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Beyond the Information Age

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Julian Birkinshaw ved London Business School med kloke ord og spådommer om fremtidens informasjonssamfunn. Birkinshaw kommer til InnovasjonsDagen 2014, den 9. september på Rockefeller, for å dele mer av sin kunnskap og erfaring – se mer her.

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We live in the information age, which according to Wikipedia is a period in human history characterized by the shift from industrial production to one based on information and computerization.

Nothing surprising there, except for the idea that this is “a period in human history” – which tends to suggest it will come to an end at some point. The industrial revolution in the late nineteenth century ushered in the industrial age, and the digital revolution in the mid twentieth century spurred the emergence of the information age. So it is not entirely crazy to speculate about what might lie beyond the information age.

Of course, I am not arguing that information will become obsolete. Firms will always need to harness information in effective ways, just as most of them still need industrial techniques to make their products cheaply and efficiently. My point, instead, is that information will become necessary but not sufficient for firms to be successful. All this talk of “big data,” for example, feels like an attempt to strain a few more drops of juice out of an already-squeezed orange, just as Six Sigma was a way of squeezing more value out of the quality revolution. Both are valuable concepts, but their benefits are incremental, not revolutionary.

So just as night follows day, the information age will eventually be superseded by another age; and it behoves those with senior executive responsibility to develop a point of view on what that age might look like.

So here is a specific question that helps us develop this point of view: What would a world with too much information look like? And what problems would it create? I think there are at least four answers:

1. Paralysis through Analysis. In a world of ubiquitous information, there is always more out there. Information gathering is easy, and often quite enjoyable as well. My students frequently complain that they need more information before coming to a view on a difficult case-study decision. Many corporate decisions are delayed because of the need for further analysis. Whether due to the complexity of the decision in front of them, or because of the fear of not performing sufficient due diligence, the easy option facing any executive is simply to request more information.

2. Easy access to data makes us intellectually lazy. Many firms have invested a lot of money in “big data” and sophisticated data-crunching techniques. But a data-driven approach to analysis has a couple of big flaws. First, the bigger the database, the easier it is to find support for any hypothesis you choose to test. Second, big data makes us lazy – we allow rapid processing power to substitute for thinking and judgment. One example: pharmaceutical companies fell in love with “high throughput screening” techniques in the 1990s, as a way of testing out all possible molecular combinations to match a target. It was a bust. Most have now moved back towards a more rational model based around deep understanding, experience and intuition.

3. Impulsive and Flighty Consumers. Watch how your fellow commuters juggle their smartphone, tablet and Kindle. Or marvel at your teenager doing his homework. With multiple sources of stimulation available at our fingertips, the capacity to focus and concentrate on a specific activity is falling. This has implications for how firms manage their internal processes – with much greater emphasis being placed on holding people’s attention than before. It also has massive consequences for how firms manage their consumer relationships, as the traditional sources of “stickiness” in those relationships are being eroded.

4. A little learning is a dangerous thing. We are quick to access information that helps us, but we often lack the ability to make sense of it, or to use it appropriately. Doctors encounter this problem on a daily basis, as patients show up with (often incorrect) self-diagnoses. Senior executives second-guess their subordinates because their corporate IT system gives them line-of-sight down to detailed plant-level data. We also see this at a societal level: people believe they have the right to information that is in the public interest (think Wikileaks), but they are rarely capable of interpreting and using it in a sensible way. The broader point here is that the democratization of information creates an imbalance between the “top” and “bottom” of society, and most firms are not good at coping with this shift.

Consequences for individuals and for firms:
So what are the consequences of a business world with “too much information”? At an individual level, we face two contrasting risks. One is that we become obsessed with getting to the bottom of a problem, and we keep on digging, desperate to find the truth but taking forever to do so. The other risk is that we become overwhelmed with the amount of information out there and we give up: we realise we cannot actually master the issue at hand, and we end up falling back on a pre-existing belief. For example, in debates about fracking or genetically modified food, very few people get to grips with the scientific data, and even fewer change their views. The challenge for individuals is to steer a course between these twin perils. This puts a premium on an individual’s ability to monitor her own analytical style –knowing when to stop digging, when to ask an expert, and when to rely on personal experience and judgment.

For firms, there are three important consequences. First, they have to become masters of “attention management” – making sure that people are focused on the right set of issues, and not distracted by the dozens of equally-interesting issues that could be discussed. A surplus of information, as Nobel Laureate Herbert Simon noted, creates a deficit of attention. That is the real scarce resource today.

Second, firms have to get the right balance between information and judgment in making important decisions. As Jeff Bezos, founder and CEO of Amazon, observed, there are two types of decisions: “there are decisions that can be made by analysis. These are the best kind of decisions. They are fact-based decisions that overrule the hierarchy. Unfortunately there’s this whole other set of decisions you can’t boil down to a math problem.” One of the hallmarks of Amazon’s success, arguably, has been its capacity to make the big calls based on judgement and intuition.

Finally, the ubiquity of information means a careful balance is needed when it comes to sharing. Keeping everything secret isn’t going to work anymore – but pure transparency has its risks as well. Firms have to become smarter at figuring out what information to share with their employees, and what consumer information to keep track of for their own benefits.

The bottom line

For the last forty years, firms have built their competitive positions on harnessing information and knowledge more effectively than others. But with information now ubiquitous and increasingly shared across firms, these traditional sources of advantage are simply table-stakes. The most successful companies in the future will be smart about scanning for information and accessing the knowledge of their employees, but they will favour action over analysis, and they will harness the intuition and gut-feeling of their employees in combination with rational analysis.

Julian Birkinshaw, London Business School

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