Category: Management 3rd May 2019
Technological innovations have transformed the business world and increased the pace of globalization (Chien & Weng 2012). The first wave of innovation was the industrial revolution that transitioned production from manual to machines. Mechanization of production processes improved efficiency and output levels. The first wave impacted the society and corporations positively by improving living standards. It enabled the companies to manufacture products in large quantities to serve bigger markets than before. The information revolution represented the second wave and made knowledge sharing easy through the World Wide Web. Information communication technology (ICT) facilitated the exchange of services through the Internet and eliminated the barriers that restricted services to their places of production. ICT has empowered individuals and organizations because it has created the opportunities. Firms and people outsource services to third parties in different localities with labor cost advantages. Thus, companies can reduce their production costs without affecting the quality of their offerings. The third wave of technological innovation involves the transition of platforms from the traditional models to the digital one. Business activities in the third wave will take place over the Internet. Consequently, it will create unprecedented disruptions. The purpose of the paper is to evaluate the notion that the third wave will be more problematic than the first two. The essay will conduct a critical review of literature related to the digitalization of business activities and assess whether it has the capability of displacing 2 billion jobs and traditional business organizations. Additionally, the essay will explore the concept of technological barons and the political reactions it has elicited. Therefore, the methodology of the paper is the literature review.
The third wave of innovation will have tremendous effects on corporations and the society. Digital platforms have become pivotal to the strategic decisions. Irrespective of the size of an organization, platforms have become tools for competitive advantage. The customer preferences have shifted. Consumers are increasingly concerned with the value they get from products (Hamilton & Philip 2012). During the first wave, the focus was products and the ability of manufacturers to satisfy the market needs. The clients had little contribution to the products and services in the market. Globalization, which has been fuelled by the evolution of ICT, has empowered consumers by providing them with access to information. The opportunity helps them identify the companies with services and products that meet their preferences. Additionally, globalization has enabled many competitors to converge in international markets digitally. Consequently, customers have a variety of products, from which to choose. The evolution of ICT has, therefore, changed the focus from companies and their products to customers and their needs. Another change that has taken place because of the second wave is that clients have become so knowledgeable that they need to contribute to the production process. The alterations have made it critical for corporations to adapt their strategies and create platforms that offer interaction capabilities between the companies and external stakeholders (Keat, Young & Banerjce 2011).
The need for companies to create platforms has practical applications in the modern corporations. For instance, Blackberry and Nokia lost their competitive edge to Apple and Google’s Android because they never made platforms, where external developers could create value. Both Google and Apple identified the need to enhance their interactions with talent sources throughout the world. The two firms formed app stores, where developers could create and improve their applications. Since the developers are also users of the products and services, they understand the needs of the markets and can meet them. The failure to transition the business activities to online platform led to a loss of market share and competitive advantage for Blackberry and Nokia (Keskett 2012). The only solution for the corporations that have lost their competitiveness is to create platforms and infuse creativity for differentiation purposes. Catching up with the market leaders may be challenging but attainable through innovative differentiation strategies that can set the firms apart from their competitors.
According to Barahona and Elizondo (2014), digital platforms provide opportunities to people to transact and share. For example, eBay is a platform, where sellers and buyers meet to trade. The platform eliminates the need for consumers to visit physical stores and offers them convenience. Since traders can deliver products to the customers, companies that sell their products on eBay have no need to establish stores in various locations. Thus, the jobs, which the stores would have offered, are eliminated by the digital platform. The dependence of people on electronic gadgets and social networks make the shift to the digitalization process the only viable option (Lutchman 2011). Currently, low-skilled workers have started feeling the effects of digitalization as more efficient machines replace them. The rising machine intelligence will make many jobs obsolete in the future. In the past, digitalization took place at a fast speed in the developed countries. Governments’ intervention through legislation set minimum wages that did not reflect the employee productivity. Consequently, the cost of labor, especially in the manufacturing sector, became untenable. On the other hand, the developing countries offered alternative production sites because they had low-labor costs. The technological innovation in ICT has empowered the developing countries to meet the quality standards of the developed world. Therefore, most corporations closed their home country production facilities and relocated to cheap production destinations like China. As a result, employees, who had been working in the home factories, lost their jobs. The third wave will be more destructive because the same trend that took place in the developed countries has started occurring in the developing regions. For instance, companies like Foxconn employed about 1.5 million workers to manufacture goods for the western markets (Moorthy 2012). The rising labor cost in China and low cost of automation has prompted Foxconn to start replacing its workers with robots for its electronic manufacturing. The changes in China will be replicated in other low-cost labor countries, which will lead to the increase in the number of jobless people.
