road map to the e-revolution

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Road Map to the E-RevolutionPaul J. Kampas aa Principal of Kampas Research, is an independent strategy consultant and educatoraffiliated with Cornell University's Johnson School of Management, Ithaca, New York, andBabson College's Center for Information Management Studies, Wellesley, Massachusetts. Hecan be contacted at [email protected] online: 21 Dec 2006.

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I N F O R M A T I O N S Y S T E M S M A N A G E M E N T

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ROAD MAP TO THE

E-REVOLUTION

Paul J. Kampas

Clearly, E-commerce is revolutionizing both IT and business. What may not be so evident for IT managers is the direction in which this revolution will take their organizations. This article helps IT managers determine this direction by show-ing how to develop a road map to chart their organizations’ course through the E-revolution.

NFORMATION TECHNOLOGY ISadvancing in a predictable sequence offive “megawaves.” We are nearing theend of the third megawave, with the

fourth megawave building rapidly. Visionaryleaders carry an implicit mental map of thispattern deep in their minds. Because the fivemegawaves follow similar patterns of develop-ment, important lessons from past waves canbe used for anticipating and exploiting futurewaves. This article provides an explicit andthought-provoking “road map” of this patternfor both technical and business leaders to see,debate, and use as they reinvent their enter-prises in the E-revolution.

In prehistory, we (Homo sapiens) gainedadvantage over other species through our supe-rior intellect and use of language. In morerecent millennia, we have augmented this nat-ural advantage with a steady stream of informa-tion technologies (IT). In fact, the ascent ofcivilization and commerce is inextricably tiedto the ascent of IT. Today’s leg of this ascent isreferred to in this article as the

E-revolution

,where “

E

” stands for electronic.IT enables advances in civilization by pro-

viding a form of

external nervous system

thatlinks the ideas and actions of individuals andorganizations into an increasingly informed,coordinated, and connected whole. To gain aperspective on the power of this external ner-vous system, it is valuable to observe the strik-ing lockstep between advances in IT andadvances in civilization throughout the ages:

❚❚

3,500 BC:

Written language fueled the rise ofcommerce and government.

❚❚

Early 1500s:

Movable metal type and theprinting press fueled the Reformation andthe Renaissance in Europe.

❚❚

Late 1800s:

The telegraph and the telephone(along with the railroad) fueled the rise of thelarge U.S. corporation and national brands.

❚❚

Late 1990s:

Digital communications is fuel-ing the rise of horizontal, real-time extendedenterprises, where companies are linking cus-tomers, themselves, and suppliers in increas-ingly rapid and responsive ways.

❚❚

Early 2000s:

Electronic commerce, distancelearning, telework, and new media are poisedto fuel the transformation of many industriesand institutions that have had long and oftenglorious histories.

How can leaders of today better navigatetheir organizations through these increasinglyfrequent and disruptive “megawaves” of IT-fueled change? The most successful leaders dothis by building a mental road map of how ITis creating opportunities and discontinuities,

1

and they use that road map constantly indeveloping strategy and making decisions. Bymaking this road map explicit and shared,leaders can include a diversity of senior man-agers and thought leaders in this critical activ-ity. The intent of this article is to help readersand their organizations develop and apply suchan explicit and shared road map via a three-step process:

I

PAUL KAMPAS,

princi-pal of Kampas Research, is an independent strategy consultant and educator affiliated with Cornell University’s Johnson School of Management, Ithaca, New York, and Babson College’s Center for Information Manage-ment Studies, Wellesley, Massachusetts. He can be contacted at [email protected].

THE E-COMMERCE REVOLUTION

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❚❚

Step 1 — Framing the functionality.

A simplebut powerful five-level framework, the infor-mation system function chain, is introducedas the conceptual foundation to mapping theE-revolution.

❚❚❚

Step 2 — Mapping the megawaves.

Informa-tion technologies evolve up the informationsystem function chain in a highly predictablepattern, enabling the visualization and map-ping of five predictable megawaves of IT-fueled change (we are currently in the thirdmegawave).

❚❚

Step 3 — Envisioning and engaging.

Opportu-nities and discontinuities created by the thirdand fourth megawaves are envisioned andthen applied to the challenging process ofdiscarding old business definitions and strat-egies and engaging new ones that embracethe major shifts taking place.

Before moving onto the first step, it isimportant to note that we live in a period inwhich historic changes are underway. Five hun-dred years from now, our descendants will lookback and marvel at how much was accom-plished. Such changes are turbulent and chal-lenging en route, and succeeding in themrequires us to both plan methodically (thefocus of this article) as well as to adapt in themoment. Doing both of these at the same timeis difficult, but nothing short will likely work inthese transformative times.

STEP 1: FRAMING THE FUNCTIONALITYTaxonomy of a System

All systems, natural or manmade, have a consis-tent but often invisible underlying order. Thisorder consists of a hierarchy or chain of interde-pendent elements as shown in Exhibit 1. Seeingand understanding the order and workings of thehierarchy or chain for a given system can provideinvaluable insights into both the present capabil-ities and future development of the system.

❚❚

In the

food chain

of an ecosystem, life formshigher on the food chain consume life formslower on the food chain for their caloric value.

❚❚

In Abraham Maslow’s

hierarchy of humanneeds,

lower-level needs must be reasonably wellmet before higher-level needs can be satisfied.

