tMichaelB is the web site for Tom Bengtson, who writes about business, religion, family and politics.

Monday, May 23, 2005

Summary of technological changes gives small businesses framework for survival

Some people say we are in the midst of a technological revolution. I don’t know what to call it, but I know things are changing.

So many things in my business -- publishing -- have changed since I embarked on my career in 1983. For example, back then newspapers and magazines were created with strips of copy output on film. They had to be trimmed and waxed and fitted into place by hand. Photos had to be turned into special graphics with a dot pattern. Color photos needed film separations. Producing a printed publication was a big deal. Today, all those things are done on a computer. My own company used to have three people in production in the early 1990s. Today, the work those people did is now done by one person, and she does a lot of other things as well.

Or I think about taking photographs. In the old days, I would shoot several photos just to make sure I got one that was in focus. Then we would process the film, and size the prints. Now, I can view my photos instantly on my autofocusing digital camera. I know right away when I have the shot I need. And I never have to deal with film or costly developing.

I think of how travel agents have basically gone away because anyone can book their own airline tickets on the internet these days. Or I think about the rise and fall of the fax machine. In the late 1980s, they were something new. Today, the fax machine goes mostly unused because everything is communicated via email. Or cell phones. At one time, they were a big deal but now everyone in business has one.

I had the opportunity recently to listen to William Carden, the president and CEO of a strategic planning and marketing research firm in Waco, Texas, talk about the impact of the technological revolution on business. He is the former dean of the National School of Community Bank Management at Texas Tech University.

He said there have been five great social and economic revolutions in the history of mankind:

The hunter-gatherer revolution, which took place about 100,000 years ago. It happened when populations got large enough that men stopped working together in groups of twos or threes, and reached out for reasons of security and food gathering into clans or groups of 20 and 30.

The agricultural revolution happened 5,000 to 5,500 years ago. It did not mean that hunting and gathering stopped. It meant that for the first time in history, at least 50 percent of men were engaged in the domestication of animals or the tilling of soil in order to provide food for cities, which had begun to emerge.

The industrial revolution occurred about 400 years ago. It started in northern Italy, working its way across Europe, and climaxing in the United States in the 19th century. It does not mean agriculture stopped. It meant that in the developed portion of the world, at least 50 percent of mankind was engaged in the manufacturer of goods and the production of things rather than tilling the soil.

The information service revolution began 35 years ago, around 1970, characterized by the commercialization of the microchip. It didn’t mean manufacturing stopped. It meant that 50 percent of employment was to be found in the information service industries, rather than in manufacturing or agricultural industries.

The bio-tech revolution started five years ago, symbolized by Dolly the sheep, the human genome project, and attempts to clone human beings. Five years from now, 50 percent of all employment will come from the bio-tech industry, Carden predicted.

What we should notice about each of these revolutions, Carden said, is that the rate of change is getting faster, and the nature of what is changing is getting greater.

The second thing to notice is that the technology of each new era transforms the nature of the era that preceded it. For example, developments out of the industrial age transformed the agricultural sector.

Carden further explained with an example of how the information services revolution changed a product of the industrial revolution. “If you bought the best refrigerator in 1970 from Sears, you would have paid $1,400,” Carden said. “It was the year the microchip was invented. Today, Sears’ best refrigerator would cost about the same, but it would have 4.5 extra cubic feet of space, it would operate at 400 percent greater efficiency, and it would weigh 175 pounds less.”

Carden said: “There is a knowledge explosion. Years ago, they used to say that knowledge was doubling every 20 years. Now, about every five years, knowledge is doubling. Two and a half years after someone graduates from college, half of what they were taught will be obsolete.”

The big catalyst for change is information technology, Carden said, as he explained the two “great technological revolutions in this country.” The first, he said, occurred between 1860 and 1970. “That was a revolution about transportation. It was about railroads, then automobiles, then airplanes. The transportation revolution was a response to the question of how do you move things cheaper and faster? It climaxed in 1970 when we put a man on the moon and we decided we had gone far enough.

“Now it is about communications. How can you move information cheaper and faster?”

Carden noted two laws that help us understand what is happening in the technological revolution. Moore’s Law, which says information technology is doubling in power and dropping in cost by 50 percent every 18 months, summarizes the significance of the technological revolution. Factor in Metcalf’s Law, which says the value of a system increases exponentially in relation to the number of users it has, and you have an information explosion which is changing life in the Western World.

The Internet is the world’s largest and most sophisticated telephone system. It is adding new users around the world at a rate of about 400,000 per month. “It is the shape of tomorrow,” Carden said.

In this environment of change, the ability to adapt has never been more important. From my perspective, I have seen how the printing industry has had to adapt to survive. I can see how the travel industry has had to adapt. And how the film and camera industries have had to change to survive. No business is immune from the influences of change.

Although my company’s resources are limited compared to some of the largest publishers out there, I believe NFR Communications has a significant advantage in that our size allows us to move quickly. We can make changes almost instantly; we don’t need the approval of numerous committees and a board of directors. Small businesses by nature have an edge over large companies when it comes to adaptability.

Of course, my goal is not only survival; it is success. That means I not only have to adapt to change, I have to figure out how to make the most of technological advances. Can I develop new products, or deliver products in new ways, as a result of the new technology? Can I figure out how to serve my customers better as a result of technology? This is the on-going challenge of running any small business.

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