The digitalization of business activities will also disrupt the traditional forms of business. Traditionally, large corporations with economies of scale could maintain their competitive edge by blocking the entry of small players into the market (Morrison 2011). Thus, they would set the standards for industries. However, the existence of digital platforms enables small businesses and individuals to compete with large corporations on the value they offer to the consumers. The dominant competitors will have to reorganize its structure to address the emerging threat. For instance, the music industry in the past was dominated by large companies like Sony Entertainment Corporation, Warner Music Group, and Universal Music Group. The companies searched for talents, recorded, and promoted their music. It was almost impossible for individual artists to record and promote their music because the equipment and the knowledge on how to record were very expensive. However, digitalization will continue to lower the cost of equipment and offer cheap online platforms, through which artists can record and promote their music. The innovation undercuts the functions of the industry giants. Therefore, the traditional business models used in the music industry will be replaced by digital ones with larger number of small scale businesses competing effectively with dominant competitors.
According to Juan Carlos (2014), the transition from the old traditional business model in procurement to e-procurement systems minimizes face-to-face negotiations and eliminates all the barriers for every bidder and buyer. Thus, the e-procurement is justifiable because it is cost-effective, and reduces bias and corruption. Many governments are likely to adopt the systems because they lead to outcomes that benefit the public. When the digital platforms are operational, the employees that worked in procurement offices will become obsolete as more efficient digital platforms take over. Since organizations that supply governments are taking advantage of the third wave, the governments will have little choice but to shift to the platforms. Therefore, the traditional business models and employees will be replaced by the electronic systems.
In the learning institutions, there is a shift towards e-learning. According to Gueverra (2007), e-learning enrollment achieves its objectives by cannibalizing the traditional enrollment base. The trend is reducing the number of people joining the traditional form of education, and thus tuition fees are shrinking. The flat enrollment rate in the traditional face-to-face learning is destructive, because the institutions will not recover costs of the structures such as dorms and athletic facilities. The cost overruns will eventually prompt the colleges to create cost-cutting measures like downsizing. Therefore, apart from disrupting the traditional form of business organizations, the e-learning will eventually contribute to the increasing number of unemployed people. Yang and Klassen (2008) argue that self-service technologies (SSTs) have altered the service encounter in almost every industry. In the banking sector, the introduction on e-banking and automated teller machines reduced the need for service spaces and large labor force. Consequently, the teller services reduced to just 10%. The small labor force denotes a decrease in employment, which contributes to the displacement of jobs and roles. The growth of technology might lead to total automation of banking and other sectors, which will eventually eliminate the need for more employees.
Boon-itt and Wong (2011) support the suggestion that 2 billion jobs will be lost by the year 2030 because of the technological advancements. Therefore, the claim that digitalization will render 2 billion people jobless is not far-fetched, because the process will affect the entire world in the future.
The possible solutions to the declining employment levels include government intervention to create supporting environments for new businesses to succeed (Brynjolfsson & McAfee 2012). The government should create flexible policies to allow new models of businesses to thrive. The technologies that have transformed lives and societies require unique business organizations. Governments should deal with obstacles that hinder entrepreneurship. One of the obstacles is the limitation of immigration of new talents with entrepreneurial capabilities. Improving critical infrastructure and strengthening patent regulations is essential to the success of entrepreneurship. The governments should also reform the education sectors, so that they can focus on creativity rather than employment expectations from students. The suggested changes are critical because they can empower countries to churn out creative entrepreneurs, who are job creators rather than job seekers.
The term robber baron is widely used in the United States to refer to a group of capitalists, who amassed wealth using unethical means (Paulino 2009). Some of the characteristics of the robber barons included control over vast natural resources, exploitation of labor markets by paying meager wages, acquisition of rivalries to extinguish competition and create monopolies. In the eyes of the public, the robber barons were self-centered criminals with a high appetite for wealth and control. Some of them controlled government officials; and hence their wealth had immense power. Some of the 20th century robber barons that had an influence on the American economy included John D. Rockefeller, Henry Ford, and J. P. Morgan. The barons consolidated small companies into large conglomerates by buying them. Consequently, they controlled the American economy at the expense of the welfare of the citizens. Citizens and some legislators were against the quasi-legal powerful organizations. The disdain from the public led to the legislation that controlled the behavior of corporations. The Sherman Anti-trust Act of 1890 was the basis, upon which political reactions took place against the unethical practices of the robber barons in the 20th century. President Theodore Roosevelt disliked the manner, in which corporations were consolidating to form powerful entities that controlled the American economy. He sued about 45 companies under the Sherman Anti-trust law and halted the formation of Northern Securities Company. The organization would have controlled the transportation sector in the northwestern part of the country (Pearce & Robinson 2009). Other political reactions against the robber barons included the lawsuit filed against 75 corporations by President William Howard Taft because they violated the Anti-trust regulations.
