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Social Responsibility in the Information Age: Societal Challenges GP Dhillon, PhD Associate Professor of IS School of Business, VCU
4 Assertions • The current move towards a service economy has its roots in the advances in information and communication technologies • Advances in information and communication technologies have created a borderless world • The emergent organizational form of the future is the infonet organization • The combination of information and communication technology advances, borderless world, emergent organizational forms are facilitating the emergence of corporate dominance relying more on regional cooperation than national affiliation
Assertion 1 • The current move towards a service economy has its roots in the advances in information and communication technologies
Some facts questioning the traditional enterprise logic (1)... • Decreased profitability of large corporations • average net after tax profit rate of American non-financial corporations has declined from a peak of 10% in 1965 (with a somewhat bouncing back between 1982 and 1985) • Fewer jobs • America’s largest 500 industrial companies failed to add a American jobs between 1975 and 1990; there share of civilian labor force dropped from 17% to 10% between 1975 and 1990. • Increased divergence between executives and workers • In 1960 a CEO of America’s 100 largest non financial corporation earned on average $190,000, i.e. 40 times the wage of an average factory worker (after taxes it was only 12 times). By 1990 the CEO earned an average of $2 million - 93 times the wage of his (rarely her) average factory worker (after tax it was 70 times)
Some facts questioning the traditional enterprise logic(2)... • Increased divergence matched by increased inequality • Between 1977 and 1990 the average pretax earnings of the poorest fifth American decreased by 5%. During the same period, the richest fifth became about 9% wealthier - before taxes. Income disparity was greatest between college and high school graduates. • Divergence of earning and places chosen to reside • Until 1970s average incomes of inhabitants of different towns or states was slowly converging, as industry spread outwards to embrace less developed areas of the nation. Since then the trend has been in the opposite direction. • Examples: • Besides the US… • Tokyo and outlying prefectures • Southern England and Midlands • Italy’s affluent north and more primitive south
So what... • Manifestation of the changes have same root cause • The emergence of the global economy and the societies that are being shaped as a consequence • It is now a reality to move money, factories, technology and equipment effortlessly across borders • For the US, the challenge goes far beyond that of being nationally competitive (i.e. protectionism, subsidizing, or extensive support of its corporations) • The challenge facing the US (the same facing every other nation) - is to increase the potential value of what its citizens can add to the global economy, by enhancing their skills and capacities and by improving their means of linking those skills and capacities to the world market. • To a large extent this can be achieved by developing distinctive competencies in using information and communication technologies in an innovative manner - at an individual, organizational and societal levels
Assertion 2 • Advances in information and communication technologies have created a borderless world
Understanding challenges posed by the ‘borderless world’ • Ken Ohame’s 4 I’s • Investment • Industry • Information technology • Individuals
Investment Investment is no longer geographically constrained • Japan, for example, has an equivalent of US $10 trillion stored away (even when the country itself hovers close to bankruptcy) in pension funds and life insurance programs • Today nearly 10% of US pension funds is invested in Asia. Ten years ago, that degree of participation in Asian markets would have been unthinkable
Industry • No longer do governments strike deals with host countries or governments. Multinational corporations move into certain areas (e.g. China and India) because it is attractive to do so. They bring in technology and know-how to do their work (not because they feel obliged to do so). These are their raw material. • US at the same time might look for decent China related opportunities by scouting out possibilities on the Shanghai stock exchange. This needs new skills (as opposed to evaluating GE, IBM or Unilever in the US).
Information technology • IT has made this cross border flow possible • E.g. product designers in Oregon can now control activities of a network of factories throughout Asia-Pacific. • E.g. engineers in Osaka can easily control plant operations in newly exciting parts of China like Dalian.
