(The Intelligent Brand - Part One is here.)
Think different
System/360 represents a sharp departure from concepts of the past in designing and building computers. [...] This is the beginning of a new generation - not only of computers - but of their application in business, science and government.
Thomas J. Watson, IBM, April 7th 1964
McLuhan has developed a theory that goes like this: The new technologies of the electronic age, notably television, radio, the telephone, and computers, make up a new environment. [...] They radically alter the entire way people use their five senses, the way they react to things, and therefore, their entire lives and the entire society. It doesn't matter what the content of a medium like TV is.
Tom Wolfe, New York Herald Tribune, 1965
Signals from the 60s
In 1964, two very different events occurred that set the scene for the profound cultural and commercial changes with which we are still in the early stages of coming to terms.
The rise of data
IBM - which had led business computing since the mid-50s - had made an enormous bet, an investment at the time of $5 billion, to develop the System/360, a revolutionary family of digital computing power, software and peripherals.
The 360 featured six mutually compatible computers and 40 peripherals that could work together. It also actively encouraged and rewarded external developers, anticipating how, in 1981, the company’s PC would kick start - while famously giving Microsoft the opportunity to supply and control DOS, the PC’s own operating system - the software industry that we now take for granted.
Rather than waiting weeks or months for information about the performance of the business, firms were, from here on, able to access increasingly sophisticated and actionable reports in closer and closer to real time, while the established silos between divisions and departments were simultaneously eroded.
The role and value of information about the business - and, over time, some information about the customer - were transformed by data processing and corporate networks during this period. So it was - and indeed still is - so easy to imagine as we plough through The Information Age, that if data is good, more data is even better, and that the global connection of the Internet would simply signal an acceleration into the same vision of the future.
The way information itself behaves and enables value for both business and customer has been fundamentally, yet very subtly, changed by the rapidly shifting context in which it lives and moves. As we’ll come to see, this subsequent networking of the world and all its data has come to demand of firms, not more of the same, but something completely different.
Network effects
That same year, 1964, Marshall McLuhan, a Canadian former English professor, published Understanding Media, a far-reaching, often opaque, account of the impact of the new media technologies on human beings, their experience and behaviours in modernity.
McLuhan was lionised by the corporate world, whose leadership, even over half a century ago, were already conscious that the world was running away with them. They were both excited and frightened by his lessons; just as much perhaps by his iconoclastic stance and calm refusal to be disturbed by their struggle to accept the implications of his manifesto.
While McLuhan’s thinking resonates through to today - not least his concept of the “global village” that the connected world creates - his central, most important and still bewildering contention was that “the medium is the message”. Though at the time his primary reference technologies were the television and telephone (with computing something of an aside) his meaning rewards close scrutiny today.
To restate this argument for our current circumstances, it’s not the content of the Web that matters so much, as the impacts - some profound and obvious, others more subtle - of our very connectedness. This is an environment that carries not merely the comforting familiarity of scores of petabytes of data - it contains and reframes everything it touches. Most of all, it changes us in ways with which we have only just begun to come to terms.
In the light of our current obsession with information - the content of our networks that tends to preoccupy business - McLuhan refocuses us firmly back to the radically changing context for human life and business. We must beware of over-focusing on what flows across these new networks, and pay closer attention to what happens to our world, our lives, our work and our corporations, as a result of our being so completely networked.
To imagine that business can transformatively benefit from digitised information, while ignoring such profound shifts in the shape of our environment, is an entirely understandable yet serious error of thought, with significant inhibiting implications for leadership insight and decisioning.
We are led to re-examine the seismic disruptions that the emergence, in the 1990s, of the World Wide Web introduced. It’s crucial to our project that we pause to understand what was - and what was not - happening here, and when.
Three ages of information
When we cannot imagine what the future may bring, we cannot create markets today for unspecified goods and services in the future. Sometimes investments are made for which there is no future demand and sometimes businesses fail to invest even when there is a demand for their output in future.
Mervyn King, LSE, The End of Alchemy, 2017
Two ages of industrialism
We tend to think and speak of The Information Age as having conclusively arrived with the ubiquity of the World Wide Web. But as it turns out, this future is nothing if not very unevenly distributed. It’s useful here to think in terms of three distinct but overlapping eras.
The Industrial Age was more or less entirely mechanical, and the overall paradigm changed little when electricity became commonly used from the late 19th century. It’s worth noting that the relationship between corporate management and business information also dates right back to that time.
Powerful innovations in that field - most famously perhaps, the punched-card tabulating machine, invented by Herman Hollerith (later to be a co-founder of IBM in 1911) for the US census of 1890 - were consistently introduced up to the middle of the last century.
In the years following World War Two, electronic computing rapidly entered the market, pioneered in its earliest days by the established powerful US office appliance firms. IBM launched its first electronic computer, the 701, in 1953, and took over the commercial computing market only a year later with the 650. In 1957 the Digital Equipment Corporation, DEC, was founded, and just two years later, IBM’s first transistorised computer, the 7000 series mainframe, was introduced.
The period from roughly 1960 to roughly 2000 spans what we can call the Late Industrial age. This was the era of data processing, where the industrial model of capitalism was extended and enhanced by computing, along with a degree of network penetration. The middle of this period was marked - and its progress dramatically accelerated - by the introduction, again by IBM, of the PC in 1981, and, in parallel, the emergence, further to the invention of ethernet, of the corporate network.