❚❚

In what is designated as an

information systemfunction chain,

higher level information func-tions require the resources of lower level infor-mation functions in order to perform their work.

As the success of lower-level elements is nec-essary for the success of higher-level elements,system chains evolve or develop by necessityfrom bottom to top, as illustrated by ascendingarrows in Exhibit 1. The life forms in ecosys-tems evolved from basic to advanced. Humanneeds, starting at birth, advance over time fromphysiological to self-actualization. And infor-mation systems have evolved over the millenniafrom clay tablets to the defeat of world chesschampion Gary Kasparov by IBM’s Deep Blue.

EXHIBIT 1

The Taxonomy of a System Chain

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In this article, the information system func-tion chain is used as a strategic frameworkbecause it offers the important benefit of atimeless perspective. Although the products andtechnologies that implement functions changefrequently, the functions they serve neverchange. For example, information storage is atimeless function, whereas information storageimplementations (clay tablets, papyrus, paper,punched cards, magnetic tape, optical disk)have changed many times. As a result, theframework provides a stable set of coordinatesfor mapping information technology-drivenopportunities and discontinuities over time. Italso reduces the tendency to focus a businessstrategy on shifting implementations as opposedto timeless functions (as in the famous exam-ple, “are we in the railroad or the transportationbusiness?” where the railroad is the implemen-tation and transportation is the function).

Detailing the Information System Function Chain

The five levels of the information system func-tion chain play important and unique roles,that, when linked together, create the totalinformation system (see Exhibit 2). These five

levels and their 12 elements are the fundamen-tal building blocks that constitute every infor-mation system — past, present, and future. Byusing this kind of systemic approach as a con-ceptual framework, the role and implications ofthe overwhelming flood of IT events andadvances can be much more easily assimilatedand assessed.

Level I — Storage/Physical.

Every infor-mation system is rooted in the physical world ofatoms and electrons, even though its primaryhigher level application is in the world of bits.As higher-level functions depend on these basicelements in many ways, failures here (e.g., diskcrashes and power outages) will bring the sys-tem to its knees. This level is closely akin to thefood, clothing, and shelter level of Maslow’shierarchy of human needs.

❚❚

Storage:

Memory, disks, tape, printing (stor-ing information on paper)

❚❚

Power:

Electricity, batteries

❚❚

Materials:

Semiconductors, aluminum, plastic

Level II — Processing.

The computer pro-cessor is the engine of the information system.Advances in processing power have huge

EXHIBIT 2

The Information System Function Chain

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enabling effects on the ability to accomplishexpanded functions in higher levels (e.g.,speech recognition, video conferencing, molec-ular design, animation, artificial intelligence).

❚❚❚

Computation.

Numerical calculation, symbolmanipulation, data compression

❚❚

Logic.

Boolean logic operations (And, Or, etc.)

Level III — Infrastructure.

Infrastructureis the

critical central function

of every system. Itprovides the essential control and connectivitythat “glue” the many elements together into aunified, well-regulated system. The categoriesof infrastructure include the

❚❚

Human interface.

This connects the systemto the user, including elements such as thegraphical user interface, display, keyboard,mouse, microphone, and speakers.

❚❚

Intrastructure.

The term “intrastructure” isbeing coined here to encompass the elementsthat control, schedule, and connect the vari-ous elements internal to the system, includ-ing the data busses or pathways, theoperating system, database managementsoftware, and the application programminginterface (API).

❚❚

External interfaces.

These connect the systemto the external environment, including con-nections to the network, barcode readers,robots, cameras, and a wide variety of sensors.

❚❚

Extrastructure.

As the complement to theintrastructure defined above, “extrastructure”is another term being coined. Extrastructureencompasses the external facilities to whichthe computer links, including networks,many kinds of devices, and other systems andservers.

Level IV — Application/Content.

Theactual work of an information system is accom-plished in Levels IV and V. Here, applicationsoftware operates on data or media of someform to produce a result, which can includeediting a document, executing a transaction,simulating a product or process, or controllinga device (e.g., a car’s electronic fuel injectionsystem).

❚❚

Applications

. The software instructions thatdirect the actions of the computer on desig-nated data or external devices. Applicationsrange from desktop productivity (word pro-cessing, spreadsheet, graphics) to enterprise-wide resource planning (accounting, payroll,logistics)

❚❚

Data/media.

Includes structured data (busi-ness data, scientific data), semi-structureddata (spreadsheets, text documents, andunstructured data (images, video, audio).

Level V — Intelligence.

As manmade in-formation technologies advance up the systemfunction chain to augment intrinsic humancapabilities, the function of intelligence is thelast frontier. Very limited capability exists heretoday in computers, which includes reasoning,inference, learning, and creativity. Advances inprocessing power will enable increasing com-puter-based capabilities over time, but notquickly. Previous attempts at creating ArtificialIntelligence (AI) have failed (e.g., JapaneseFifth Generation Project) because they vastlyunderestimated the degree of complexityinvolved.

STEP 2: MAPPING THE MEGAWAVES

In this section, the road map of how the Infor-mation Revolution develops over time ischarted. By seeing the predictable pattern ofdevelopment (i.e., the megawaves), a realizablevision of future opportunities and discontinui-ties can be conceived.