The technology barons are very similar to the robber barons, although they operate in the modern era. The technology barons control the largest technology corporations in the world such as Google, Facebook, Apple, and Microsoft. The power of the group is similar to that of the robber barons. For instance, both Google and Apple supply 90% of operating systems used by the smartphones in the world (Robbins & Mary 2009). More than a third of Europe and half of America use Facebook. Additionally, technology barons have started investing their wealth in other unrelated fields. For instance, Google has diversified its investments into the creation of robotics, driverless cars, and energy. Facebook has dedicated $2 billion to the creation of virtual-reality equipment. The technology barons have a strategy to purchase startup companies before they can materialize into large entities. For instance, Facebook bought WhatsApp and Instagram to expand its control of communication applications. While the robber barons offered minimal wages to the employees and curtailed the operations of small enterprises, the current tech barons have devised similar methods. Apple smartphones’ assembly in China uses sweat shops, where people are overworked and unfairly compensated. Additionally, companies like Facebook make billions using the social media users’ data without paying for it. The profits that companies like Facebook and Google receive come from analyzing the private user information on their sites and matching the results with the products they are likely to purchase. The process offers advertisers on their sites an opportunity to pitch their goods to prospective buyers based on the profiles and preferences. A comparison between the two types of barons indicates that the technology barons are a worse phenomenon in exploiting people because they did not offer even the minimum wage to people that provided a platform to make profits. The organizations led by the technology barons have a tremendous influence on the political systems. Google has a committee that assesses the political candidates to fund. The committee’s spending in 2014 was the largest among American corporations. Facebook has formed a pressure group known as Fwd.us, which advocates for immigration reforms.
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Therefore, the technology barons have managed to control the social, economic, and political aspects of life. As a result of the domineering and controlling behavior of the technology barons, governments around the world have reacted differently. The European Union launched investigations against Google because competitors complained that the company abuses its dominant position in Europe to undermine them. Some of the complaints that prompted the investigations included the accusation that Google downgrades the search results of its rivals while promoting its affiliates. Apple was implicated in a lawsuit because it entered into an informal agreement with Palm to avoid poaching each other’s employees. The court, which is an arm of the government, ordered Apple to provide some of the documents that showed the former CEO Steve Jobs requesting Palm CEO to avoid poaching its employees. The move would restrict competition and deny employees better pay deals. The solution to curbing the influence of the barons is for governments to improve antitrust laws and enforce them relentlessly. However, it is impossible to eliminate the power of the barons because they have created products and services that are integral to people’s lives. Thus, they will retain immense power despite the regulations.
The information revolution provided clients with knowledge, and thus empowered them to demand value from organizations. The dependence of customers on mobile gadgets has laid a platform for digitalization. Unlike the first two waves, digitalization requires a total shift from the traditional business model, and thus will be more problematic. Apart from the economists, other authors have supported the notion that the third wave will displace 2 billion jobs. The changing customers’ needs have forced firms to migrate to digital platforms, eliminating jobs in the traditional business organizations. The technological advancement that accompanies the third wave has made automation cheap and easy. Thus, companies have replaced workers with robots for manufacturing. Additionally, the third wave will change the traditional business organizations in various ways. Firstly, it will remove entry barriers in different industries, enabling small firms to compete effectively with large corporations such as in the music industry. Secondly, functions like procurement are adopting the digital platform to improve efficiency and remove vices of bias and corruption. Thirdly, learning institutions have started offering e-learning, which is cannibalizing the traditional markets for the face-to-face education. Other institutions, including banks, have initiated migration to the digital platforms, which has reduced the traditional functions and employment down to 10%. Some of the solutions to the job losses include government action to implement policies that are friendly to entrepreneurship, immigration, and education. Additionally, the building and improvement of critical infrastructure will enhance the environment for new businesses to thrive and increase employment opportunities. The rise of both robber and technological barons led to the exploitation of employees, elimination of competition through dubious means, accumulation of wealth and power. The government reactions included the creation of legislation to curb the illegal activities and launching or lawsuits against the ones, who violated the regulations.