Emergence of Information Economy

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Essay Title 3: The emergence of information economy has far-reaching strategic implications for managers in many organizations. Select and discuss some of these implications by reflecting on three aspects, namely (1) the rationale behind your selection, (2) the changing requirements imposed by the new economy and (3) the disconnections between an organization’s IT capability and the external requirements. It is vital to address the increasing commoditization of IT and/or IT--‐based solutions when illustrating their strategic potentials.

The changes businesses have had to accommodate to because of the emergence of information economy, have been immeasurable. Moving from vertical integration to outsourcing in an increasingly virtual organization focused on specialization, the accent on networking and strategic alliances have all been examples of such changes, all in response to growing competition and necessity to be different. The strategic implications IT has had for managers in organizations are extensive, “as companies have come to view it as a resource ever more critical to their success.”(Carr 2003:5) It is challenging to understand the strategic implications information technology has had on organizations, its role in businesses being contextually relative depending on type, size of organizations. However, some trends have emerged, allowing for better appreciation of the changing requirements of the business environment and managers in many organizations. This essay will discuss communication, economic and organizational changes impacting managers, whilst paying attention to issues causing the disconnection between an organization’s IT capability and external requirements. Moreover, because practical examples help to substantiate understanding, the essay will also analyze real-life organizations behaving under the pressure of change, whilst addressing the increasing commoditization of IT when illustrating their strategic potentials. Implications Communication and intra-enterprise relationships While speed, flexibility and reliability have always dominated industries, “technological innovations have transformed each of them”(Dicken, 2007:414). Before the emergence of communication and information economies, “little attention was paid to the collaborative relationships possible between enterprises”(Meyer, 2011) as organizations, stressed traditional remunerations of vertical integration. However, “managers are continually being confronted with new and ever-changing competitive pressures from deregulation, globalization… convergence of industries and technologies”(Prahalad, C. K. and Krishnan, M. S. (2002):24) Furthermore, the lack of alignment between technological deployment and business strategy is creating the disconnection. Moreover, internal rejection of innovation creates issues when “managers’ ability to respond rapidly to those challenges is predicated upon a degree of information-technology flexibility that traditional approaches cannot provide”(Prahalad, C. K. and Krishnan, M. S. (2002):25). “Before the rapid development of the Internet, separate systems – telephone, television and video, individual computer systems – stored and transmitted voice, video and data. Today, these systems are converging”(OECD, 2008), implying that managers need to see change as an instrument necessary for growth, as was mobile technology in the past. Dell exemplifies how the emergence of the information economy has meant the end for the traditional intermediary organization. Using the Internet as a platform, Dell replaced the conventional communication between customers, suppliers and retailers, gaining a sustainable competitive advantage. “The customer order activates the supply chain. Customers can ‘design’ their products from a lot of options to be incorporated into a production schedule. The order then initiates a flow of component parts from suppliers to be assembled into a final product, turned over to a logistics service...
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