Principles and Process of Development

In human development, most people experi-ence predictable life stages as they mature frominfancy to adolescence and into adulthood. Innature, ecological systems also mature throughpredictable stages of plant and animal growth.The Information Revolution is maturing in asimilarly predictable pattern as well.

The developmental pattern of the Informa-tion Revolution is driven by five principles thatderive from the function chain nature of infor-mation systems. Based on these principles, a use-ful map of the five megawaves of the InformationRevolution can be created (see Exhibit 3).

1.

Evolution from bottom to top.

Because infor-mation systems are based on a system func-tion chain, advances in lower-level functionsmust naturally precede advances in higher-level functions. Thus the sequence ofadvances is from bottom to top.

2.

Many small waves.

Most advances or wavesof information technology have a positivebut incremental impact on the market(ballpoint pens, laptop computers, cablemodems).

3.

A few megawaves.

A few technologicaladvances create megawaves, and have a

nfra-structure is the critical central function of every system.

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transformational impact on the market.These megawaves are called “phase transi-tions” by complexity theorists (akin to statechanges that occur when heating water tothe melting point and the vaporizationpoint). Megawaves have two distinct stages:the

creation stage

and the

mass commoditi-zation stage,

which are described in detailsubsequently.

4.

Dominant function.

At any point in time,one function will be in a phase transition(megawave) in which abundance is replac-ing scarcity. During this period, this func-tion dominates the others as it is the drivingforce of change. This is because the move-ment to abundance in this function is creat-ing new forms of value and thus creatingopportunities for improvement and advan-tage. Because of this driving role of thedominant function, the themes for each ofthe five megawaves and ten stages arenamed for what is happening in the domi-nant function.

5.

Acceleration

. The rate of progress is clearlyaccelerating; 5,000 years elapsed from theinvention of written language to the Guten-

berg printing press, 500 years from theprinting press to the digital computer, and20 years from the digital computer to theearly Internet. Although the pace is acceler-ating, some problems are still hard to solve(computer vision and computer intelli-gence), and thus the rate of progress can besomewhat unpredictable.

Overview of the Five Megawaves

Change almost always happens in waves asopposed to occurring through slow, steadyprogress. This is true for various reasons, mostlyrelated to the phenomenon of the phase transi-tion as mentioned previously. Here, a techno-logical advance coupled with a market demandcreates an economic opportunity or discontinu-ity that creates an avalanche effect. The rate ofthe avalanche is dependent on several factors,including level of pent-up demand, affordabil-ity, availability of related and necessary prod-ucts (e.g., software and other media), and thecost of switching from previous implementa-tions (e.g., legacy software or data, legacy infra-structure, etc.).

EXHIBIT 3

The Five Megawaves of the Information Revolution

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In the Information Revolution, each mega-wave can be divided into two stages.

❚❚

The creation stage.

In this first stage, a break-through technology or set of technologies iscreated, refined, and cost-reduced. As thetechnology here is usually expensive andcomplicated (e.g., mainframe computers), itsusage is generally limited to well-funded andwell-staffed enterprises.

❚❚

The mass commoditization stage.

In this sec-ond stage, the technology has become rela-tively inexpensive and easy enough to use(e.g., personal computers) so that it movesinto the mass market, where refinement andcost-reduction continue.

Based on this two-stage-per-wave model, thefive megawaves (and ten stages) of the Infor-mation Revolution can be readily mapped andcharacterized (see Exhibit 4). In the followingdescriptions of the stages, some readers maynot be familiar with the term “killer applica-tion.” A killer application (or “killer app”) refersto a high-demand, high-profile application orusage of the technology that creates the marketpull for the technology’s initial acceptance.

First Megawave: Written Word (3,500 BCto 1946).

The most fundamental function ofany information system is the storage (i.e.,preservation) of information. Information stor-age has two important purposes: temporal —retention for future reference, and spatial —dissemination to others. Predominantlythrough the use of pen, paper, and printing,the first megawave of the Information Revolu-tion enabled the transformation of an uncivi-lized and illiterate world into an advanced andsophisticated one.

Stage 1 — Documentation (3,500 BC to 1452)

❚❚

Length:

Approximately 5,000 years

❚❚

Enabling technology:

Written language

❚❚❚

Initiating event:

Cuneiform clay tablets inMesopotamia

❚❚❚

Killer applications:

Taxes, laws, and accounting

❚❚

Impact:

Rise of civilization and commerce

The rise of civilization and commerce is closelytied to society’s ability to capture, preserve, andshare information. Empires cannot be sustainedwithout taxes and laws, commerce cannot betransacted without accounts, and science and

EXHIBIT 4

Milestones of the Information Revolution

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medicine cannot be advanced without articlesand books.

Stage 2 — Mass Publication (1452 to 1946)

❚❚

Length:

Approximately 500 years

❚❚


Movable metal type andimproved printing press (Gutenberg)

❚❚

Initiating event:

Printing of the GutenbergBible

❚❚

Killer applications:

Demand for the Bible andreligious texts, scientific texts

❚❚

Impact:

Rise of the Reformation and Age ofEnlightenment

Until Gutenberg created the technology for themass publication (and thus the mass consump-tion) of information, books were expensive andliteracy was scarce. Powerful institutions (e.g.,the Catholic Church) took advantage of thissituation by setting themselves up as the soleintermediaries between people and higher pow-ers. However, between the invention of theprinting press in 1452 and the year 1500, a vastpublishing industry sprung up, producingaround 50,000 titles (called the incunabula), 40percent of which were about religion. In 1517,Martin Luther nailed up his famous 95 theseson the church door in Wittenberg, Germany,and the Reformation was underway. In additionto religious texts, many of the important tomesfrom the Greek and Roman golden eras wererepublished, and a major era of learning andrationality was ignited as well.

