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Index
However, in recent times these intangibles have grown so large that they frequently overshadow the physical and financial capital of a company, often by more than a factor of 10. And so businesses are beginning to recognize that they must identify and measure the components that make up IC.
Some of these components include the quality and attitudes of employees, the attitudes of management, the internal procedures, data bases, and lines of communication in the company, relationships with suppliers, and the customer community served by the company.
A famous example of the power of employee attitudes is known as the "Hawthorne effect". In the late 1920's and early 30's a group of efficiency experts studied the workforce at Western Electric's Hawthorne plant. Each time they improved an element of the worker's environment, such as better lighting, more space, frequent breaks, etc, worker productivity increased. Then they removed all of these improvements, returned the environment to its original condition, and, to their amazement, productivity soared to its highest level! Perplexed, they asked the workers and were told that this was the first time anyone had ever noticed them and thought them important. The belief that they were valued and doing important work contributed to productivity far more than any other element in their workplace.
Another example that illustrates the importance of employee-employer relationships is the work of W. Edwards Deming and Joseph M. Juran in Japan. American employers frequently have an adversarial relationship with their workers and view them as the reason for low productivity. Deming and Juran saw that the problem lay with the attitudes and procedures of management, and that by instituting certain statistical quality control measures throughout the production process, along with strong and enthusiastic support by the workers, both quality and productivity could be greatly enhanced.
Lines of communication within a company are very important: I know of a now defunct large computer company whose divisions unknowingly developed two nearly identical lines of computer hardware, and the duplication in effort was not detected until they were nearly ready for market.
The attitudes toward, and knowledge about, technological innovations can control the destiny of a company. When IBM was asked to invest in Xerography, the management calculated the amount of carbon paper then used to make copies, and concluded that the market was too small! They completely overlooked the possibility that xerography would create totally new markets and activities, rather like estimating the traffic flow a bridge would create by counting the number of people who swim the river.
Perhaps the best known example of the failure of management to deal with innovation was that by the corporate leaders at Xerox in the 70's. The point-and-click windows environment which dominates computing today was developed by scientists at Xerox who had a vision of what computing could be. Unfortunately, that vision was totally lost on management who had a fixed view of computers as business and scientific calculating machines.
The Dell computer corporation recently introduced a major change in its corporate culture that affected many elements of its internal organization and relationships with suppliers: it essentially rebuilt itself around the new Internet language XML. See Dell for a discussion of their experience.
However well or poorly it is implemented, the increasing importance of technology and the lessons of the past 50 years have convinced most American companies that intellectual capital must be fully addressed.
It is debatable whether this is a fundamentally new revolution or is a continuation and intensification of the myriad of changes that have occurred over the past 200 years. Certainly those changes have rocked society to the core and totally altered our relationship with nature. But whether it is a new revolution or a continuation of the old, most will agree that it is of major importance.
Some view it as a decentralizing and democratizing force whereas others see it as a more efficient means to transfer wealth and power from the many to the privileged few. Certainly the recent decline in real wages for the average American, the decline in security and retirement benefits, and the huge increase in the disparity between the upper two percent and the rest of us lend credence to the latter view.
The effects of this force can be seen in many areas. For many people it has opened up a flood of information available with the click of a button, such as immediate answers to almost any piece of factual information. It both encourages and facilities life long learning. At the same time, it increases isolation, and removes contact with people and nature. My wife and I often remark on how different our childhood was from that of our kids -- we played outdoors as much as possible, and explored a sizeable physical area, whereas our kids live indoors attached to PCs.
For most workers there is less security, more change, frequent skill upgrades and retraining, flexibility in terms of the duration, hours, place of employment, and working conditions. In my area, the retirement package offered newer employees has steadily declined through the decades.
