Futurist Predicts Bits-Based Economy

n the international bestseller Paradigm Shift, Canadian infotech guru Don Tapscott prognosticates that networks and open systems will radically transform how companies do business. Two years after that publication, as Tapscott finishes up a second tribute to technology's powers, he describes how computers and other information technologies are changing not just business, but the whole economy.

WT: Describe what you call the second era of the information age.

TAPSCOTT: We're moving into a new era where most things are different in terms of the nature of technology, but more importantly, in the role of technology in business and in our economy. Organizations that can figure out this shift have a chance of succeeding and those that don't are basically toast. They tend to fall behind, become irrelevant and cease to exist. Punishment is swift for those who can't manage the transition to the new enterprise, the new technology.

WT: Can you give me an example?

TAPSCOTT: Encyclopedia Britannica was the largest encyclopedia company for generations and its market was largely selling to families with young children. Their product was a physical product, a number of volumes and you paid for it in a single shot. It was updated every few years, although there was an annual report that was not integrated with the rest. Last year, Britannica fell to No. 3, replaced by Microsoft and Grolier, No. 2, that have encyclopedias on CDs. The obvious benefit of a CD is that you can put it in your pocket, it costs $90 [instead of] $2,000, it's updated every quarter and it's multimedia.

Britannica has tried to leapfrog both Microsoft and Grolier by putting Britannica on the 'Net as well as on a CD. Now you can go to the Internet, the World Wide Web, there's Britannica and it shows you how to subscribe. So what was a physical book has become a subscription service. But it's changed a lot more than that because when you go into the encyclopedia there are hot links, and when you click on one it will take you into other databases.

What was a book has become a directory of information, all human information that is in digital form. Furthermore, the thrust of the company shifting away from selling door to door to the family, to looking for fundamentally new markets, and now it's done deals with a number of universities, whereby every university student as part of their tuition gets access to the Encyclopedia Britannica online. So that's a good example of how through this new interactive, multimedia technology and this growing information highway, a company was changed. Not reengineered, which is a necessary but insufficient change for the new environment, but rather it changed who its customers were, what its product was, what its distribution channel was and what its marketplace was.

WT: Where does the Internet fit into this new way of doing business?

TAPSCOTT: The key thing that has happened in the last three years has been the rise of the Internet. The Internet is the example of the information highway, it's the model and it's evolving into the infrastructure for a new economy. This is not just a tool for business, it will be the basis for the creation of wealth and our ability to sustain social development. This is not about watching more TV, or 500 channels, there will be millions of channels, there are already tens of thousands. It's about changing the nature of the firm, the way that wealth is created. And any society or organization that can't figure that out will tend to fall behind. At the national level, it's called massive structural unemployment and competitive decline.

WT: Are American businesses leading the way in this new business world?

TAPSCOTT: In general, the United States is ahead of other countries in the world, maybe with the exception of Canada. The big problem in Europe and the Pacific Rim, Japan and so on, is the much more hierarchical command and control type of societies and much tighter regulation. In the United States, it's a much more entrepreneurial and open competitive environment and that's really propelled the U.S. ahead. On the other hand, there are huge problems and dangers as a result of moving forward to the new economy.

WT: Such as?

TAPSCOTT: I sense a real fear as I travel around that some kind of market determinism or technological imperative will prevent us from using this technology in responsible ways. There is a wonderful new promise but there are also perils. When we create a society of haves and have-nots and knows and know-nots, [the gaps grow] between men and women and between the cities and rural communities or inner cities, or whites and others and so on. How about the issue of privacy? There's a coming firestorm on this issue as more and more human communications and business transactions come onto this new infrastructure.

WT: What about universal access? Should Internet access be guaranteed?

TAPSCOTT: Universality in terms of telephony has been a long-standing principle since the 1930s and the current administration is committed to achieving universality. But this is a complicated issue. It's not just a question of getting a wire out to every house, school, office, laboratory or factory, it's also a question of having active and informed users. Right now, [most] people with degrees have computers hooked up to networks and a tiny minority of people without high school educations have computers connected to networks.

So we need a lot more than the penetration of networks into underserved areas. We need penetration of awareness and motivation as well. This requires a campaign at the national level involving business, consumer organizations, government, labor, political organizations and others. We need to achieve a national campaign to move to the new infrastructure to ensure universality.

WT: And who should pay for universality?

TAPSCOTT: Those who benefit, which include the providers but also the active users. I like the idea of a pot, a toll booth on the highway that's collecting funds that can go into a pot that can help generate this campaign and extend networks into areas where the market will never take it. It's in everyone's interest to have universal access, including business because it gives them more customers in the short term, but in the longer term, if we create an alienating, two-tiered society, there will be massive dissonance and instability. This is a whole new medium of human communications and shifts like this have always been ushered in through violence, through huge conflicts and turmoil.

WT: Do you foresee a third era of the information age?

TAPSCOTT: The information age is kind of like a blip. And we're moving into a new age. In my new book, I refer to it as the age of networked intelligence, and the economy is a digital economy based on innovation and knowledge. In the new economy, communication occurs in bits as opposed to being something physical. The firm in the digital economy will be as different from the corporation today as it was from the feudal craft shop. It's happening right now and it's starting to get beyond reengineering business processes to the creation of whole new businesses, and business structures. There's never been a technology in human history that's proliferated as fast and there's never been a time that has been more rich with opportunity and fraught with peril.