Second Megawave: Computerization (1946to 1985).

With the written word havingfueled the rise of the governments, commerce,and science, the demand for automated pro-cessing of this large volume of information wasa natural result. Napier’s logarithms (1600),Charles Babbage’s mechanical calculators (early1800s), and Herman Hollerith’s tabulatingmachine (1890) provided incremental improve-ment, but it was not until the arrival of electricpower (1880) and finally the transistor (1947)that the tools were finally in place for the mega-wave of computerization. In this era, informa-tion was transformed from a passive medium toan active and then interactive medium, provid-ing the powerful computer platform of businessand scientific advances for decades to come.

Stage 3 — Automation (1946 to 1978)

❚❚

Length:

32 years

❚❚


Electric power, switch-ing technologies (vacuum tubes and thentransistors)

❚❚❚ Initiating event: ENIAC computer (used vac-uum-tube technology)

❚❚ Killer applications: Artillery trajectories andcipher breaking in World War II; businessaccounting (including the U.S. Census) andscientific number crunching

❚❚ Impact: Rise of the “Information Age”

The pent-up demand for automated infor-mation processing had become enormous bythe twentieth century. Populations, govern-ments, and businesses had grown tremendouslyand were hobbled by their inability to processinformation in a timely, efficient, and accuratemanner. The arrival of the digital computer inthe 1940s was just in time to enable the greatpost-war economic expansion.

Stage 4 — Mass Interaction (1978 to 1985)❚❚ Length: seven years❚❚ Enabling technology: Microprocessor, personal

computer❚❚ Initiating event: Apple II personal computer❚❚ Killer applications: Electronic spreadsheet,

word processing, desktop publishing❚❚ Impact: The Information Age breaks out of

the glass-encased computer center and intooffices and homes

As result of Moore’s law (silicon chip densityand thus computer performance doublesroughly every 18 months), the march from themillion-dollar mainframe to the $2,000–3,000personal computer was accomplished in aboutthree decades. The Apple II was the first suc-cessful product in this category; it was followedshortly by the explosive growth of the IBM PC.At this new price point, computing became anemployee and consumer phenomenon, and theimpact began to sweep through corporationsand into small businesses, schools, and homes.

Third Megawave: The Death of Distance(1985 to ca. 2005). With storage and pro-cessing needs reasonably well met, the chal-lenge of better linking users to computers,computers to computers, and computers toother devices was the next frontier. Localizedprocessing by mainframes and personal com-puters had created localized business efficien-cies, which often did not translate intoenterprisewide performance due to “informa-tion gulfs” between computer systems. Anotherobstacle was the “usability gulf” between usersand their computers. With the arrival ofimproved networking and the graphical userinterface, these two gulfs were bridged in thethird megawave, creating not only strong link-

he arrival of the digital computer in the 1940s was just in time to enable the great post-war economic expansion.

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ages within enterprises, but across enterprises,with consumers, and increasingly around theglobe (see Opportunities and Discontinuities ofthe Third Megawave for more detail on Mega-wave 3).

Stage 5 — Infrastructuralization (1985 to 1993)❚❚ Length: eight years❚❚ Enabling technology: Graphical user interface,

local and wide area networks❚❚ Initiating event: Macintosh personal com-

puter plus enterprise networks❚❚ Killer applications: Corporate e-mail and net-

worked enterprise applications (e.g., enter-prise resource planning applications fromPeopleSoft, SAP, Oracle, and others)

❚❚ Impact: Rise of the “Real-time Enterprise”

The electronic linking of activities within andacross enterprises created the ability to moreefficiently match and manage supply anddemand up and down the value chain. Manu-facturing planning strategy went from “buildand pray” to “sense and respond,” which drovedown inventories and product outages on retailshelves.

Stage 6 — Mass Communitization (1993 to ca. 2005)❚❚ Length: Approximately 12 years❚❚ Enabling technology: World Wide Web, Java❚❚ Initiating event: Mosaic Browser plus World

Wide Web❚❚ Killer application: Mass information access

and interaction (e-mail, chat, auctions, pur-chasing)

❚❚ Impact: Rise of the “Global Community”

With the arrival of the World Wide Web, theability to inexpensively and powerfully link con-sumers and businesses alike expanded dramati-cally. This massive and rapid deployment (zeroto 50 million connections in four years) is put-ting in place an infrastructure that will createwidespread and powerful business-to-business,business-to-consumer, and consumer-to-con-sumer communities, and will result in a pleth-ora of opportunities and discontinuities in theyears to come (see Opportunities and Disconti-nuities of the Third Megawave).

