Businesses Undergoing Change

18 Apr
April 18, 2013

The history of technology shows us that the history of information technology and economic history were and still are closely related to each other. The examples range from the mechanical calculator Blaise Pascal invented in 1645 for decimal addition and subtraction to the Colossus computer Alan Turing built in 1936, from the Arpad Net that went into operation in 1969 to the development of the Word Wide Web and its interactive, participatory version, Web 2.0, as well as social media.

All these innovations were directly reflected in economic events, with the innovations of the present and future naturally being put to commercial use at ever faster rates of speed. The interplay between technical innovations and their economic utilization involves a tremendous dynamism. The path from innovation to marketable product is becoming ever shorter. One reason for this is that market economy style competition has increased worldwide. The demand for technological powers of innovation is also rising steadily. The international competition among business locations for growth and prosperity is ultimately a competition for innovative strength.

IT and Focusing

IT innovates with business structures to shape the way we conduct business in a global economic world. In an economic world with little economic networking and comparatively high transaction costs, all processes, transactions and interactions relevant to the business had to be integrated—even those unrelated to the primary business goal and not belonging to core areas of expertise. The decline in transaction costs created a completely new situation for many businesses. It became and still is becoming more and more economically attractive to outsource certain business functions and to concentrate on the core business. The task of focusing has become a promising corporate strategy ever since.

The list of business functions being outsourced is long. It even extends to what were once considered core functions such as communication with the customers in the company’s own call center. This task is now placed in the hands of an outside service provider.

Focusing processes result in companies that are more competitive and that concentrate mainly on doing whatever the business task is for which they were founded. IT made it possible to restructure value creation chains and business processes in new ways and thereby boost competitiveness.  What is decisive in this context is that information penetrates and becomes available to the value chains more quickly, to those paths a product or service takes to consumers. Value is added at each step along the way. Productivity is increased substantially as a result of this increased speed.

IT puts products and services ever closer to customers, whether a car factory, a service center or a health care institution is involved. This also means customers have become considerably more competent. Customers no longer want salespeople to develop solutions for them. They already know best themselves from the Internet what they need. Sales is therefore taking on an increasingly vital role after long being undervalued. This transformation is far from over.

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