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IMS5023 : Information Enterprise Management and Marketing


WEEK 7, SEMESTER 1, 2005

INFORMATION FOR AWARENESS: FOR-PROFIT

 

1. INTRODUCTION

This week we consider the overall process of commercialising ideas, and introduce two other models/ frameworks to help us consider how businesses 'make a dollar' by means of information goods and services: Thompson's Technology Classification, and Sproull & Kiesler's Two-Level Perspective on the Impacts of Communication Technologies in Organisations. Because this process and these models are introduced in this lecture, which focuses on for-profit information services, it does not mean that they do not apply equally to the other categories (information for pleasure, information for awareness - non-profit, or information for accountability). Analysis of these models can certainly help in the consideration of all these categories of information enterprise. We apply these insights to potential areas for developing information enterprise and ecommerce, and examine selected web-sites of commercial information enterprises.

References

Robbins, Stephen P. & Barnwell, Neil S. (1989). Organisation theory in Australia. Sydney: Prentice Hall of Australia.

Sproull, Lee & Kiesler, Sara. (1991) Connections: New ways of working in the networked organization. Cambridge, MA: MIT Press.
 

2. FROM IDEA TO PRODUCT - THE PROCESS OF COMMERCIALISATION

Peter Batchelor, Manager of Commercialisation in the Faculty of Information Technology at Monash University, suggests that the following kinds of questions need to be asked when trying to decide whether it is feasible to commercialise an idea.

a) Does it address a genuine problem or need?
b) Has anyone else thought of it before? (Is already being developed elsewhere? Are there any patents or other kinds of intellectual property - IP - already in place?)

c) Can others be persuaded that the idea has value, while ensuring that the idea is not 'stolen'? (e.g. Ones employer, a venture capitalist, a bank, a company already in the field? The role of non-disclosure agreements.)

d) Identification of intellectual property rights? (Who has made what contribution? What should they be entitled to? Generally, there should be a balance between risk and reward for all stakeholders.)

e) Can the idea be translated into a business plan? (Addressing: description of the product, feasibility, business structure required, assessment of competition, finance required, projected costs and returns, likely risks, intellectual property issues, timescales, human resources requirements and availability).

f) What practical steps must be taken to implement the plan i.e. to commence production and sales?

g) What arrangements must be implemented to monitor progress and revise future plans as needed?

h) What arrangements must be implemented to ensure ongoing compliance with government and industry regulations or codes of practice?

i) What is the worst case scenario? What risk managment strategies must be put in place? (Do we have a 'plan B'?)

 

3. USING THEORETICAL MODELS AS CHECKLISTS FOR BUSINESS OPPORTUNITIES IN INFORMATION ENTERPRISE

If you asked yourself, what kind of information business could I get into to earn a living, you might do worse than thinking of each of the models we have introduced in this Subject, and using it as a checklist.

The IT Pyramid would help you decide whether your expertise and interest lies in the hardware/ physical networking layer; the applications/content layer; or the organisational and human networking layer.

The Information Communities model could help you decide whether your expertise and interest is in recorded or current information; in information for accountability, awareness or pleasure; in the development of information systems integrating people and technology; or in knowledge management ñsetting up strategies to maximise organisational learning and the transformation of 'tacit' knowledge into 'explicit' knowledge which can enter the pool of recorded or current information.

The various Porter models (value chain, value system, industry attractiveness, information intensity) and Scott's 'Value drivers' models could all help you decide what target industry offers the best opportunities, and also what point(s) in the value chains for that industry might need inputs of information goods or services.

The various related concepts (not represented diagrammatically - but nevertheless a model) expounded by Varian and Shapiro (See the Week 3 notes) could help you decide how to develop your range of products and services and how to price these for various market segments, especially in order to acquire and 'lock in' a customer base.

The POLCA model is a checklist for the management of any enterprise, including an information business. Each of the management functions of planning, organising leading, and controlling must be 'done right' if achievement is to result.

