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Contemporary Issues

Castells’ Informational (Network) Society and Friedman’s ‘The Flat

World’

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The Revolution Castells (2002) contends that a new revolution

Information Technology (IT) started in the US (especially California) in the 1970s around computers, and microelectronics.

The revolution was facilitated by innovation through a milleux of researchers in universities, spin-offs and start ups facilitated by a great concentration of science and technology talent, venture capitalists, markets, etc.

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The Revolution This revolution has transformed the way we work,

play and do business. The revolution as a seed was planted in the 1970s

but came to fruition in the 1990s, changing, enabling and facilitating the way business is carried out.

With the revolution came in the microcomputer, the Internet, communication and networking technology, and the software to go with it.

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The Network The informational society, according to Castells (2002),

represents a point of historical discontinuity where the emergence of a new technological paradigm organized around new, more powerful, and more flexible information technology makes it possible for information itself to become the product of the production process.

The new information technologies, by changing the way that information is processed, impact every area of human activity, making it possible to establish endless connection between different domains, as well as between elements and agents of such activities’ (ibid: 78).

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The Network The result is a networked, deeply interdependent economy

that becomes increasingly able to apply progress in technology, knowledge, and management to technology, knowledge and management themselves, leading to a virtuous cycle of greater productivity and efficiency given the right conditions of equally dramatic organizational and institutional changes.

Castells further contends that one of the main features of the Informational Society is the emergence of a new economy in the world at the end of the 20th century, whose operation is enabled by ICTs.

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The Network This new economy distinctive feature is that it is

informational, global and networked (Castells, 2002:77). It is informational because the productivity and

competitiveness of units in this economy, whether firms, regions, or nations depend on their capacity to generate, processes, and apply efficiently knowledge-based information;

it is global since the core activities of production, consumption, and circulation, as well as their components, be they capital, labour, raw materials, management, information, technology, or markets, are organized on a global scale (either directly or through a network of linkages between economic agents);

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and it is networked because under the new historical conditions, productivity is generated through and competition is played out in a global network of interaction between business networks. He further says that it is the IT

revolution that provided the material basis for its creation.

The Network

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The Genesis of the Network

To explain why ICTs became such an important component and infrastructure of the new economy, Castells revisits the economic realities of the American firm in the 1970s

These strategies were informed by the need ‘to reduce production costs, (starting with labour costs); to increase productivity; to broaden the market; and to accelerate capital turnover’, in order to increase profits.

This saw many of the large firms look to foreign countries for production and markets leading to many of them establishing production units in the countries that had the human resource capacity (at a reduced cost).

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The Genesis of the Network To open up these new markets and to link the market

segments of each country into a global network, there was need for a great mobility of capital and the firms therefore required ‘dramatically enhanced communications capabilities’ (ibid:96).

As the firms extended their global reach, integrated their markets and maximized comparative advantage of location, they were able to increase their profitability in the 1990s.

These new found global networks relied increasingly on the unfolding developments in ICTs. The increased global competition meant that firms had either to integrate into the new technological system or phase out.

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Another trend in the new global economy, according to Castells (2002:102) is the global financial markets.

These global capital market are globally interdependent, where capital is ‘managed around the clock in globally integrated financial markets working in real time for the first time in history: billions of dollars worth of transactions take place in seconds in the electronic circuits throughout the globe’.

New ICTs enable capital to be ‘shuttled back and forth between economies in a very short time, so that capital, and therefore savings and investment, are interconnected worldwide, from banks to pension funds, stock exchange markets, and currency exchange’.

The Genesis of the Network

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The Genesis of the Network Whereas it is the performance of capital in the globally

interdependent financial markets that largely shape the fate of economies at large, it is in the information networks connecting the different centers that the actual operations of capital take place, where the flows are global and increasingly autonomous relative to the actual performance of economies (ibid:106).

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The mosaic unfolding is a network of global corporations whose market, production, labour and financial capital are increasingly global.

The new economy as espoused by Castells originally developed around two main industries: information technology and finance.

At the heart of the information technology industries are the Internet-related firms.

The Genesis of the Network

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These Internet-related firms can be classified into four layers that comprise of: companies that provide the Internet infrastructures

(telecommunications companies,Internet service providers, Internet backbone carriers, companies providing final access manufacturers of end-user networking equipment);

firms developing the internet infrastructure applications (the software products and services for web applications);

companies which get their revenue from advertising, membership fees and commissions in exchange for providing free services (like content provision, reselling, portals, market intermediaries) on the Web;

companies conducting web-based economic transactions (e-commerce).

