Academic journal article International Journal of Business

Turning Economic Inefficiencies Business Value: Lessons from the New Collaborative Technology

Academic journal article International Journal of Business

Turning Economic Inefficiencies Business Value: Lessons from the New Collaborative Technology

Article excerpt

I. REDUCING INEFFICIENCIES: A PATH TO VALUE CREATION

The first industrial revolution began in Britain with the mechanization of the textile industry. Tasks previously done by hand were replaced by machines and automation while several jobs were made redundant the factory was born, creating new employment types, boosting the productivity of labor. The second industrial revolution came in the early 20th century through mass production and corporate organization. Entrepreneurs could now efficiently mobilize labor, as well as capital resources at scales unimaginable before. Both revolutions made people richer, urban. Now a third revolution is under way where "everything that can will be digitalized" (Negroponte (1995). Learning to extract value from information in the digitized world is a similar process like learning to cultivate soil in the agricultural era, utilizing machines for mass-production or mining for gold. The starting point for turning the shock of the new into sustainable economic benefits is to understand how information drives value creation for individuals and enterprisers.

According to IBM's study (2011), inefficiencies in the global economy are estimated at nearly $ 15 trillion, "or 28 % of worldwide GDP." According to IBM "... much of this waste is found in our systems of commerce--in inventory backlogs, failed product launches, wasted materials and ineffective marketing campaigns ..." Inefficiencies are also generated by wrong hiring decisions, poor utilization of assets and resources, failure to implement the right process or adopt the best technological solutions. Globally, from an economic viewpoint, the term "inefficiency" characterizes the allocation of resources to a sunk cost, the failure to utilize assets due to lack of coordination, the inability to execute a transaction that improves the position of all interrelated parties, due to lack of information or computational capabilities. Identifying these opportunities, technological solutions, processes, institutions for "turning waste into value" poses major opportunities for businesses, entrepreneurs, for the improvement of welfare; however lot of work still lies ahead in order to develop a coherent framework for recovering value from economic waste. Recurrent root-causes are related to the lack of or access to knowledge, information, and computational capacity; processing and coordination costs can be technically addressed by the evolutions in consumer, media, and collaborative technologies. Still, several barriers linked to market structure, institutions and vested interests are moderating the pace of change.

In most economic models of transaction a set of information is assumed as given for each party, while the available technologies for accessing and processing information are in most cases not taken into consideration. The new collaborative technologies provide the building materials for developing an infrastructure that revolutionizes the ways information is shared among individuals. Directly, they reduce inefficiencies in transactions by decreasing the cost to information, indirectly by increasing the capacity of individuals to analyze and compile it. The penetration of the emerging physical and virtual network topologies for sharing, exchanging information throughout transaction phases is determined by the costs of: (1) transmitting, sharing data through the channels of each network and (2) building and maintaining the network. In this context consumer technologies provide the unifying framework for scaling-up the necessary services and solutions for leveraging digital urbanization: First, by reducing the complexity of customizing information, they can be utilized for addressing thrash that stems from its absence, from increased costs of acquiring knowledge, barriers between buyers and sellers (lack of marketplace structure, industrial organization), incompatibility of systems, resources or modes of communication (including language), costly, lengthy product launches and mainly poor capacity utilization of assets. …

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