Thompson's Technology Classification and Sproull & Kiesler's Two-Level Perspective on the Impacts of Communication Technologies in Organisations

These two models also provide valuable checklists to helps us:
a) to understand what existing successful enterprises are doing, and

b) how we might find a niche for our own enterprise.

 

4. THOMPSON'S TECHNOLOGY CLASSIFICATION

The model was devised in the 1960s by James D. Thompson, and is called Thompson's Technology Classification. 'Technology' is used in this model in a way that is common in organisation theory literature - but is a bit different from the colloquial use of the word. Robbins (1989, p. 468) defines technology as 'The information, equipment, techniques and processes required to transform inputs into outputs.' He explains the model as follows (pp.123-125):
Thompson sought to create classification scheme that was general enough to deal with the range of technologies found in complex organizations. He proposed three types that are differentiated by the tasks that an organisational unit performs.

Long-linked technology [A in the diagram]. If tasks or operations are sequentially interdependent, Thompson calls them long-linked. This technology is characterised by a fixed sequence or repetitive steps ... That is, activity A must be performed before activity B, activity B before activity C, and so forth. Examples of long-linked technology include mass-production assembly lines and most school cafeterias...

Mediating technology [B in the diagram]. Thompson identified mediating technology as one that links clients on both the input and output side of the organization. Banks, telephone utilities, most large retail stores, computer dating services, employment and welfare agencies and post offices are examples. As shown [in the diagram], mediators perform an interchange function linking units that are otherwise independent. The linking unit responds with standardising the organisation's transactions and establishing conformity in clients' behaviour. Banks, for instance, bring together those who want to save (depositors) and those who want to borrow. They don't know each other, but the bank's success depends on attracting both...

Intensive technology [C in the diagram].Thompson's third categoryñintensive technologyñrepresents a customised response to a diverse set of contingencies. The exact response depends on the nature of the problem and the variety of problems, which cannot be predicted accurately. This technology dominates in hospitals, universities, research labs, or military combat teams.

Robbins quotes Thompson in giving the following example of intensive technology:
The intensive technology is most dramatically illustrated by the general hospital. At any moment an emergency admission may require some combination of dietary, x-ray, laboratory, and housekeeping or hotel services, together with the various medical specialities, pharmaceutical services, occupational therapies, social work services, and spiritual or religious services. Which of these, and when, can be determined only from evidence about the state of the patient.
Thompson's Technology Classification challenges us to answer questions like: 'Which kind of technology underlies my enterprise? Will it succeed in my particular market'. For example, most applications of intensive technology carry a higher unit cost - can my market afford this?
 

5. SPROULL & KIESLER'S (1991) TWO-LEVEL PERSPECTIVE ON THE IMPACTS OF INFORMATION TECHNOLOGY IN ORGANISATIONS

A Note on 'The Networked Organisation'

The technology-based view of a 'networked organisation' is:

. . . one in which computers are connected to one another in an information transport medium that carries packets of information. The networked organisation is defined by its nodes, pathways and packets. (Sproull & Kiesler, p. 12).
In contrast, the human-based view of a 'networked organisation' is:
. . . one in which people are connected to one another in diverse forums to exchange ideas and other resources. In this view the networked organisation is defined by its people, forums and resources. Technical components of the networked organization provide necessary technological infrastructure to connect people but by themselves do not create the human networked organization. (Sproull & Kiesler, p. 12).

If our first message is that making and managing new connections is what is important, our second message is that technology by itself does not impel these connections. They do not just happen by installing a network and distributing electronic mailboxes. (Sproull & Kiesler, p. 161).

This human-centred view is established on four key principles: This perspective supports and extends the IT pyramid model we examined in Week 1.

Communication technologies are central to any information enterprise venture involving virtual communities. Sproull & Kiesler's (1991) two-level perspective on the impacts of new communication technology offers a helpful framework for considering the impacts of an information innovation.