Companies use information technology to restructure themselves in many ways. For example, just-in-time production, which greatly reduces inventory, is facilitated by computer databases which locate products and schedule their delivery. An extreme case is the Internet company eBay, which uses information technology to eliminate inventory altogether. There is less need for vertical integration (producing all of their supplies themselves) and more outsourcing and business-to-business interactions, increasingly facilitated by the new Internet language XML. Information technology makes it easier to create small runs of customized products, and it has so reduced the barriers of distance that transnational companies now dominate much of the world's economy.
Marketing can now target customer bases with high precision. For example, cookies in Web browsers allow marketeers to gather very detailed information about users, including where they go, how long they stay, what they examine, what they purchase, what browser and PC they use, etc.
A major unknown is the effect of the information society on the physical environment. This may be its most important consequence as there can no longer be any doubt that the environmental destruction wrought by the older industrial revolution is one of the greatest dangers we face. The extinction rate of animal and plant species is thousands of times greater than the natural rate, severe man made global warming (by 10 degrees in a century) is now believed by the majority of scientists, whereas once it was considered a fringe view, the depletion of the ozone, the loss of soil, etc., all paint a frightening picture.
In some ways, information technology is making this worse. The servers and infrastructure for the Internet use a great deal of energy. See The Nets's Power Play and and Power Struggle for differing arguments on this subject. Also, it was expected that computers would reduce paper output, but ever cheaper and more capable printers may have expanded its use. In homes, most electricity was used for lighting, radios, TVs, and VCRs, but these have been joined by PCs, video games, printers, scanners, fax machines, and all sort of electronic toys and robots which consume energy and batteries (toxic waste).
Another effect is that information technology allows many people to live almost totally indoor lives and with little contact with nature. As a result they do not perceive the dangers to the environment with their own senses.
However, there are many reasons hope that this is not the case. For one thing, information technology may greatly reduce waste by more efficient design, computer control of combustion and machines, more efficient control of traffic flows, and better monitoring of the environment.
In addition, information technology has reduced the power and size requirements for a given performance by factors of hundreds of thousands or millions over the past generation, and while we may be facing fundamental limits, there is no doubt that very large reductions will occur for some time to come.
My favorite scenario involves the extensive use of wearable computers. These require advances in the areas of microelectronics, speech and gesture recognition, the integration of cell-phone, GPS, and TV technology in computers, and the development of comfortable, lightweight, and attractive headsets with integrated camera, speakers, and high resolution retinal displays. But all of these technologies are making such rapid advances that we should see such computers by the end of the decade. In a 1-2 pound package using very little power (perhaps provided by our own body) they could potentially provide us with all of our information needs: our watches and alarm clocks, calendars, cell-phones, radios, TVs, VCRs, CD players, video games, computers, cameras, fax machines, all the books, magazines, and newspapers we read, our legal, financial, and medical information, the little scraps of paper we make notes on, our family photo albums, etc. The savings in materials and energy consumption would be immense. Already I see many people wearing headsets while exercising, answering phones, walking, etc, so a dramatic increase in their capabilities will likely lead to greater use.
As reported in Distance Education only 10-15 percent of American universities fail to offer significant online instruction. These are mainly small liberal arts colleges that emphasize the community experience in learning. So e-learning is a very major and growing part of the educational experience, and is being used not only by universities, but by other agencies, special groups such as the elderly or disabled, adult education, high schools, rural areas, and private industry. Almost all reports agree that online learning is as effective as traditional learning in the classroom.
I don't know enough about the European experience to say much about the difference between American and European growth rates in online learning. According to an Internet survey as of November 2000 there were 167 million US/Canada online users compared with 105 Million European users, and since Europe has a somewhat larger population, the per capita access to the Internet is moderately higher in the U.S. This alone might give us the edge in online learning. Also, America definitely leads all other countries in adult education (somewhat to my surprise, American adults score better in Science than adults in any other country, despite the poor performance of our children) and online learning is especially well suited to the schedules of adults.
However, Philip Jones in Online Learning 2001 Europe notes that "The corporate online learning market in the United Kingdom is expected to triple in the next two years to nearly U.S. $2.3-billion dollars", so the growth in that part of Europe is certainly very rapid.
