Chapter 58 11.3 Information Factory

We can imagine the shape of companies in the future: they will continue to evolve until they are completely networked.A purely networked company should have the following characteristics: distributed, decentralized, collaborative, and adaptable. Distributed - Commerce is no longer conducted in a single location.It's happening simultaneously in several different places.The company's headquarters may not even be located in one place.Apple Computer Company has a large number of buildings densely distributed in two cities, and each building is the "headquarters" of a different function of the company.Even small companies can exist in a distributed manner within the same geography.Once you're networked, it doesn't really matter whether you're downstairs in your office or across town.

Open Vision, based in Shelton, Calif., is a prime example of this new model.This is an ordinary small software company.As the company's CEO Michael Fields said: "We are a truly distributed company." Open Vision has customers and employees in many cities in the United States, and all work is carried out on the network.Still, "the vast majority of them don't even know where the Shellot is," Fields told the San Francisco Chronicle. In this stretch toward ultimate networking, however, companies should not be broken down into mere networks of many individual individuals.Based on the data collected so far and my own experience, for a fully distributed company, the most reasonable solution is to combine teams of 8 to 12 people to work in the same location.A large global enterprise, if organized in a fully networked fashion, can be thought of as a system of cells, each of which is composed of a dozen or so people, including many run by twelve employees. a mini-factory with 12 people, a "headquarters" with 12 people, a profit center with 8 people, and a supply department run by 10 people.

Decentralization - How do you pull off a massive project if you only have 10 people?In the case of the so-called Industrial Revolution, in most cases the real wealth was achieved by bringing certain processes under centralized control.The bigger it is, the more efficient it is.The "money grabbers" of yesteryear discovered that they could make hundreds of millions if they could control every key and complementary link in their industry.That is why steel companies control the mines, mine their own coal, build their own railroads, manufacture their own equipment, house their own workers, and strive to achieve some kind of self-sufficiency within a giant corporation.This approach really works when the world is slowing down.

Nowadays, with the rapid economic development, having such a complete production chain has become a kind of burden.This approach is only effective when the "time is right".Times have changed, and control must give way to speed and flexibility.Those additional functions, such as providing energy for itself, will soon be transferred to other companies. Even functions that were otherwise important were subcontracted.Gallo Winery, for example, no longer grows the specialty grapes it needs to make its wine; it delegates the thankless work to others while it concentrates on brewing and marketing.Likewise, a car rental company may subcontract the repair and maintenance of its own fleet to other companies and focus solely on the rental business itself.An air passenger carrier will subcontract the cargo space (an extremely important profit center) for its transcontinental flights to an independent freight company because they find that the latter can run the business better than they can do it themselves, and will Get more profit.

The Detroit automaker was once known for doing everything hands-on.Now they subcontract nearly half of their functions, including the all-important engine building.GM even hired Pittsburgh Glass Industries to paint the bodywork at GM's plant—a crucial part of the sales process.In business journals, this burgeoning practice of decentralization through subcontracting is known as “outsourcing.” By exchanging vast amounts of technical and financial information electronically, the coordination costs of large-scale outsourcing have been reduced to an affordable level.Simply put, the Internet has made outsourcing a viable, profitable, and competitive option.An assigned task may have to go back and forth several times until it is finally implemented on the shoulders of a small but compact team that can focus and efficiently complete the task.Typically, these teams may be an independent company, or some autonomous branch.

Studies have shown that if a task is divided into several parts and assigned to different companies, the transaction cost required to ensure quality is higher than the cost of completing the task within one company.However, (1) the development of network technology, such as electronic data exchange and video conferencing, has made these costs increasingly low; Dwell on tasks that are no longer needed, and start working on tasks that may be needed in the future—something that centralized enterprises lack. Extending the outsourcing logically, it is not difficult to come to the conclusion that a 100% networked company only needs one office to accommodate all its professionals and connect with other independent groups through network technology.Plenty of multimillion-dollar intangible business can be done with an office of two assistants, or no office at all.Chiat/Day, a major ad agency, is working on spinning off its physical headquarters.During the project, the team rents a conference room in the hotel and works using laptops and telephone relays.After the project is completed, the team disbands and regroups.Some of these teams "belong" to the company, while others are managed and accounted for separately.

Let's imagine a future car manufacturer based in Silicon Valley, which I'll call Upstart Auto.Upstart auto companies are poised to take on Japan's Big Three. Upstart's structure looks like this: 12 people share an office in a clean, tidy office building in Palo Alto, California, including some finance people, four engineers, a CEO, a coordinator, a lawyer, and a marketing guy .Across town, employees in an old warehouse assemble an eco-friendly car with 120 miles per gallon.The car is made of Polytron composite materials, a ceramic engine, and various electronic components: high-tech plastics come from a young company in a joint venture with Upstart; the engine is bought in Singapore; It's coming in a steady stream from Mexico, Utah, and Detroit.The transport company acts as a temporary storage for these components - the materials needed for the day arrive at the factory exactly the same day.Each car is customized by consumers online and shipped immediately after assembly.A computer-controlled laser lathe quickly finalizes the body molds, while the body design is determined through customer feedback and target markets.A flexible assembly line made up of robots is responsible for the assembly of the cars.