Fourth Megawave: Hypermedia Mania (ca.2005 to ca. 2025). With a robust informa-tion infrastructure reasonably in place, theability to create and distribute powerful, new,and world-changing forms of media i sunleashed. Though today we are still in the lat-

ter half of the third megawave, the rising tideof the fourth megawave is clearly evident. Elec-tronic commerce and online trading are onlythe harbingers of things to come in the fourthwave (see Opportunities and Discontinuities ofthe Fourth Megawave for more detail on Mega-wave 4).

Stage 7 — Virtualization (ca. 2005 to ca. 2015)❚❚ Length: Approximately 10 years❚❚ Enabling technology: Widespread video con-

tent and conferencing of reasonable quality❚❚ Initiating event: Offering of full-blown dis-

tance learning degree programs by leadinguniversities

❚❚❚ Killer applications: Collaboration, conferenc-ing, interactive multimedia

❚❚ Impact: Rise of the “Virtual Age,” with dra-matic “dematerialization” of entertainment,education, consulting, and the corporation

Much information has traditionally been deliv-ered in a physical form, including books, maga-zines, newspapers, classroom lectures, meetingsin conference room, products in stores, and ser-vices in branches. With a high bandwidth infra-structure in place, a substantial amount ofphysical information delivery will transition tovirtual delivery via many forms of electronicinteraction and conferencing (video, voice, anddata). This “dematerialization” of businesseswill create dramatic opportunities and disconti-nuities (see Opportunities and Discontinuitiesof the Fourth Megawave).

Stage 8 — Mass Actualization (ca. 2015 to ca. 2025)❚❚ Length: Approximately 10 years❚❚❚ Enabling technology: Advanced/smart hyper-

media authoring tools❚❚ Initiating event: PC-created entertainment

offerings impact Disney earnings❚❚ Killer applications: Entertainment/arts, edu-

cation, marketing/advertising, design❚❚ Impact: Focus of many jobs moves from oper-

ations to creation and leisure time from spec-tatorship to creation

While the focus of Stage 7 is on the delivery ofinformation, the focus of Stage 8 is on the cre-ation of information. What inexpensive per-sonal computers and desktop publishingsoftware did to professional printers in Stage 4is an early example of what inexpensive 3D-enabled hardware and smart hypermediaauthorware will do to professional studios (cre-ators of Web sites, games, graphics, imaging,

ith a robust information infrastructure reasonably in place, the ability to create and distribute powerful, new, and world-changing forms of media is unleashed.

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video, animation, courseware) in Stage 8. Forexample, creating a first-class professional Website will not take dozens of professional pro-grammers to write scripts, Java, HTML, etc., asit does today, but will be easily accomplished bya handful of “authors” using advanced tools(see Opportunities and Discontinuities of theFourth Megawave).

Fifth Megawave: Lots of ‘Bots (ca. 2025to ca. 2060). Although the desire to aug-ment human work with robots (smart hardwareagents) and knowbots (smart software agents)has existed for decades, the ability to syntheti-cally replicate human cognition and visual pro-cessing is a very challenging task. Predictions,therefore, for the timing and achievability ofthe fifth megawave are highly speculative, butsome will be proposed nonetheless to stimulateyour imaginations. So, by around the year 2025when the fifth megawave is estimated to begin,enough processing power and enough under-standing of the working of the human braincould exist to begin to make some significantinroads into this somewhat sacred domain.

Stage 9 — Agentization (ca. 2025 to ca. 2040)❚❚ Length: Approximately 15 years❚❚ Enabling technology: Advanced neural net-

works, expert systems, others❚❚ Initiating event: Computers consistently pass

the Turing Test❚❚ Killer applications: Decision support agents

(shopping, investing, hiring) and robots withvisual processing (driving, machine operating)

❚❚❚ Impact: Elimination of most blue collar, pinkcollar, and some white collar work

The first stage of this last megawave focuses onproviding specialized services that have limiteddomains of knowledge and complexity and lit-tle or no requirement for creativity. The impacton low-skilled jobs will be dramatic, and thehuman workforce will strive to stay ahead ofrobots and knowbots through advanced educa-tion and focus on creativity (creativity willremain the computer’s weak point).

(Note on the Turing Test: Alan Turing, anEnglish mathematician, proposed in 1950 a wayto test whether computers could have “originalthought.” In this test, called the “imitationgame,” a remote human interrogator must dis-tinguish between a computer and a humansubject based on replies to various questions ina given period of time. Turing (optimistically)predicted that by the year 2000, that averageinterrogator would not have more than a 70

percent chance of making the right identifica-tion after five minutes of questioning.)

Stage 10 — Mass Re-creation (ca. 2040 to ca. 2060)❚❚ Length: Approximately 20 years❚❚ Enabling technology: Inference engine, others❚❚ Initiating event: Synthetic person wins Time’s

“Man of the Year” award❚❚ Killer applications: Synthetic executives, syn-

thetic actors, synthetic athletes, and the like❚❚ Impact: Transformation of the nature of work

In this final developmental stage of the Infor-mation Revolution, it is possible that comput-ers could have the ability to replace humans inmany domains of traditional work. As the pre-dominance of goods and services could be cre-ated and provided by machines, the majorquestion will be what people will do for a living.Some interesting scenarios on the combinationof mass re-creation (new forms of work) andrecreation (more time to play) can be envi-sioned. Possibilities include an increased focuson nurturant services (coaching, counseling,mentoring) to enhance physical and emotionalwell-being, as well as on creative (arts) and edu-cational pursuits to enhance personal expres-sion and growth.