However, the core nature of value creation remained essentially the same. Systemic innovation took the form of incremental improvements. They were rarely, if ever, what we would today call truly “disruptive”.
Lagging the Web
It’s both startling to realise and hard to accept that we are today still in the surprisingly slow process of crossing the long bridge between this Late Industrial period and, heralded by the commercial arrival of the World Wide Web from 1995, the “real” Information Age.
With the arrival and ubiquity of global digital networks, the nature of life, work and trade are being reconfigured. Crucially, the nature, behaviour, role and value of information itself - not merely its massive and always-increasing volume and velocity - are profoundly altered in the Web environment.
Most of the world’s largest corporations remain rooted, for the most part, at the tail end of the Late Industrial Age. Their digital transformation programmes have, certainly, added plenty of information- and network-enabled efficiencies to their still-industrially-based business models, but have not moved them to the other side of the bridge.
How can we get our minds around what’s changed, and what matters about those changes?
The difference between these two worlds is hard to easily capture. However, at this early stage, we might ask ourselves why Amazon’s recommendations - with all the information the company holds on us, and despite its immense investments in data and data science - remain so stubbornly dumb, while Uber’s driver map - showing us the location and ETA of our ride - should feel so very smart?
Is Amazon the mighty digital pioneer, in fact, an Industrial leviathan? And why are Uber’s apparently simple service add-ons still so riveting?
New context, new content
Not another channel
It may seem unnecessary to go back and reexamine the nature of the World Wide Web. In fact, we’re already so accustomed to living, working and trading online, that we miss what’s actually happening, like goldfish asked to explain the water and the bowl we live in.
The Web is a radically different kind of network. To think of it - as we started to in the late 90s - as ‘another channel’, created a mistaken mental model that still haunts us today.
Industrial era networks were linear and content-dependent. Simply put, when you launched a new product, you shipped it to retailers over road and rail channels, and you promoted it over media channels - primarily print and broadcast.
These channels only went one way at a time: they were the opposite of interactive. They were also passive, we could say “intrinsically empty”, in the sense that, in the absence of trains, planes, automobiles, newspaper articles and advertisements, TV programmes and commercials … there was nothing happening.
However much traffic we sent hurtling down them, the overall dynamic was the same. They each carried a single type of traffic. And the content entirely defined them. Think of a road with no cars, a newspaper with no copy, a TV with nothing on.
To see today’s and tomorrow’s Web as merely a continuous increase - more channels for carrying more stuff - is a profound and critical category error.
Can we usefully think of, for example, YouTube - where so much of the world’s attention and media spend now reside - as just “a lot more channels and a lot more content”, much of which is user-generated? Of course we can’t. And that’s before we recall that it also happens to be the world’s second most-used search engine.
The Web is called “a web” for good reason. Online, when something happens anywhere, it happens everywhere. Just like a spider’s web, every single event creates a signal, a change, a shift. No matter how small or large, it’s this “active and alive” quality of the Web that differentiates it.
And while the channels of the industrial era were populated and propelled almost entirely by commercial activity, the Web - whether we’re at any point in time providing goods and services and promoting them or not - contains the lives, behaviours and communications of billions of human beings. It’s busy out there! It never stops and it never stops growing. And this vibrant change is happening more, and faster, every day.
This is an entirely discontinuous shift into a radically new market model. We are tasked with understanding, creating and communicating correspondingly new forms of value, for customers whose shifting experiences and expectations are every bit as fluid and fast-moving as the Web itself. Without a shift in vision, we are trapped: transforming and innovating for a Late Industrial marketplace and customer, both of which are slipping rapidly into the past.
Not the new oil
McLuhan urged his bewildered audience of 1960s business leaders to appreciate that the impact of the changing content of media cannot be confused with the changing context.
Now we understand just how very different this new context of the Web is from the industrial channels that preceded it, we can turn our attention to its content: the surging tide of infinite varieties of information that it carries.
Just as we had framed the impact of broadcast television as being based purely on its programming and the commercials that funded it, we have tended, as we balance uncomfortably between Late Industrialism and the true Information Age, to assume that for business, the Web is all about the data.
While the television programmes, advertisements, trucks and trailers of Industrialism certainly all carry their own intrinsic kinds of value, the popular metaphor of data as “the new oil” is a second category error, one that compromises our thinking and our priorities as we face up to the complexities of digital transformation and innovation.
In a sense, we know we’re in trouble as soon as we recall the Industrial origins of this idea. And yet, while oil - assuming of course that we wish, for now, to use hydrocarbons as a source for energy - arrives with intrinsic value built in, the same is categorically not true of data.
When we compare data to oil, we’re tacitly promoting and reinforcing the idea that it behaves like the traditional natural and human resources that Industrial corporations captured and acted on to create products. We are also implicitly sustaining the notion that data must surely have some kind of intrinsic scarcity value: that we should therefore be mining it, hoarding it. And that it might somehow run out at some point.
The problematic conclusion, from there, is that the process of creating fresh customer value in this new Web environment derives primarily - as of course it does in Industrialism - from exclusive ownership and exploitation of this precious resource.
We’ll come to understand that the resulting belief that, somehow, the process of innovative value creation starts with the information and proceeds from there outwards into the market - as it would if we were mining, refining and exploiting natural resources - no longer applies when we move into the Web model.
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