virtual cafe after reading the last chapter:

I am head of marketing for a fast growing young company that trains business people in the management, marketing and strategy issues of the InternetŠ

I've just finished reading chapter 5 of Web Presence. It's fascinating for me, as it is moving so close to problems and issues I come across every day. Previously, my attempts to interest my work colleagues in the ideas contained in The Entrepreneurial Web - which I was very excited by - were hampered by the perception that you were engaging with problems at a very conceptual level, and the company prides itself on providing help and advice of a very practical 'real-work' kind.

My own limited experience of managing an e-business project - when I was put in charge of project managing a piece of development on our own Web site - has shown me how completely on-the-money your views are about the efficacy of managed teams and forward planning. The team kept asking me for my vision of what the finished site overhaul would look like, and I kept refusing to provide it.

I told them that any vision we had now would be completely out of date in 3 week time, and that instead we were going to evolve the site from where it was at that point towards something we would all feel was a site we wanted to use.

When I started talking about green frogs they looked at me as if I were mad. However, despite serious doubts being cast on my sanity, I succeeded through this method in opening our membership area and getting the site - which contains some 1000 pages - more or less completely up to date for the first time in a year.

My successor in the hot seat has adopted a more traditional approach. He currently faces familiar problems of overruns, loss of key members of his team and the consequent non appearance of deliverables within the original timeframe.

This post illustrates a dilemma common to many people at the cutting edge of e-business solutions. Their professional position forces them to hold conventional views, but, their personal experiences tell them that these ways aren't working. It's a catch-22 situation: if you propose or advise a strategy that is unacceptable you lose credibility – yet, if you propose or advise on a strategy that is acceptable you know it won't work.

The only way around this impasse is to go back to basics: go though the steps of conventional decision making processes to see where they might be going wrong. Isolating e-business problems in this way. Not only might find solutions but also lead to discovering unexpected e-business opportunities.

 

Object oriented, e-business solutions using FSPs.

A phenomenon that has emerged in the Information age is the FSP (function service provider). This is effectively a virtual employee, who performs a specialty function for a company based upon some specialty knowledge or expertise in a particular software application. Although these FSPs will be owned and run by people outside of the company, they will perform in much the same way as a regular employee working in house: fulfilling particular essential roles. The difference being that they will be responsible for purchasing, running and maintaining any software or hardware they use.

These FSPs (function service providers) are evolving out of ASPs (applications service providers) to provide a variety of niche service functions. The services are usually provided on the basis of low rental, short time commitment SLAs (Service Level Agreements). This enables auteurs and entrepreneurs to construct low cost, highly complex businesses – simply by piecing together the ready made modules in the same way that a child might build a structure with Lego set components. This is illustrated in figure 6.8.

 

Figure 6.8

Complex e-businesses can be constructed from ready made FSP modules

As FSP services are provided on a one to many basis, the monthly rental costs charged to individual clients will be far less than clients could provide the same service for themselves in house. Also, the fact that the SLA allow short term commitments means that modules can be changed very quickly and at virtually no capital cost.

 

Low cost flexibility

Industrial Age business strategists also build businesses in a modular way, but, they are very different from the modular structures possible in the Information age. Modular functionality will be added by treating the new modules as projects and appointing managed teams to develop the functions.

The conventional Industrial Age sequence of events would be:

1) plan the construction of the function,

2) submit those plans to a funding authority

and, if the funding is agreed:

3) appoint a team and a team leader

4) build and test the new modular extension to the business.

In the environment of the Information Age, there is seldom a need to custom build a modular function. Almost invariably, somewhere on the Internet, there will be somebody providing a suitable service to carry out any particular function needed. Therefore, the Information Age strategist will not have to plan a design, spend capital to build the function or take time to test it - they will simply select a ready functioning service and start using it straight away.

If Industrial Age strategists find a functional module unsuitable, or becoming redundant, they will have to write off the capital investment. For the Information Age specialist there will be no capital investment to write off – they simply cancel the renting of any functional service if it proves unsuitable or becomes redundant.

The cost of continually adapting a business to a fast changing competitive environment might require many sequences of modular replacements. For the Industrial Age strategist this will involve innumerable delays and capital costs. For the Information Age strategist, adapting the business to change is simply a matter of exchanging functional services – instantaneous changes, involving no capital costs.

Renting functional services, instead of custom designing them, also changes the nature of the funding requirements for business expansions. With Industrial Age strategies, large sums of capital have to be allocated to allow a company to expand. But, with an Information Age strategy, expansion is arranged simply by increasing the total amount of the outgoing service agreement rentals to cover the rentals for any new modules needed for the expansion.

The ability to expand and contract a business easily and cheaply is vital in the e-business environment. New technological developments, competitive initiatives, rapidly changing trends and fashions can leave a business high and dry almost overnight. A business needs to be able to survive these periods without extensive financial loss or having to suffer debilitating cash hemorrhaging with the burn rate eroding the capital base.

This marks the difference between Industrial Age and Information Age businesses: one is designed for stability in a stable environment, the other is designed for adaptability and survival in a chaotic and unpredictable environment.

 

 

### End of chapter 6 ###

Back to index Note: This book lead to the creation of the stigmergicsystems.com website

Copyright 2001 - Peter Small

Peter Small

All rights reserved by Pearson Education (Longman, Addison-Wesley,Prentice Hall, Financial Times for FT.COM imprint