Power Shift by Alvin Toffler

Subject: Futurist, flex firms, power dynamics

We are all in a power shift era.  Power deals with knowledge and the role it plays in our lives. Without knowledge you will not win a battle, in war or in market competition.  Knowledge is the key to success.  Alvin Toffler gives many examples on how knowledge has changed lives in his incredible book PowerShift.  With knowledge you can gain power.  But the shifting of power has become more fluid; it can shift from one person to another quickly.

Manufacturers were once in control before our digital age. One example Alvin talks about is the Gillette razor company and the power it had. Gillette had all the control of its product in the beginning. Gillette controlled how many razors went in each store. How many different styles/brands of Gillette’s a store would display. The store owner had no control.

Manufacturers kept their competition running because of the information they knew. They knew how to accumulate knowledge about their consumers. From this knowledge power was born. The invention of bar-codes shifted power from the manufacturer to the retailer.  Bar-codes reveal a lot of information about the consumer. A retailer now has information about their consumer from these bar-codes. The invention of computers for bar-codes has shifted the power from the manufacture to the retailer.

Today these same manufacturers beg for space in stores.  Store owners know what the customer wants from the information it collects through its barcode system.  A good example of how power can shift because of technology. Deeper knowledge permits us to reach high speed levels that produce items as a faster and better efficiency.

The invention of networks has opened the world to anyone. LANs and WANs can connect companies across the globe. “Companies daily grow more dependent on their electronic nets for billing, ordering, tracking, and trading; for the exchange of design specifications, engineering drawings and schedules; and for actually controlling production lines remotely. Once regarded as purely administrative tools, networked information systems are increasingly seen as strategic weapons, helping companies protect established markets and attack new ones.” In today’s society we have VANs (Value Added Networks) now. These networks can translate information’s from one form to the other. “VANs merely scramble and rescramble messages to adapt them to different media.” VANs can translate from one language to another. It may not be perfect but it is understandable.

VAN networks are a revolution in today’s business. A network's main function is to share information. Corporations are leading towards electronic interaction network. This interaction allows the buyer to place an order with the seller and have the transaction take place immediately. This leads to intimacy with customers and suppliers. You can become locked into a supplier though. Information sharing could lead to blurring boundaries of information. The information can be used as a weapon for the ‘go-betweens’ and intermediaries. Wholesalers and warehouses are bypassed. There are dangers to new technology. Corporations have to watch out for themselves and their customers. Information boundaries are critical.

Could extra intelligence produce a better way of life? Technology is proving extra intelligence does lead to a better life. The invention of the computer has proven this fact. “Before long the power of computers will leap forward because of parallel processing, artificial intelligence, and other stunning innovations. Speech recognition and automatic translation will, no doubt, come into wide use, along with high definition visual displays and concert-class sound. The same networks will routinely carry voice, data, images, and information in other forms.” Upgrading information leads to intelligence.

Microprocessor revolutionized the mainframe computer. “The next step has come with the introduction of recently of “hyper-media” data bases capable of storing not merely text but also graphics, music, speech and other sounds. More important, hyper-media combine data bases and programs to give the user far greater flexibility than earlier data base systems.” This technology has changed how people in today’s corporate world operate.

Information is freely transformed from one place to the other. Everyone does not have to have the exact same computer and software. “The goal of hyper-media is to “free-form” and “free-flow” information.” Knowledge is power and power is knowledge.

Skills and knowledge are needed for jobs, not quantitative but qualitative. In the near future job descriptions will be based on what knowledge you have in the technological field. Your brain will earn you money not your physical strength. UPS and FedEx drivers use computers, load and unload trucks plus they drive trucks. They have to use their brain to run the computer and their physical strength to load and unload the trucks. Knowledge is inexhaustible. Wealth used to be measured by the possession of goods you had now it is measured by the amount of intelligence you have. The information wars struggle for control of knowledge. Knowledge is a hot commodity.

In the past, middle management’s role in a corporation was to collect information from below and then review, format it and pass it on to top level(s). But the channels of information were often clogged with bureaucracy and information overload. One solution to this problems was bypassing the chain of command to get things done. This caused many problems with regard to communication. Managers were often unaware of certain information exchanges or activities that were going on. In contrast, the Japanese had the same problem but they had a system called a doki-kai system which deviated from formal bureaucracies. Employees who were hired together maintained contact with each other and hung out after working hours. I was during this time that there was an exchange of information about each of their ‘Cubby holes’.

One of the first steps taken to free up the flow of information was to design computer management information system to help remove clogs. Big mainframes (like IBM’s SNA) were first used to store massive amount of information. Users used dumb terminals to access applications and information stored on the mainframe. The information was organized like that of a company, in a hierarchical structure. To employees, a mainframe represented the typical structure of concentration of power, at the top, that would be used against them.

Ex: Payroll records used fields which were defined in the database. Specific information were sent to departments only on a need to know basis. The rest was not made (readily) available.

