We are limited, not by our technology, but by the way we think. We still think just the way we thought two hundred years ago, as if nothing had happened.

Carver Mead

POUL ANDERSON, ONE OF OUR MOST THOUGHTFUL WRITERS of science fiction, imagines in one of his "future histories" an interstellar consulting agency called Serendipity Inc. With the aid of the most capacious computer in the galaxy, Serendipity sells only one thing: information about potential opportunities in distant solar systems. Serendipity does not sell to the general public. Its only clients are an elite cadre of space pioneers, traders, and adventurers who in the course of their own travels pick up unique and timely bits of information about the remote reaches of the galaxy. Much of this information, though not relevant to their own enterprises, could be enormously profitable to others in a different line of business.

In exchange for a deposit of such fresh information and an enormous fee, the Serendipity computer will provide for a client the exclusive information on some far-flung opportunity tailor-made for the client's own capabilities. But, and here is the most intriguing part, the client does not ask the computer any specific questions, for any subject about which

Anderson was imagining a future time in which information is the most valuable of all resources. That time is now, and Serendipity, Inc. and its clients, however fanciful, are in a very real way models for business corporations under the information standard. In their corporate strategies and structures, and even in their relationship to the state, Anderson's creations reflect the transforming power of the Information Standard.

When information technology made information the most important factor of production, it made the timely acquisition of the best information the number-one goal of business management, as it is for Serendipity and its clients. Information technology is simplifying corporate structure: The layered hordes of middle management whose primary function was once to move information up and down the corporate hierarchy are disappearing; at Serendipity the computer has replaced them entirely. Finally, no government bureaucrats regulate Serendipity or its clients. For one thing, the government neither knows nor understands what Serendipity is doing. Even in our own time, the paradigmatic information industries, such as microelectronics, remain largely unregulated because their technologies change too fast for any regulatory agency to keep up. Moreover, such industries are not only led but staffed at almost every level by knowledge workers who bridle at the idea of outsiders and amateurs from the government interfering in their work.

The supremacy of the sovereign state depends to some ex-

Information technology is changing the "government" of businesses, upsetting the "sovereign" privileges of top business executives and the traditional roles of middle managers and both traditional and professional workers, spreading corporate democracy, and making corporate subjects into corporate citizens.

This is a sea change from the time the large business corporation first appeared. Until recently, corporations have been organized along the same lines as the largest and most complex state organization: the military. The branching hierarchy of the military bureaucracy, which was essentially a communications system, and the tradition of following orders without question, fulfilled the army's primary management goal: to make all the parts of a vast body respond as one to directions from above and to funnel intelligence smoothly in the opposite direction. One person can personally command or communicate with only so many others. As a result, the system developed into a hierarchy, replete with sergeants directing squads, lieutenants directing a platoon, captains directing a company, and so on up the line to the commander in chief.

By the end of the nineteenth century, the growing size and complexity of industrial organizations demanded similar coordination. The assembly line that vastly increased the flow of products per worker also greatly increased the need to manage and coordinate those workers: Middle management was born. Like sergeants, captains, and lieutenants, these men and women were skilled messengers bearing information up and down the line to keep the systems running smoothly. They had to make sure that the right part reached the right place at the right time, or else the process would break down.

The railroads provided an early example of modern business organization. Some attribute this to the fact that in the early days the railroads hired a great many men from the army corps of engineers to help them build their system and that they brought both their engineering knowledge and their organizing skills to the business. As trains began to move at speeds far beyond human experience, the roads were plagued by accidents. Railroad management responded by establishing chains of command at least as strict as those of a military unit. With the aid of an indispensable telegraph system, trains could be kept on schedule and out of danger.[56] ) The system did more than prevent accidents; it became a vast and systematic management tool. Managers throughout the railway system were required to file detailed and standardized daily, weekly, and monthly reports on traffic, maintenance, costs, etc., a real innovation at the time. The system certainly helped keep track of cars and freight and made it possible for the roads to use their resources sensibly. But it also shifted power up the hierarchy in the direction of those receiving the report and reduced the autonomy of those below. As James R. Beniger writes:

[The Western Railroad] programmed its operating workers with "careful and explicit rules." Enginemen, for example, became little more than programmable operators, dutifully following rules like "in descending grades higher than 60 feet per mile passenger trains are not to exceed 18 miles per hour and merchandise trains not over 10 miles per hour"... [The] conductor ...had standardized detailed programs for responding to delays, breakdowns and other contingencies ... carried a watch synchronized with all others on the line, and ... moved his train according to a precise timetable.[57] 

These conductors, lower-echelon managers, were largely information carriers. So were the station and district managers. Indeed, not only in the railroads but throughout the industrial