STEP 3: ENVISIONING AND ENGAGINGAs the third megawave comes to a close and thefourth megawave replaces it, the intensity andfrequency of IT-induced business opportunitiesand discontinuities over the next decade will beunprecedented. An individual’s future successwill be based on the ability to translate theseopportunities and discontinuities into a visionand strategy that actively exploits them, asopposed to being passively exploited by them.This section explores these opportunities anddiscontinuities from today through the end ofthe fourth megawave.

Opportunities and Discontinuities of the Third MegawaveToday, the third megawave (Death of Distance)is more than halfway through its second stage(Mass Communitization). This era has beenand will continue to be chaotic because civiliza-tion’s external nervous system is undergoing amajor upgrade.

Managing the Shift in Power. In humans,the analogous developmental era to the Deathof Distance is adolescence, when teenagers aremoving from a parentally controlled infrastruc-

n individual’s success will be based on the ability to translate opportunities and discontinuities into a vision.

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ture to a peer-to-peer oriented infrastructure.As is well known, this period is chaotic becauseof the substantial and often shaky shift inpower that is occurring. However, throughunderstanding the purpose and nature of thisstage, effective parenting strategies can bedeveloped. In the third era of the informationrevolution, which we are in today, a similar sub-stantial and shaky shift in power is occurring.Drivers of this power shift include:

❚❚ Access to information and transactions. Thepublication of the Bible and other religioustexts in the late 1400s that led to the Refor-mation in the early 1500s is a dramatic exam-ple of how expanded access to informationcan shift power away from central institu-tions. The Internet has already begun to havea major impact on the bargaining power ofautomobile buyers, who previously had littleinformation on the dealer’s actual cost. Withthe advent of online securities trading, indi-viduals can affordably circumvent their stockbrokers and mutual fund managers to man-age their own investments. And with theavailability of online auctions, individualsand small businesses (e.g., those engaged inantiques and collectibles) can compete withmuch larger entities.

❚❚ Creation of reverse markets. In regular mar-kets, the seller sets the price and the buyerchooses which seller to buy from. In a reversemarket, like Priceline.com, the buyer offers aprice, and the sellers compete for the busi-ness. As a result, the seller’s powerful posi-tion of price-setting has been diminished.

❚❚ Ease of switching. Location, location, loca-tion is no longer the key to business success.With competitors only a click away, consum-ers can easily switch from a less satisfyingseller to a more satisfying one.

❚❚ Movement to “open code.” Being held captiveto a vendor’s proprietary software has longreduced the bargaining power of the softwarecustomer, from $100 million dollar enter-prisewide application customers to $100Microsoft Windows consumers. Withadvancing infrastructuralization comes thebeginning of a movement to “open code”(e.g., the Linux operating system and theNetscape browser). Here software code is putin the public domain for all to use and mod-ify, shifting power to the customer. In fact, ananalogy could be drawn between the masspublication of the Bible (i.e., open religiouscode) and the diminution of the power of theCatholic Church in the early 1500s to the

potential mass publication of Linux code andthe diminution of the power of Microsoft inthe early 2000s.

As a result of these drivers, power is shiftingfrom large corporations or institutions (the par-ents) to well-informed, networked employees,distributors, and consumers (the children).Successful management strategies for this erawill necessarily reflect a challenging movementto power-sharing from power-over, which isexactly what successful parents of teenagers do.

Please note that although the consolidationand globalization of many large corporationsmay appear to take power away from consum-ers, it is really a reaction to the forces of com-moditization and convergence of their productsand services (see the following text). Here sub-stitution and switching by consumers is moreeasily accomplished, and thus consumer poweris enhanced.

Unlearning Infrastructure Scarcity. As infra-structure moves from scarcity to abundance inthe third megawave, many of the long-standinginhibitors to the ubiquitous, enjoyable, profit-able use of IT are being removed. However, the“unlearning” of long-standing frustration andskepticism that has resulted from decades ofscarcity (i.e., “we already tried that”) is critical.Though there is much talk about how to buildlearning organizations, perhaps the moreimportant and more difficult task is buildingthe “unlearning organization,” where past mod-els are put aside when they are no longer valid.Some areas of unlearning key to developingsuccessful strategies in the latter part of thethird wave include:

❚❚ End of limited mobility. Massive investmentsare being made in new forms of wireless com-munications (low-orbit satellites, PCS, digitalcellular, wireless LANs) that will providemuch more pervasive, high-bandwidthmobile information access. In addition, high-quality flat panel displays are rapidly drop-ping in price, making portable digital appli-ances far more capable.

❚❚ End of low bandwidth to home and small busi-nesses. With telecommunications deregula-t ion spreading wor ldwide, te lephonecompanies, cable companies, and even energyutilities are investing rapidly in improvedbandwidth to homes and small businesses.

❚❚ End of network-free zones. With the emer-gence of affordable, user-friendly local areanetworks, homes and small businesses willbecome fully networked, including appli-

he more important and more difficult task is building the “unlearning organization,” where past models are put aside when they are no longer valid.

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ances and entertainment devices as well ascomputers.

❚❚ End of hard-to-use. Improvements in speechrecognition, graphical user interfaces, bio-metrics, remote management, and flat paneldisplays will make the ownership and use ofdigital appliances easier, more enjoyable, andthus accessible to a larger percentage of ourpopulation.