Sproull & Kiesler claim that when organisations introduce new technology, they normally justify the technology in terms of its first-level (efficiency) effects, eg cutting costs through labour savings, improving productivity, speeding up communication, accelerating information flow. Both inventors and early adopters of the new system focus on the efficiency benefits derived from planned uses of the technology. These are important aspects to consider.

However, the greatest and most enduring impacts of the technology come from unanticipated second-level (social system) effects. Full possibilities of a new technology are difficult to foresee at the time of implementation. The most profound impacts are the social ones that emerge slowly as people re-negotiate their patterns of behaviour and thinking.

. . . the most important effects of a new technology may not be to let people do old things more efficiently but instead to do new things that were not feasible with the old technology. (Sproull & Kiesler, p. 4).
For example, the automobile was originally seen in terms of saving on costs of horses, but its more profound effects related to changing residential patterns, patterns of work and human interactions. The telephone was introduced as an efficient replacement for telegraph in business, but its greatest impact was as a tool for social communication between friends not in physical proximity, reducing isolation. When ARPANET was introduced in 1969 it was designed to facilitate sharing of expensive computer hardware, programs and large databases from remote terminalsóbut its most popular feature was email, scientists actively communicating with each other, exchanging ideas, developing shared communities of interest.

Some Second-Level Effects of CBCTs in Organisations

New computer-based communication technologies (CBCTs) in organisations trigger changed patterns of attention, social contacts and interdependencies.

Organisational structural changes, erosion of hierarchy: A tendency for employees to bypass traditional information gatekeepers and access key decision makers (even the CEO) directly via email has been observed. This has (in part) contributed to flatter organisational structures, and in particular to eroding middle management positions over the past decade. Sproull & Kiesler postulate that this has been fuelled by the weak social cues in electronic (email) communication, which lessen natural inhibitions that are evident in face-to-face communication. The weak social cues of email include its primarily plain text format, and the perceived ephemerality and anonymity of the medium.

Changes in meeting dynamics and outcomes: Electronic group meeting dynamics encourage very different patterns of interaction from those of face-to-face meetings, such as:

Facilitation of new linkages within organisations and between organisations: Email and electronic discussions increase personal connections, linking peripheral or isolated employees with the 'centre' and also with other people from the periphery (ie people who they would never otherwise 'connect' with). This can greatly facilitate information exchange, motivation and commitment to the organisation.

Management communication with staff through regular email circulars is one factor that can contribute to increased employee morale. However, this passive information distribution seems far less important than employees' active participation in the life of virtual communities within the organisation. Through ongoing electronic discussions employees come to feel that they have a voice, that they are emotionally involved and 'connected' with the organisation.

Similar connections made with staff from other significant organisations (eg suppliers, customers, channel intermediaries, regulatory bodies, financiers, key stakeholders) can have substantial business benefits.

Summing up

Sproull & Kiesler write:

Our vision of a networked organisation is one in which all employees participate fully in the information life of the organization, independent of their geographical, organizational, or social location. They share information in dynamic and flexible ways that evolve with organizational issues and opportunities.

New connections will be most attractive to organizations committed to employee competence and involvement and to organizational flexibility as ways to achieve and sustain success. Without such commitments, analyses of electronic communication will be dominated by first-level efficiency thinking. (Sproull & Kiesler, p. 161).

A major message of the Sproull & Kiesler model is that the greatest opportunities for information enterprise come when organisations and individuals focus on 'second-level' thinking, and market their products and services accordingly.