The Genesis of the Network

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The Genesis of the Network

The finance industry, unfettered from regulations of earlier years and having become interdependent and global took advantage of the Information technologies and firms, especially the internet to conduct business, either between businesses or with customers

In the new economy, we have the global firms that now have a global reach in terms of markets, production, labour and access to capital.

These firms, much as they are headquartered (and majority owned) in particular countries, now have a global reach with subsidiaries and strategic partners in different parts of the world. Some have also gone into mergers and acquisitions (Castells, 2002).

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This brings us to what Castells call the network enterprise. Castells claims that the new informational, global economy

got ‘characterized by the development of a new organizational logic that is related to the current process of technological change, but not dependent upon it, and that it is the convergence and interaction between a new technological paradigm and a new organizational logic that constitutes the historical foundation of the informational economy (ibid:164).

As the tapestry of the informational, global and networked economy gets clearer, the centrality and the criticality of the new information and communication technologies gets into sharper focus. Without the powerful computers, networked through digitally switched telecommunications networks, ‘the complexity of web alliances, of subcontracting agreements, and of decentralized decision-making for large firms would have been impossible to manage’

The Network Enterprise

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The organizational change that was unfolding and the attendant needs induced to some extent the technological trajectory: the networking needs of the new organizations engendered the explosive diffusion of personal computers and computer networking.

In the early 1990s information networking technology exploded due to the digitization of the telecommunications network, the development of broadband transmission and a dramatic increase in the performance of the computers connected to the network.

With networking technology maturing in the 1990s, it was now possible to operationalize computer interactivity on the Wide Area Network (WAN) which hitherto had not been possible since computers could only be connected on the Local Area Network (LAN). With this development, there was a computer paradigm shift from mere linkage to cooperative working regardless of the location of the interacting partners.

The Network Enterprise

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The Network Enterprise The development of the World Wide Web (WWW) in the early 1990s

and freely available browser software, and the still developing network and Internet security technology there was an increased to shift to the ‘computer network’ this time in the Internet for work and collaboration.

The WWW meant that more and more could now use the Internet as the technology of choice to not only advertise but also do customer support and enable online transactions with customers and suppliers.

This, coupled with broadband and the falling costs of Internet connectivity, especially in developed countries meant that more and more transactions could be carried out on the Internet at a very low cost.

This facilitated more and more possibilities of flexibility of firms and even of workers where employees could work from anywhere including their homes. Further, more and more firms and individuals could get visible on the Internet

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The Network Enterprise We briefly look at one last effect of the informational

society: at the work environment. Castells posits that the maturation of the information

technology revolution in the 1990s transformed the work process, introducing new forms of social and technical division of labour (ibid:255).

He argues that in the 1980s micro-electronics-based machinery fully penetrated manufacturing and in the 1990s the networked computers diffused throughout the information-processing activities at the core of the services sector.

He claims that in the 1990s the factors that affected the transformation of the work process included computer technology, network technologies, the Internet and its applications.

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The Network Enterprise

The massive diffusion of information technologies caused similar effects in offices, factories and service organizations.

He further argues that the production process introduces a new labour that characterizes the emerging informational paradigm which is value-making, relational-making, and decision-making.

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To conclude, the following can be gleaned from the perspective: Networks (running on ICT infrastructure) define the

society and the economy Nodes in the network are powerful. The network is not spread out evenly around the world. There is a risk for the parts of the world who are not part

of the network to be cutoff and fail to partake of the benefits of being in the network, with the result that they would increasingly miss out and be marginalized.

In conclusion

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The world is Flat We next consider the perspective espoused by Friedman

(2005) that the ICTs have leveled the global competitive playing field ‘…it now is possible for more people today to collaborate

and compete in real-time with more other people on more different kinds of work from more different corners of the planet and on a more equal footing than at any previous time in the history of the world – using computers, e-mail, networks, teleconferencing, and dynamic new software.’

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The Flat World The argument is that unlike in other eras where countries

and (later) organizations would be the only ones able to collaborate and compete with each other across the globe, today we also have individuals being empowered to collaborate and compete with any other individual from any part of the world irrespective of whether they are white or black, from the developing or developed country.

This has been made possible by the technology (ICT) which empowers anyone who is able to ‘plug’ into the global network and ‘play.’

One would not only need to be connected to the global network but also have what it takes to collaborate and compete, namely education, skills, and experience, enabling them to offer the goods or services the other party requires in the most efficient and cost effective way possible.