Envisioning and Embracing Convergence.As the many different analog information for-mats for video, audio, voice, and image move toa common digital format, the convergence ofpreviously fragmented products and servicesoccurs (see Exhibit 5). The opportunities anddiscontinuities caused by digital convergenceare profound.

❚❚ Digital appliances. Many large vendors ofanalog hardware products, including con-sumer electronics (Sony, Philips), copiers(Xerox, Canon), cameras and film (Kodak,Polaroid) are undergoing deep changes as dig-ital products begin to make obsolete theiranalog ancestors.

❚❚ Digital infrastructure. An unprecedentedconsolidation of analog communications

media (cable and telephone) providers andtheir transformation into digital packet-switched network providers is underway (e.g.,via cable modems and digital subscriberline). In addition, wireless digital communi-cations (land-based and satellite) services arebeing built out and integrated with existingwireline services.

❚❚ Digital hypermedia. Convergence is spreadingupwards from hardware and networks to con-tent and intelligence. The packet-switched–based World Wide Web is accelerating theconvergence of media through providing thefacilities for easily intermixing multiple digi-tal media (see additional coverage on conver-g e n c e o n t h e f o u r t h m e g a w a v e i nOpportunities and Discontinuities of theFourth Megawave).

Opportunities and Discontinuities of the Fourth MegawaveAs the end of third megawave nears, the begin-ning of the fourth megawave (HypermediaMania) has already surfaced. In this wave, con-vergence will continue unabated and the land-scape of many content-rich industries willchange dramatically.

EXHIBIT 5 The Three Levels of Digital Convergence

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Content Convergence. The products andservices that will be affected by the fourthmegawave include entertainment, education,consulting, publishing, infoservices, software,financial services, advertising, and selling. As allthese “content” industries begin to exploit thecommon digital infrastructure provided in thethird megawave, the phenomenon of digitalconvergence (introduced in Opportunities andDiscontinuities of the Third Megawave) willbreak down long-standing barriers between con-tent industries and thus create tremendousopportunities and discontinuities. These con-tent industry barriers will blur because theindustries have been traditionally built aroundislands of mostly analog information. Theseinformation content islands include:

❚❚ Text: Publishing, infoservices❚❚ Video: Television, movies, lectures❚❚ Audio: Music, speech❚❚ Image: Photography, art❚❚ Money: Commerce (business-to-business,

and business-to-consumer), financial services

The information formats listed above willconverge into digital “hypermedia” in the

fourth megawave as shown in Exhibit 6, caus-ing the industries that align with them to con-verge in many ways as well . So what ishypermedia? Hypermedia is an integration oftext, data, audio, image, and video informationstored in a standard digital format. Hypermediacan be stored on a local computer or accessedover the Web. It is interactive and hyperlinked(hyperlinks are “click to” connections betweenrelated information elements).

The Landscape of the Fourth Megawave.The anticipated converged content landscapecreated by the fourth megawave contains sixmajor and strongly interlinked arenas (seeExhibit 7). In each of these arenas, significantopportunities and discontinuities will be created.

❚❚ Electronic commerce. Shopping, banking, bro-kering (jobs, tickets, reservations, stocks andbonds) will all be handled effortlessly andinexpensively online. Boundaries betweenbanking, investing, insurance, and billing willblur, and many brokering roles will be disin-termediated to some degree. In addition,many physical branch offices (i.e., “bricks andmortar”) will disappear as transactions are

EXHIBIT 6 Analog Content Converges to Digital Hypermedia

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handled electronically. In general, consumerswill move increasingly to a self-service model,which often creates both higher customersatisfaction and lower seller costs.

❚❚ Interactive/new media. Multiplayer games,fantasy sports, animation, gambling, music-on-demand, and video-on-demand piped overthe Internet to surround-sound, large-screenhome entertainment centers will give con-sumers many choices of highly realistic andcompelling media. In stage two, smart multi-media authoring tools will allow lone profes-sionals and amateurs to produce high-qualityinteractive multimedia (including music) aswell, which could well create a burgeoning“micro-multimedia market” (in some waysanalogous to the microbrewery arena).

❚❚ Distance learning. Just-in-time learning andlife-long learning offerings will develop rap-idly online to keep workers and managers cur-rent in a fast-changing world. In addition,traditional “bricks and mortar” learning (K–12 and higher education) will be augmentedto an unknown, but possibly significantdegree by more affordable, more accessibleonline learning. A category of “star” facultycould be created who have multimillion dol-

lar contracts and reach thousands of studentselectronically. Universities could move from arigid semester format to a structure in whichstudents cycle in and out for a few weeks at atime, with dorms being set up more as hotelsthan as semi-permanent residences. In thisarrangement, more students could be servedat a lower cost.

❚❚ Knowledge management. The systematic cap-turing, storing, and sharing of organizationalknowledge will be greatly enabled by a robustinfrastructure and hypermedia content. Asthis capability improves, the implications for“feet on the street” consulting to be aug-mented by online knowledge centers and“distance consulting” are significant. If thishappens, some blurring of business schools(distance learning) and management consult-ing firms (distance consulting) could occur.