Repair and improvement of the robot was outsourced to a robotics company.A company called Pinnacle Plant Maintenance Services takes care of the maintenance of the shed.Things like answering the phone are left to a small service provider in San Mateo.The administrative work of all teams in the company is handled by a national agency.The same goes for computer hardware maintenance.Marketing and legal people have their own responsibilities (of course), and these people are also hired from outside the company.Bookkeeping is almost entirely computerized, but an external accounting firm responds remotely to any accounting needs of the company.There are only about 100 people who receive wages directly from the upstart company. They form groups, and each group has its own welfare plan and salary system.By helping suppliers grow, forming alliances, and even investing in partners, upstarts quickly captured the market.

Seems a little far away, doesn't it?Actually not that far.Let's take a look at how a real-life Silicon Valley pioneer started 10 years ago.James Bryan Quinn wrote in the March/April 1990 Harvard Business Review: The other chips were from Hitachi, Texas Instruments and Motorola, the display was from Hitachi, the power supply was from Astek, and the printers were from Tokyo Electron and Quemo.Similarly, Apple minimized its internal affairs by outsourcing application development to Microsoft, marketing to McKinna Consultants, product design to Frog Design, and distribution to ITT Industries and Computer Land. Sexual services and capital investment.

It's not just business that benefits from this networked outsourcing.Municipalities and other government agencies were quick to follow suit.One of many examples is the city of Chicago, which outsourced its public parking management to EDS, a computer outsourcing company founded by Ross Perot. EDS has developed a system that runs on a handheld computer device that prints tickets and links them to a database of 25,000 city meters in Chicago to improve collection of fines.After EDS took over the task for the city of Chicago, the payment rate of the citations jumped from 10 percent to 47 percent, adding $60 million to the struggling city's coffers.

Collaborative - Networking internal work makes economic sense so much that sometimes certain core functions are even outsourced to competitors of the company for mutual benefit.Companies may cooperate in one business while competing in another. In the United States, many major domestic airlines outsource the complex booking and ticketing process to their competitor, American Airlines.Likewise, two credit card companies, MasterCard and VISA, sometimes offload billing or transaction processing to their archrival, American Express.In the 1990s, "strategic alliance" was a buzzword for companies.Everyone is looking for a partner with whom they can form a symbiotic relationship, or even a competitor with whom they can form a symbiotic relationship. The boundaries between industries—transportation, wholesale, retail, communications, marketing, public relations, manufacturing, warehousing—are lost in infinite networks.Airlines do travel, they sell junk by direct mail, they arrange hotel reservations, while computer companies have barely touched hardware. Perhaps at some point, completely self-sufficient companies will become very rare.The implication of the concept of the company will also change from a tightly coupled and strictly constrained organism to a loosely coupled and loosely constrained ecosystem.The notion of IBM as an organism needs to be turned upside down. IBM is actually an ecosystem. Adaptability - The shift from product to service is inevitable, as automation continually reduces the cost required for physical replication.In fact, the cost of duplicating a software CD or a music cassette is a fraction of the cost of the product.And, as products get smaller and smaller, their cost keeps coming down because less material is used.A pill costs a fraction of its selling price. However, in the pharmaceutical, computer and, increasingly, high-tech industries, costs for R&D, design, licensing, patents, copyrights, marketing and customer support—those that are service components—dominate. increasing proportion.And all of these are information and knowledge intensive. Today, a super product is not enough to support a company for a long time.Things change so quickly; innovative substitutes (such as fiber optic cables to replace electrical cables), reverse engineering, cloning, and third-party add-ons that allow underdog products to thrive, and rapidly changing standards (Sony, although in Losing heavily on BetaVCR, but still likely to dominate on 8mm tape) combined, all try to bypass those traditional paths to gain advantage.To make money in the new age, you have to follow the flow of information. A network is an information processing factory.As the value of a product increases with the knowledge contained in it, so does the value of the network that generates that knowledge.A small device coming out of a factory once followed a linear path from design to production to distribution.Today, the life of a small device manufactured by some kind of flexible production process takes on a web-like pattern—simultaneously spread out in many different departments in different places, and has overflowed the factory, so that it is difficult to say exactly where. One thing is what happened first and where it happened. The entire network is in motion at the same time.Marketing, design, manufacturing, suppliers, buyers are all involved in creating a successful product.Product design means involving marketing, legal, and engineering teams all at the same time, rather than sequentially as in the past. Since the UPC bar code became popular in stores in the 1970s, the movement of retail goods (cans of soda, socks) at the counter has been linked to the back-office management system.However, in a mature network economy, it should be possible to link these things with front-office management systems and consumers by adding weak communication capabilities.Producing little things with active microchips instead of passive barcodes means hundreds of mentally retarded little things on each shelf in a discount store with thousands of shelves.So, why aren't these chips activated?They are now intelligent.They can display their own prices, thanks to you, and can easily be adjusted to match sales.If the store owner wants to make a sale, or if you have some kind of coupon or discount card in hand, they can recalculate their prices.A product can also remember if you glanced at the price tag and walked away—information that would be of great interest to store owners and manufacturers.In any case, advertisers can brag: at least you looked up.When the products on the shelf get their own or each other's attention and interact with consumers, they will quickly explode into a completely different economic form.