 

6. E-BAY AND WISHLIST.COM.AU AS AN EXEMPLARS OF E-COMMERCE/INFORMATION ENTERPRISE

The online auction site E-Bay is one of the most successful of all e-commerce ventures. It is not 'pure' information enterprise because all kinds of goods (not just information products like books, DVDs or CD-ROMs) are sold over E-Bay. However it is extremely information intensive, involving complex and ever-changing communicative interaction among buyers and sellers. Among its many achievements E-Bay transformed the selling of Winter Olympics tickets for the Salt Lake City games, when a proportion of tickets were sold by electronic auction. Bidding for ringside figure skating tickets went up to thousands of dollars. (The differential between face-value and auction prices was allocated to the Paraolympics budget.)

Despite the dot.com crash, Australia has examples of information-intensive e-commerce enterprises that have proved viable. Consider the case of Wishlist.com.au under the leadership of its excellent young Chairman, Huy Troung.  See also the following website: http://www.asia-inc.com/March04/Haustra_huy_mar.htm

 

7. BUSINESSES THAT SELL INFORMATION VS BUSINESSES THAT SELL OTHER GOODS AND SERVICES

We can distinguish between business sectors that sell information goods and services, viz. In other cases information is a means to selling non-information goods and services: It will readily be seen that this list hardly scratches the surface.

The key thing that is highlighted is the following: the best things to sell on the Internet are either information itself, or goods and services that require significant information to help make a purchase decision.

 

8. THOMPSON'S CATEGORIES AND E-COMMERCE

Long-linked technology This category alerts us to businesses whose activities are routine - like a factory assembly line - but which nevertheless need an 'information feed' in order that their activities can run smoothly. For example a currency exchange dealer conducts a series of operations to convert the banknotes you have into the currency you need. An information input regularly needed is the market exchange rate for the currencies concerned. An ice-cream vendor at the beach undertakes a routine kind of business, but the weather forecast (will it be a fine day with plenty of people on the beach?) is an information input that help him/her decide on stock levels required.

Mediating technology A good example of mediating technology are dating services, or introduction services. Excellent information databases are needed from those seeking to identify a suitable partner. A company selling holidays must provide a wealth of information about options and costs for airfares, car rentals, accommodation, tours, places to eat etc. These must be selected and organised to suit the target market of the particular holilday company.

Intensive technology A consultancy company like Boston Consulting Group addresses complex problems in all industries. They must assemble a wide range of information inputs depending on the problem at hand. A university or industry research may need any kind of scholarly or trade publication to help address a research problem. The databases and document supply arrangements they use must cater for all contingencies.

9. SPROULL & KIESLER'S PERSPECTIVE ON COMMUNICATION TECHNOLOGIES AND E-COMMERCE OPPORTUNITIES

Sproull and Kiesler's two-level framework suggests that the most promising opportunities for information enterprise/ the development of innovative information products and services lie in the realm of incorporating in some way the establishment of 'connections' with and between people, and involving them in active ways in areas that interest them.

Amazon.com provides a good example of how this has been applied to a traditional area of sales - the bookstore. Clients indicate areas of interest and receive regular personalised updates by email on new titles in these fields; they can both read and submit reviews/ ratings/ evaluations of the titles/ items they purchase. Look at the Bluemountain electronic greeting card site http://www.bluemountain.com/ to see a range of personalisation and interaction features available (eg submit your poetry).

 

10. 'ZOOMING IN' ON BUSINESSES THAT SELL INFORMATION

We would now like to introduce you to some significant for-profit enterprises that sell information products or services, rather than other types of goods.

Inspect these sites. In each case try to think of whether they are examples of Thompson's long-linked, mediating, or intensive category.

Amazon.com is the obvious starting point - books, CDs, videos, computer software, games, with an excellent user interface.

Reed-Elsevier is the Netherlands based international giant of academic, research and professional publishing. It is the parent company of Elsevier Science, LEXIS-NEXIS, Butterworths and Reed Business Information, to name but a few of its subsidiaries. A press release stated that 'The company now derives 20 per cent of its revenue from electronic formats. Pure Internet revenues last year were 10 million [British pounds] and are growing at around 50 per cent per annum.' The spokesperson quoted in the press release continued that 'after 1.2 billion of acquisitions in 1998, including BioMedNet, ChemWeb, Engineering Information and Beilstein Informationsysteme, the company still has the scope to spend 1 billion to 2 billion in new acquisitions.' Science Direct offers online the full text of more than 1000 journals published by its parent Elsevier Science and other participating publishers.