❚❚ Distance teaming. The creation of high-per-formance remote virtual teams through net-worked hypermedia applications called“groupware” (e.g., videoconferencing, dataconferencing, workflow) will transform theworkplace. With high-bandwidth links to thehome, telecommuting will proliferate, andmultinational teams will become more com-

EXHIBIT 7 Mapping the Landscape of the Fourth Megawave

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monplace as well. Given such a capability,the rise of the “virtual corporation” will con-tinue, with companies beginning to lookstructurally more like the Internet than like apyramid.

❚❚ Online communities. Communities ofalumni, customers, employees, hobbyists,investors, and others will form to share infor-mation, ideas, opinions, and advice. Suchinformation sharing will substantiallyincrease the influence of these groups, creat-ing a powerful grass-roots media that willshift some degree of power from large corpo-rations and government agencies as well.Akin to the news media of today, these com-munities will provide an open forum in whichthe power of public opinion is leveraged.

Putting the Road Map to Work

The three-step process laid out in this article isintended to provide a generalized approach andtoolset to be tailored and applied to developingstrategy and making decisions in the reader’sunique line of business. In this section, somesuggested ways of applying the three steps inthe organization are provided.

Applying Step 1: Framing the Functionality“Open your eyes, for you have only to seethings properly to understand” (LeonardoDaVinci)

❚❚❚ Establish a shared language and frame. Theworld of IT is loaded with jargon and movesquickly. This can make it difficult for thenontechnical members of a senior manage-ment team to engage in critical strategic dis-cussions of where IT is going and how toexploit it. The information systems functionchain framework introduced in Step 1 (referto Exhibit 2) can help address this challengeby providing a shared language and systemicframework of all the functions of IT.

❚❚ Improve the assimilation and assessment ofnew information. The assimilation and assess-ment of new information is critical for spot-t i n g e m e rg i n g I T c a p a b i l i t i e s a n danticipating the opportunities and disconti-nuities they will create. This activity, though,can be daunting due to the overwhelmingflood of information that is often difficult todigest. However, when a systemic frame (e.g.,the information system function chain) hasbeen internalized, the underlying order of ITbecomes visible and new information flowsmore easily into that order.

Applying Step 2: Mapping the Megawaves“Perspective is worth 50 IQ points” (Alan Kay)

❚❚ Build a penetrating perspective. Perspectivehas the effect of increasing IQ because itenables individuals to see the “whole” andthus prevent nearsighted trial-and-error deci-sions that happen when the pieces are seenonly in a fragmented way. To this end, thefive principles of Information Revolutiondevelopment defined in Step 2, along withthe five megawaves road map (refer toExhibit 3), can help individuals better seethe drivers and patterns of technologicaldevelopment. Through seeing these driversand patterns, a penetrating perspective of thefuture becomes possible.

❚❚❚ Articulate and debate assumptions about thefuture. All decisions, individual and group,are made based on a set of underlyingassumptions about the future. The success ofany decision depends on the clarity and valid-ity of these assumptions, which are oftendeeply held in individuals “guts.” The five-megawave road map provides a shared frame-work upon which these assumptions aboutthe future can be explicitly articulated andopenly debated. This energetic debate is theintellectual crucible from which the visionand strategy to be developed in Step 3 flows.

Applying Step 3: Envisioning and Engaging“What business am I in? What business will Ibe in? What business should I be in?” (PeterDrucker)

❚❚ Envision what business the company should bein. The road ahead in the E-revolution willalmost certainly require significant changesto the company’s business. Such changes willstem from opportunities to enter or even cre-ate new market segments as well as frombeing ambushed in existing markets by newentrants. The task here is to envision whatbusiness the company should be in. Forestablished enterprises, this decision oftenincludes the painful issue of cannibalizingexisting businesses in order to enter new ones(e.g., Compaq computer establishing direct-to-customer sales in conflict with its dealersto compete with Dell; Merrill Lynch estab-lishing discount online trading accounts inconflict with its brokers to compete withSchwab and E*Trade).

❚❚ Engage a new strategic mindset. Driven byadvances in the third megawave, winning inthe E-revolution often requires organizationsto expand their boundaries (more partner-

he assimilation and assessment of new information is critical for spotting emerging IT capabilities and anticipating the opportunities.

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ships and alliances, more global reach) as wellas make them more permeable (sharing morepower with suppliers, customers, and employ-ees). Advances in the fourth megawave willrequire organizations to become more cre-ative (interactive media) and provide morevirtual value (online communities, smartproducts). To implement such sweepingchanges, a powerful vision combined withcourageous leadership is essential.

Conclusion

The next decade of the E-revolution will bringhistoric changes. Some glorious institutions willfall as new ones emerge, and others will recom-bine in previously unthinkable ways. To navi-

gate this journey of change, a road map of theE-revolution is a valuable tool. Though neverperfect and never finished, such a road map canprovide the basis for better identifying thecompany’s destination, selecting the route toget there, and, perhaps most important, con-vincing others to go along. �

© 2000 Paul J. Kampas. Printed with permission.

Note1. Discontinuities are major business shifts, often

driven by technological substitution. Examples include the substitution of digital encyclopedias for printed ones, and the substitution of digital cameras for film-based ones. Such shifts can bring long-successful companies to the brink of disaster, as happened to the Encyclopedia Britannica.

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road map to the e-revolution

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