Individual • Emergence of an informed consumer
Why do we need to be concerned • Loss of traditional competitiveness • between 1969 and 1979 the value of manufactured imports relative to domestic production in the US surged from 14% to 38% • In 1986 for every $100 spent on goods produced in the US, Americans were buying $45 worth of manufactured imports • In 1986, 66% of televisions and radios, 45% of all machine tools, 28% of all automobiles and 25% of all computers were produced outside the US
Move from high volume to high value • Profits derive not from scale and volume, but from continuous discovery of new linkages between solutions and needs - e.g. computer manufacturers are in the service business where emphasis is on customizing software and integrating and installing systems around it - e.g. IBM • Necessary skills: • problem solving - putting things together in unique ways • problem identification - helping customers identify their problems • strategic broker - linking problem solving and problem identification
Assertion 3 • The emergent organizational form of the future is the infonet organization
Strong External Coalition Weak Weak Internal Coalition Strong Organizing logic of the future
The new web of enterprise Strategic broker Combination of unique skills Problem identifier Problem solver
Key characteristics of the enterprise of the future • Speed and agility • Lower overheads - office buildings; plant and equipment; payroll (were necessary in the old enterprise for control and predictability) • Ability to switch directions quickly • Ability to discover new linkages between problems and solutions, wherever they may lie - blessed by information systems acumen, marketing know how and blessed with strategic and financial acumen • Few strategic brokers, problem identifiers and solvers work for high value enterprises - in the sense of salaries and steady jobs. They share the risks and returns
Common types of enterprise webs • Independent profit centers - eliminated middle men and pushes authority to problem solvers and identifiers (e.g. J&J; HP; GE; AT&T; various publishing houses) • Spin-off partnerships - strategic brokers act as venture capitalists and midwives nurturing good ideas and then spinning off (e.g. Xerox; 3M; Hitachi - more than 60 companies, 27 traded publicly) • Spin-in partnership - good ideas emerge from problem identifiers and solvers outside the company. Strategic brokers facilitate in bringing them in (e.g. Sun and Cobalt) • Licensing - the franchise business • Pure brokering - Nike, Compaq, Apple II • Incubators
Questions • Manufacturing vs service • small vs large enterprises
Assertion 4 • The combination of information and communication technology advances, borderless world, emergent organizational forms are facilitating the emergence of corporate dominance relying more on regional cooperation than national affiliation
Emergence of the interlinked economy (ILE) • Traditionally: USA, Europe and Japan have formed a triad. More recently Hong Kong, Korea, Taiwan and Singapore have joined the ILE, while China, Malaysia, and Thailand have also been making their presence felt • Today: • The Kansai area in Japan spanning across the three cities of Osaka, Kobe, and Kyoto. The region in itself represents a $500 billion economy. • The Shenzhen area in China which has a per capita GNP of $5695 (as compared to China’s GNP of $317). • The Spartanburg-Greenville belt in South Carolina in the US with over 215 international companies. Nearly 50 companies have their headquarters in this belt. • Singapore, Johore, Malaysia, and the Riau islands (Indonesia) including Batam have often been termed as the growth triangle. • Penang in Malaysia, Medan in Indonesia, and Phuket in Thailand represent another emerging growth triangle. In Penang for example the unemployment rate fell from 16% 1969 to 2.9% in 1994. In fact the GDP of Penang is 15% higher than the rest of Malaysia.
The three jobs of the future • By 1990, in the eyes of the Census, you were either: • “managerial and professional specialty” • “technical, sales and administrative support” • “service occupation” • “operator, fabricator, and laborer” • “transportation and material moving” This classification made sense for an economy focused on high volume
Three jobs of the future - cont/- • The 1990 census categories had little bearing upon the competitive positions of American’s worldwide • The emergent three categories are: • routine production services: repetitive tasks performed by old foot soldiers of American capitalism in high volume enterprises (include traditional blue collar and routine supervisory jobs; including many information processing jobs) • in-person services: simple and repetitive tasks done on a person-to-person basis - perhaps with some vocational training (waiters, waitresses; nursing home aids, janitors, taxi drivers, secretaries etc) • symbolic-analytic services: includes problem identifiers, problem solvers and strategic brokers (research scientists, design engineers, software engineers, civil engineers, investments bankers, a few creative accountants, lawyers …..) These categories cover 3 out of 4 American jobs - others include farmers, miners etc, who constitute less than 5% of American workers