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BPO Journal

Sunday, October 02, 2005

History - A Guide to the Future

Last week, I came across this fascinating online lecture by Carlota Perez on technological revolutions and techno-economic paradigms and their role in shaping industrial policy. She talks about how technological revolution happens in surges - every 40-60 years, we observe a technology revolution that changes paradigms of innovation and economic organization of activity. As the engines of growth shift, these revolutions bring explosive growth and significant structural change over time. She discusses two phases of a technological revolution - the "installation period" which is the time of learning, adaptation and creative destruction, and the "deployment period" which is the time of institutional recomposition and growth (the interim crash or burst of the bubble separates the two phases).

Perez states that we're not in the deployment period yet - investments are still focused on short-term gain, social systems continue to foster unstable environments, and "idle money" continues to focus on and inflate assets such as housing precluding demand expansion required to absorb excess supply being produced. Perez argues that these structural tensions can be overcome by industrial policy and requires the active attention of businesses and government.

I think there are signs that we may be in the deployment period. A lot remains to be done but organizations and individuals are adapting to the changes that the Internet as a generic tehnology and its subset of new, interrelated technologies have brought about. An IBM worldwide study on innovation, the Global Innovation Outlook found that innovation is occurring more rapidly, is driven by combinations of technologies, expertise, business models and policies, and is redefining the concept of intellectual property as "something to be invested, spread, even shared to reap a return, not tightly con-trolled and hoarded". Rapid change accompanied by smaller times to market and shorter cycles of market saturation have given rise to a new set of best practices and organizational principles. Outsourcing has enabled new loosely coupled, network organizational forms marked by interactive frontiers. The traditional view of inter-firm relationships as dyadic exchanges that prevailed in the era of mass production and transactional outsourcing are yielding to collaborative, enduring partnership forms that are fast redefining the rules of competition. And the change is not random or solely for short-term lucre. For example, firms are using outsourcing to enable business transformation. Although the average contract value has declined, the average contract length has risen reflecting organizational focus on tightly focused outsourcing arrangements to deliver long-term value. Firms are increasingly investing in these new principles of organization and making the allied change in business thought and leadership strategies.

Not all these organizations are satisfied with their efforts. But change is never easy and without disruptions. Perez's lecture sheds light on the nature of change and in a remote sense, on how to prepare for it. Perhaps, as the frequency of such change increases, industries and governments will be better prepared for the strategic transformation that technological revolutions bring and transition into the deployment period with relative ease. In my opinion, even anticipating the future and defining its nature is a big win.

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