Information Challenges

Quoted (with color emphasis added for additional—beyond the all caps in the original text—concept highlighting) from the first few paragraphs of Chapter 4 of Peter Drucker's Management Challenges for the 21st Century

This is an example of a capital expenditure clue plus the work investments needed to acquire a new way of seeing our world (foresight) and some hindsight on unimagined futures.

Are you already working on this?

Who will need to understand this 15 years from now so they will be working on it?

Does this have a place in your strategic work plan?

Introduction—The New Information Revolution

A new Information Revolution is well under way.

It has started in business enterprise, and with business information.

But it will surely engulf ALL institutions of society.

It will radically change the MEANING of information for both enterprises and individuals.

It is not a revolution in technology, machinery, techniques, software or speed.

It is a revolution in CONCEPTS.

It is not happening in Information Technology (IT), or in Management Information Systems (MIS), and is not being led by Chief Information Officers (CIOs).

It is led by people on whom the Information Industry tends to look down: accountants.

But an Information Revolution has also been going on in information for the individual.

Again it is not happening in IT or MIS, and is not led by CIOs.

It is a print revolution. And what has triggered these information revolutions and is driving them is the failure of the "Information Industry"—the IT people, the MIS people, the CIOs—to provide INFORMATION.

So far, for fifty years, Information Technology has centered on DATA—their collection, storage, transmission, presentation. It has focused on the "T" in "IT."

The new information revolutions focus on the "I"

They ask, "What is the MEANING of information and its PURPOSE?"

And this is leading rapidly to redefining the tasks to be done with the help of information and, with it, to redefining the institutions that do these tasks.

From the "T" to the "I" in "IT"

A half century ago, around 195O, prevailing opinion overwhelmingly held that the market for that new "miracle," the computer, would be in the military and in scientific calculations, for example, astronomy. A few of us, however—a very few indeed—argued even then that the computer would find major applications in business and would have an impact on it. These few also foresaw—again very much at odds with the prevailing opinion (even of practically everyone at IBM, just then beginning its ascent)—that in business the computer would be more than a very fast adding machine doing clerical chores such as payroll or telephone bills. On specifics, we dissenters disagreed, of course, as "experts" always do. But all of us nonconformists agreed on one thing: The computer would, in short order, revolutionize the work of top management. It would, we all agreed, have its greatest and earliest impacts on business policy, business strategy and business decisions.

We could not have been more wrong. The revolutionary impacts so far have been where none of us then anticipated them: on OPERATIONS.

Not one of us, for instance, could have imagined the truly revolutionary software now available to architects. At a fraction of traditional cost and time, it designs the "innards" of large buildings: their water supply and plumbing; their lighting, heating and air-conditioning; their elevator specifications and placement-work that even a few years ago still absorbed some two-thirds of the time and cost of designing an office building, a large school, a hospital or a prison.

Not one of us could then have imagined the equally revolutionary software available to today's surgical residents. It enables them to do "virtual operations" whose outcomes include "virtually killing" patients if the resident makes the wrong surgical move. Until recently, residents rarely even saw much of an operation before the very end of their training.

Half a century ago no one could have imagined the software that enables a major equipment maker such as Caterpillar to organize its operations, including manufacturing worldwide, around the anticipated service and replacement needs of its customers. And the computer has had a similar impact on bank operations, with banking probably the most computerized industry today.

But the computer and the information technology arising from it have so far had practically no impact on the decision whether or not to build a new office building, a school, a hospital or a prison, or on what its function should or could be. They have had practically no impact on the decision to perform surgery on a critically sick patient or on what surgery to perform. They have had no impact on the decision of the equipment manufacturer concerning which markets to enter and with which products, or on the decision of a major bank to acquire another major bank. For top management tasks, information technology so far has been a producer of data rather than a producer of information let alone a producer of new and different questions and new and different strategies.