These online programs definitely are leading to links with other institutions throughout the world. To quote from my own university's distance learning page:
"The UW has entered the Association of Pacific Rim Universities, the World Wide University Network, and the Sloan Foundation consortium. All three bring together universities from around the nation and world to promote quality in distance learning".
The future of online learning appears assured. While there are disadvantages as well as advantages, the former are being somewhat whittled down by technical advances and the latter are being enhanced.
The main disadvantages of online learning appear to be reduced interaction with professors and students, especially of the informal "coffee shop" variety, and the lack of direct physical interaction where professors or fellow students can guide you by pointing at objects, or showing you where to click the mouse, etc.
The advantages include the time, cost, and difficulties avoided due to the elimination of commuting, the flexibility in terms of time and place, the repeatability of lectures captured on streaming video and the ability to locate and replay sections of interest, the often more in-depth analysis encouraged by email, and the wider audience and range of views permitted by chat groups (the University of Washington offers a special Web site with chat rooms and discussion groups for online students).
The largest barrier I see to online learning is limited bandwidth. Streaming multimedia (video and sound) is one of the most effective means of instruction, but it is virtually useless at typical dial-up modem speeds of 56 Kb or less. While I expected 250 Kb to be better, I was surprised at how very much better it is: while somewhat inferior to TV, especially in capturing rapid motion, I found it quite acceptable and better than being in the back of a large auditorium. I am fortunate to have high speed access both at work and (through a cable modem) at home, but most people in this country and elsewhere lack this luxury.
My own experience with online learning has been mostly positive, although I have seen many online demos where the mouse moves too fast, the text is faint or fuzzy, there is no control over speed, or repeatability, or starting points. I have taken courses in multimedia, VRML, XML, and the design of courses, and found the interaction with students across the country, email interaction with the course authors, and the projects created by the students, to be most informative.
To some extent gaps are a normal and expected part of new technologies and are no cause for alarm. Some groups are favorably positioned to pioneer the techniques which are often initially expensive and difficult to use. Thus electricity, radio, telephones, TVs, and VCRs were at first owned mainly by the well-to-do, but as mass production lowered the cost and devices became easier to use, they became affordable to nearly all in industrial countries. A well known example of this in America is illustrated by the Truman-Dewey presidential election in 1948. All polls indicated that Dewey would win by a landslide. But the polls were conducted via telephone and at that time there was a sizeable gap between those who could afford phones and those who could not, and so the sampling was heavily biased. That would not happen today as roughly 95% of American households have telephones.
According to a Gartner report a digital gap definitely exists in America, where upper income families are 2-3 times more likely than the poor to access the Internet, but it has narrowed recently and I expect it to narrow further as costs continue to decline and PCs are made easier to use. Other gaps, such as broadband versus dial-up modem are currently increasing, but this is to be expected because broadband access is much more recent.
The gender gap has nearly disappeared in America but there is still a major age gap. A recent columnist in a PC magazine described the difficulties he had in introducing a PC to his grandmother. In my experience, a major part of that difficulty lies with the mouse which is a poor device for pointing, worse for dragging, and nearly useless for drawing or writing. It causes great frustration among the elderly. I find it strange that a greatly superior device, the pen, is only available on the cheapest types of computers, the PDAs. However, I believe that pen driven PCs will become much more common in the near future, as well as other usability improvements which will help both the elderly and the rest of us.
The gap between nations, however, is very different. Within an industrial nation the supporting infrastructure in terms of roads, power, utilities, technical support, and communications is nearly everywhere, and even the poor have access to much of it. But in really poor counties, with per capita incomes of a $1/day, such support is non-existent. While wireless and satellite technologies may reduce some of the need for a ground based infrastructure, I suspect that the digital gap between rich and poor nations may well increase.
© Copyright 2001 University of Washington Computing & Communications.
Larry Gales