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The Flat World In this ‘flat world,’ only those offering value-added services

or goods will be able to collaborate and compete. Whether individual, company or country, one only needs to

be connected to the global network enabled by the computers and Internet, running on the global fiber-optic network that has made us operate like next-door neighbors.

Friedman also brings out the fact that all the global knowledge centers of the world are being connected into a single global network ‘creating’ the potential for innovation and prosperity.

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The Flattening Some examples, given by Friedman, on how this

collaborating and competition is taking place is taking place at the national and global include: Routine work (e.g tax return accounting) from US

companies being routed to small Indian companies that are able to do it for a fraction of the cost. The staff in the US can then concentrate on value addition. This is made possible because these companies are connected to the internet and can download the work, do it and upload it back to the US over the Internet.

Radiologists in hospitals in the US outsourcing the reading and interpretation of CAT scan to doctors in Australia and India by shipping digital images over the internet

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The Flattening Reuters’ subsidiary in Bangalore, India with Indian

nationals who do most of their basic routine work, leaving the much reduced workforce in the US office to do value-added services like analysis and interpretation.

Wall street outsourcing most of their work to Indian firms Customer support work of many large organizations in

the West has being outsourced to call centres in Bangalore.

A lot software programming of the major software firms in the US done by Indian companies.

Companies in Dalian, China handling a lot of the software programming work for Japanese companies.

Aerodynamics design work for major Airplane manufacturers in the west being carried out by Russian Engineers

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The Flattening All this work is facilitated by these small companies in India,

China and Russia having access to broadband Internet, where they can download the work, do it and then send it back all over Internet.

The people in these countries are paid a fraction of what people in the west would be paid.

The reason why this outsourcing arrangements are attractive to these companies in the West is that these countries (India, China) have a crop of highly educated and trainable young professionals who can do the work for a fraction of the cost thus making a saving.

Also, these companies have access to the Internet.

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The Flatteners

Some of the forces that have enabled the leveling of the global competitive playfield, according to Friedman(2005), include: Internet Browsing Software Work Flow Software Open-sourcing Outsourcing Off-shoring Supply-Chaining In-sourcing

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The Flatteners

In-sourcing In-forming The Steroids

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The Flatteners With these flatteners reinforcing once another and working

together in a complimentary, mutually enhancing fashion, the net result, according to Friedman is: ‘… the creation of a global, web-enabled playing field that

allows for multiple forms of collaboration – the sharing of knowledge and work – in real time, without regard to geography, distance, or, in the near future, even language. …not everyone has access yet to this playing platform, this playing field, but it is open today to more people in more places on more days in more ways than anything like it before in the history of the world. …this is [how] the world has been flattened.’

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The Flatteners

Apart from the flatteners looked at, there is need for players (managers, innovators, business consultants, business schools, designers, IT specialist CEOs, and workers) to get comfortable with and develop new ways of horizontal collaboration, and value-creation processes and habits that could take advantage of this new, flatter playing field.

Because the world has been flattened and new forms of collaboration made available to more and more people, the winners will be those people who learn the habits, processes, and skills most quickly.

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In Conclusion The global competitive playing field (flattening) has come for economic

purposes where those players that can provide goods and services in the most efficient, cost effective way will prevail.

For them to compete they must first be connected to the Information and Communication infrastructure so they are able to access and use the resources (human, financial, material) that are required.

It is instructive however to keep in mind the fact that granted that ICTs are the technology of choice, the flattening is driven by an economic imperative, and not a technological one.

We have also observed that the players succeeding are those with certain advantages for example access to highly educated, highly skilled, affordable (cost effectively) human resource.

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In conclusion

In conclusion, the following observations come out of the perspective: The world is getting flat for individuals and organizations in all

countries Countries and groups and individuals can have the chance to

compete in the flattening world but they must have certain prerequisites put in place (ICT infrastructure, Highly-educated, highly skilled cheap labor, tax incentives, enabling infrastructure and institutions, etc.)

By looking considering only India and China, this may not be sufficient evidence to under-gird the theory since there are countries that are not benefiting from the ‘flattening’.

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In Conclusion

For countries that may be able to compete, shall all benefit from the flattening since not all have what it takes?

Will projects at the community level enable the poor to compete and benefit at the global level?

Does this imply that the need to ensure that to all must get access to high quality education and training and infrastructure for them to be able to compete in the ‘Flat World’?

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THE END