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Week 13: January 25

E-Commerce and Online Trading

Jason Galloway has kindly agreed to give us an introduction to his online trading activities.

A few online stock trading and information sites:

Don Tapscott's Digital Economy

Cultural analyst with a decidedly commercial orientation, Don Tapscott has written with enthusiasm and insight about the impact of digital networking on the North American economy in The Digital Economy: Promise and Peril in the Age of Networked Intelligence. In a more recent book, The Net Generation: The Rise of the Net Generation (1998), he forecasts the coming influence of the demographic of wired kids born since 1978.

Don Tapscott Presentations provides a full review of Tapscott's affiliations and accomplishments.

The Digital Economy: Promise and Peril in the Age of Networked Intelligence, Don Tapscott, 1995.

The following summary by M. Soules:

Canadian economic theorist and systems analyst Don Tapscott suggests that business process reengineering (BPR) is a management strategy inappropriate to the task of creating businesses able to compete in a global economy and an environment of networked intelligence: "It is true that the old business processes, management practices, organizational structures, and ways of working have become inappropriate. Clearly, many large companies needed to reengineer to reduce cost base" (3).

Many large corporations have been reengineering with a vengeance: AT&T, 40,000 layoffs; IBM, 60,000; GM, 74,000; Digital Equipment, 20,000; Sears, 50,000; Boeing, 28,000. "Chain Saw" Albert Dunlap cut 11,000 jobs at Scott Paper in 1994: "We’re painted as villains; but we’re not. We’re more like doctors. We know its painful to operate, but its the only way to keep the patient from dying. But while we had to cut some jobs, we were able to give 65 percent of the workforce a more secure future than they might have otherwise had" (Newsweek, Feb. 15/95: 48).

Tapscott believes this process reengineering "does not a strategy for the new economy make." Instead, "corporations need to get beyond reengineering to the transformation of the corporation enabled by information technology (IT). The goal should not just be cost control but the dramatic and profound transformation of customer service, responsiveness, and innovation" (4). He claims that reengineering is a "necessary but insufficient condition for competitiveness."

Tapscott lists a variety of terms used by management theorists to describe this new vision of the digital economy: the "networked organization" (Drucker); the "learning organization" (Senge); the "virtual corporation" (Davidow and Malone); the "relational organization" (Keene) (12). What do all these terms refer to? According to Tapscott, "The new enterprise is a network of distributed teams that act as clients and servers for each other." Furthermore, "Organizational consciousness is a prerequisite for organizational learning."

The key technology in the Age of Networked Intelligence is, according to Tapscott, the I-way: "Just as the highway system and electrical power grid were the infrastructure for the industrialist economy, so our information networks will be highways for the new economy" (15). Unlike Howard Rheingold, Tapscott holds out considerable hope that the rapid commercial expansion of the Internet will encourage rather than compromise the creation of new forms of electronic democracy:

The crowning achievement of networking human intelligence could be the creation of a true democracy. Technology itself is shifting from mainframe, host, centralized computers to networked computing, where each computer has autonomy and functions as a peer of the others. Similarly, rather than an all-powerful centralized government, arrogating decisions to itself, governments can be based on the networked intelligence of people. Government as centralized mainframe can be replaced by government as network. (16-17)

Tapscott’s argument, however, begs the question that such a transformation of both enterprise and government requires that those formerly in positions of power will willingly foster the decentralization of that power.

Despite his general optimism, Tapscott does not neglect what he calls the "dark side of the age of networked intelligence." There are significant perils, including:

The Twelve Themes of the New Economy

At the heart of Tapscott’s analysis are twelve themes which differentiate the new economy from the old:

  1. Knowledge. The new economy is a knowledge economy: from smart clothes to smart roads.
  2. Digitization. The new economy is a digital economy.
  3. Virtualization. As information shifts from analog to digital, physical things can become virtual: from virtual ballot boxes to the virtual job!
  4. Molecularization: The old organizations are becoming fragmented, replaced by dynamic clusters of individuals.
  5. Internetworking: Clusters network for the creation of wealth.
  6. Disintermediation: Mediary functions between consumers and producers are being eliminated through digital networks.
  7. Convergence: Computing, communications, and content industries are converging to become the dominant economic sector.
  8. Innovation: "Obsolete your own products."
  9. Prosumption: Consumers become involved in the actual production process.
  10. Immediacy: In an economy based on bits, immediacy becomes a key driver and variable in economic activity and business success.
  11. Globalization: We are involved in a global conversation: more than 100 million telephone calls are completed every hour, using 300 million access lines the world over, and the number of calls will triple by 2000.
  12. Discordance: Unprecedented social issues are arising, potentially causing massive trauma and conflict. (44-68)

On the relation between the new economy and education, Tapscott writes:

...learning will more and more be provided by the private sector. This will come about not out of social responsibility but, rather, because working and learning are becoming the same activity for a majority of the workforce and because knowledge is becoming an important part of products. Moreover, the traditional educational institutions are failing to meet the needs of the economy, and there are huge and growing opportunities for learning products and services. (67)