The people in Management Information Systems (MIS) and in Information Technology (IT) tend to blame this failure on what they call the "reactionary" executives of the "old school." It is the wrong explanation. Top executives have not used the new technology because it has not provided the information they need for their own tasks. The data available in business enterprise are, for instance, still largely based on the early- 19th-century theorem that lower costs differentiate businesses and make them compete successfully. MIS has taken the data based on this theorem and computerized them. They are the data of the traditional accounting system. Accounting was originally created, at least five hundred years ago, to provide the data a company needed for the preservation of its assets and for their distribution if the venture were liquidated. And the one major addition to accounting since the 15th century-cost accounting, a child of the 1920s—aimed only at bringing the accounting system up to 19th-century economics, namely, to provide information about, and control of costs. (So does, by the way, the now—so-popular revision of cost accounting: total quality management.)

But, as we began to realize around the time of World War II, neither preservation of assets nor cost control is a top management task. They are OPERATIONAL TASKS. A serious cost disadvantage may indeed destroy a business.

But business success is based on something totally different, the creation of value and wealth.

This requires risk-taking decisions:
1) on the theory of the business;
2) on business strategy;
3) on abandoning the old and innovating the new;
4) on the balance between immediate profitability and market share.

It requires strategic decisions based on the New Certainties discussed in Chapter Two.

These decisions are the true top management tasks.

It was this recognition that underlay, after World War II, the emergence of management as a discipline, separate and distinct from what was then called business economics and is now called microeconomics.

But for none of these top management tasks does the traditional accounting system provide information. Indeed, none of these tasks is even compatible with the assumptions of the traditional accounting model.

The new information technology, based on the computer, had no choice but to depend on the accounting system's data. No others were available. It collected these data, systematized them, manipulated them, analyzed them and presented them. On this rested, in large measure, the tremendous impact the new technology had on what cost accounting data were designed for: operations. But it also explains information technology's near-zero impact on the management of business itself.

Top management's frustration with the data that information technology has so far provided has triggered the new, the next, Information Revolution. Information technologists, especially chief information officers in businesses, soon realized that the accounting data are not what their associates need—which largely explains why MIS and IT people tend to be contemptuous of accounting and accountants. But they did not, as a rule, realize that what was needed was not more data, more technology, more speed. What was needed was to define information; what was needed was new concepts. And in one enterprise after another, top management people during the last few years have begun to ask, "What information concepts do we need for our tasks?" And they have now begun to demand them of their traditional information providers, the accounting people.

The new accounting that is evolving as a result of these questions will be discussed in a later section of this chapter ("The Information Enterprises Need"). And so is the one new area—and the most important one—in which we do not as yet have systemtic and organized methods for obtaining information: information on the OUTSIDE of the enterprise. These new methods are very different in their assumptions and their origins. Each was developed independently and by different people. But they all have two things in common. They aim at providing information rather than data. And they are designed for top management and to provide information for top management tasks and top management decisions.

The new Information Revolution began in business and has gone farthest in it. But it is about to revolutionize education and health care. Again, the changes in concepts will in the end be at least as important as the changes in tools and technology. It is generally accepted now that education technology is due for profound changes and that with them will come profound changes in structure. Long-distance learning, for instance, may well make obsolete within twenty-five years that uniquely American institution, the freestanding undergraduate college. It is becoming clearer every day that these technical changes will—indeed must—lead to redefining what is meant by education. One probable consequence: The center of gravity in higher education (i.e., post-secondary teaching and learning) may shift to the continuing professional education of adults during their entire working lives. This, in turn, is likely to move learning off campus and into a lot of new places: the home, the car or the commuter train, the workplace, the church basement or the school auditorium where small groups can meet after hours.

In health care a similar conceptual shift is likely to lead from health care being defined as the fight against disease to being defined as the maintenance of physical and mental functioning. The fight against disease remains an important part of medical care, of course, but as what a logician would call a subset of it. Neither of the traditional health care providers, the hospital and the general practice physician, may survive this change, and certainly not in their present form and function.

In education and health care, the emphasis thus will also shift from the "T" in IT to the "I," as it is shifting in business.