The microprocessor placed the intelligent power of mainframes onto the desktop computer. The power of microprocessor didn’t threaten the existing power models since most of the data was still specific fields which were not flexible. But, the advent of new relational databases, which are inherently non-hierarchical, which allowed the free form and flow across other software packages. Add hyper media (e.g., video compression, CD-ROM), the individual now had the power to manipulate information and present the information in a form that would create perceptions. Free forms of storage and manipulation strike a blow against specialization; new forms of communications end run hierarchies and break them up. For example, employee can access and assist on projects being done at the top. The top can call up information on what the lower level employee is working on. This is the cause of reduction in middle management.

The relationship between Knowledge & Power is how people organize their concepts and how they organize their institutions. For example, the way we organize knowledge frequently determines how we organize people. When knowledge was conceived of as specialized and hierarchical, business were built like in accordance to this. Cubby holes would freeze the information into these places. Power struggles made action slow and crushed creativity. Competition requires innovation but Bureaucracies crushed innovation. Institutions are replaced with mechanical idiot proof rules. Bureaucracies can no longer perform the function they once did.

Flex Firms are new firms created by having access to money information. Franchises are now popular; small business units who have access to a large corporation. Another example is family enterprises who specialize and are able to react to the market quicker. We see a shift from the power or large bureaucratic management distilled down to small units. These anti-hierarchical cluster or business units find each other using the power of the computer. A computer to them gives them access to information for solving problems in the market place.

In the industrial revolutions, skill of the work was mechanized so that anyone else could step in and do the same job without missing a beat. Today's jobs requires skill with more content than just the time-motion routines of the past. Jobs in essence are less interchangeable where knowledge workers are less and less replaceable. Today it is difficult to have to replace a knowledge worker. It is costly. Knowledge workers today, depending on the field, can essentially name their own price. It is said that it takes 6 months to train new person and even then you cannot guarantee that that person will fit in.

One noticeable result of this new independence of the knowledge worker is that Unions have become less powerful because people are not interchangeable. For example, for strike to occur, you no longer need workers to be organized. A few key knowledge workers today have the power to bring a project to its knees. Other weapons of the knowledge based employee include:

The only ounce of prevention is based on peer pressure and treating employees well.

In the past, Economic Power would be controlled by hierarchical, economical monoliths during the era of acquisition and mergers. One of the fundamental mistakes made was to think that these megacorp will stay together. History has shown that as markets mature or evaporate these megacorps begin to realign themselves again. Beyond the market reasoning, internal workings work against the usurpation:

One must look at relationships between these companies, not just the structures: Some are growing others are breaking up into small business units and creating the new power mosaic” The profit center is now companies broken up and operate as Small Business Units (SBUs). Monoliths were encouraged to break up into SBU forming mosaics that were more profitable. One of the problems was that a hierarchical system used a system of computing that was hierarchical. This made it hard for top-level managers to control or view the SBUs.

It wasn’t until the PC gained acceptance that the boardrooms were willing to look at SBUs. These changes where setup by the implication of the computer and its distributive power. PCs had to be networked to mainframes; microcomputers shifted power downward as different departments were able to gain autonomy. They allowed top management to keep track of SBUs. It became easy for top management to let them be autonomous while still holding them accountable for their SBUs by monitoring the information with their computers.

With these new SBUs, the gap between finance and operations widen. Making financial concentration go hand in hand with operational deconcentration. A move from doing all things in house (vertical integration) to outsourcing. Companies moved to take advantage of not having to train or buy technology by outsourcing some of their work. One impetus for this was that in-house production produces rigidity. In-house production becomes an internal monopoly forcing internal departments to pay higher prices. For example, GM & Ford announce to increase outsourcing to 55%. Explains explosion of small business. The point is that now centralized corporations are into the central to production in capitalistic system. Now SBUs; decentralized way of doing business. We are not going to see the giant companies ruling, but a symbolic economy made up of SBU and Profit Centers in and out of corporations. Boutiques, not behemoths.

1) Mass Media product Mass Democracy

2) Mom & Pops were pushed out by big companies during the smoke stack era and coming around to technology available to allow Mom & Pop to compete - full circle.

3) Restructuring of Society: Back in the Roosevelt Days you had at most 10 groups who could influence policy making; today there are hundreds. In this new mosaic society, we need to rethink the fundamental democratic laws.

4) bureaucratism: most prevalent form of power in a system. Not capitalism or socialism. The flow of information and the flow of money; both are important. Power will flow to those sectors which regulate information in a super symbolic corporation. Bureaucratic Powershifts will occur.

5) Privatization has become a buzz word: downsize bureaucracy; outsource... Privatization is the government equivalent of corporate divestiture. We overlook that as we break up business into SBUs, a government that doesn’t follow suit will be a gross mismatch with how we are to do business (Internet is a good example). This is one way government is trying to cope with the new realities.

Victor Antonio G. is an author and motivational speaker.  Please share this with a colleague or friend who may need some words of inspiration.  Remember, Success Happens for a Reason.   

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