Dialog is one of the oldest database hosting companies in the information industry. In the pre-Web days of indexing and abstracting databases it reigned supreme by making accessible, via dial-up, numerous research and reference databases sourced from dozens of database producers. As the full-text age dawned, its market position became more difficult. However it is constantly re-inventing its range of products and services in a battle to survive. A recent press release announced that it had won re-classification on London Stock Exchange as an Internet rather than a media stockñwith beneficial effects on its share price. In the US it was already a NASDAQ-listed technology stock. Dialog is aggressively pursuing the Intranet market.

Questel-Orbit is another long-standing database host belonging to the France Telecom Group.

BIOSIS is a major provider of research information to the life sciences community.

Reuters - the worldwide new and financial information provide describes its product ranges as follows:

Financial information products deliver news and prices to customer screens. They provide data-feeds to financial markets and the software tools to analyse data. Transaction products enable traders to deal in the foreign exchange, futures and options and securities markets. Customers include most of the world's leading financial institutions.

Media products deliver news in all dimensions of multimedia: text, television, images, still pictures, sound and graphics. Reuters also supplies news through online services, including a large number of web sites. Customers include broadcasters and newspapers around the world.

Professional products supply information and related technology to managers to professionals outside finance and the media. Reuters packages the news in electronic briefing products for corporate executives. Other Reuters services have been developed for the insurance, advertising and transportation industries, health and other corporate and professional sectors.

Another group of enterprises dealing in information as a product are data conversion services.

Turning to the specifically Australian scene, the Australian Securities and Investment Commission (ASIC) http://www.asic.gov.au/ although a Commonwealth Government instrumentality, is a vast and efficient for-profit information provider through its DocImage service.

The Australian Bureau of Statistics (ABS) http://www.abs.gov.au/ is also, in part, a for-profit provider.

Market research companies such as Roy Morgan, and consulting companies such as Boston Consulting Group http://www.bcg-anz.com.au/ or KPMG are for-profit information businesses.

Media companies such as The Age's Citysearch and are for-profit enterprises based on advertising revenue, even though they are free to the user.

SOME CONCLUDING ISSUES

I should like you to think about the differences between for-profit and non-profit information enterprises in protecting ideas (intellectual property) and raising capital.

a) Protecting ideas. Despite the great desirability of private/public sector partnerships in information enterprises, public sector organisations are bound by rules of probity that generally involve tendering. What happens when a for-profit enterprise approaches a non-profit information enterprise (say, a museum) with a great idea for a value-added product involving its collections or services? If the project is put out to tender, the proposer's idea becomes public property, and he/she may not even win the tender.

If a government non-profit organisation has a great idea whose development/implementation needs a private-sector partner, again how well does this fit into the tendering framework?

Would you agree that voluntary, non-government, non-profit associations are in a more flexible position than government-owned enterprises, but less flexible than for-profit enterprises? What are the trade-offs for these differences in flexibility?

b) Raising capital. How does a government-owned information enterprise (eg VICNET) handle the capital-raising requirements for which private-sector companies turn to the financial services sector or wealthy individual investors? This is a tough problem, and inevitably constrains the scope of action of non-profits.

Again, would you agree that non-profit associations or companies limited by guarantee are in a better position to accumulate reserves and/or negotiate loans than government entities, but are not as favourably placed as for-profit enterprises? Again what are the trade-offs for these differences in capacity to raise capital?



Preparation for Tutorial 8

The focus of the tutorial will be Assignment 2. In preparation, think of what you have been told about Assignment 2, and make notes about questions and ideas that you wish to raise.



 
Tom Denison