Long before computers, the exquisitely organized management hierarchy of General Motors helped it dominate the automotive industry. A human information feedback system, starting at the dealer level, allowed the top management of the largest industrial corporation in the world to revise its production decisions every ten days. The industrial-era assembly line stayed in sync through the efforts of an army of clipboard bearers, grandly called managers, who constantly checked that the right parts and workers were in the right place at the right time doing the right things at acceptable levels of quality. Even mid-nineteenth century factories, few of which came close to fulfilling the assembly-line vision, required vast information systems consisting of whole corps of managerial workers that had never existed before.[58] ) Middle managers were unknown in the United States before the mid-nineteenth century, yet managers and clerks accounted for almost 17 percent of the U.S. work force by 1940. From 1900 to 1910 the number of managers in the U.S. work force grew by 45 percent, far outpacing the growth in the general work force. In the same decade, the number of stenographers, typists, and secretaries, the staff workers for middle management, increased 189 percent.[59]  All these people shared essentially one function: to carry information up to decision makers and then carry the decisions back down.

Those at the top of such a classic industrial hierarchy might fancy themselves Napoleons of commerce, sole owners of the big picture, whose commands, conveyed eagerly by hundreds of white-collared subalterns, would turn squadrons of marketeers on a dime or unloose a devastating barrage of production. That world is vanishing.

Computers offer a hydraulic of the mind that frees us from

Management layers that were set up to report rather than produce are beginning to disappear, changing the power structure of companies. The middle mangers who used to convey information and the upper managers who "owned" it and held power thereby are losing that power and in some cases their jobs. The new information systems flatten the management hierarchy. They change the very meaning of management and the skills needed to do it well.

In the future, what will managers do? The answer is both simple and unsettling: They will run the business, which is what they should have been doing in the first place. Managers, no longer forced to devote most of their time to acquiring or moving information, will be able to use information to solve business problems.

What will this look like, practically speaking? Many managers will find it looks disturbingly like work. For instance, more and more managers are spending time outside the hierarchy, working in ad hoc groups formed to solve specific problems, rather than in routinized information management. Typically, these task forces are composed of specialists in various phases of the business: accounting, legal, marketing, manufacturing, and technical. Quite often they are formed to fix a problem and are dissolved when the solution is found. The members of the task force operate more like professional workers, who offer their own particular skills to

Years ago, when Castro seized the assets of American banks in Cuba, Citibank had a task force in place to do several things: to see that Americans got out of Cuba safely, that Cuban assets in the U.S. were identified and arrangements had been made to seize them in satisfaction of debts due, to advise foreign correspondent banks of loss of control of the Cuban branches, to cancel test words and codes, to advise government agencies, to pass the proper accounting entries, and to take appropriate legal action. With all this done, the task force was disbanded, leaving behind a record of things learned for the next emergency. At the time, this was unusual enough to be noticed. Today it is becoming business as usual.

As the distinction between managers and professionals breaks down and managers do more professional work and less time facilitating the functioning of the corporate hierarchy, more and different types of people become eligible for leadership. It used to be all but axiomatic that the best loan officer in a bank would be groomed for the bank presidency. The credit function is still crucially important and must be always nurtured. But in a modern bank it may be more important to have as president the man with the best grasp of the information technology that allows banks to offer customers a range of services and options never previously imagined.

The new business organization will need different leadership skills. Hierarchical organizations provide tight control of a large group of workers by placing relatively small groups of workers, or submanagers, under the direct supervision of a higher manager. Thus, the steepness of the management pyramid. Flatten that structure and the people within it get a lot less direct supervision. It becomes more important for organizations to have well-understood common goals by which workers can direct themselves. The job of instilling

Peter Drucker has compared tomorrow's business leader to a symphony conductor, and it is a good analogy:

In some modern symphonies, hundreds of musicians are on stage together and play together. According to organization theory, there should be several "group vice president conductors" and perhaps half a dozen "division VP conductors." But there is only one conductor -- and every one of the musicians, each a high-grade specialist, plays directly to that person, without an intermediary."[60] 

The erstwhile commanders, moreover, are finding yet another a new challenge to their leadership: As information becomes the most important factor of production, good workers and managers acquire more of it. Former subalterns become formidable experts with specialized skills that may outstrip those of the boss. These people reject autocracy because their talents cannot be efficiently used by the "command and control" model.

In her book , Zuboff dramatically illustrates the changing meanings of corporate power, management, and leadership by telling the story of how full computer automation came to two traditional paper mills and failed in one but succeeded in the other. Both mills had long been run by a corps of middle managers who supervised blue-collar worker-operators. The operators had spent most of their time moving about the plants checking on individual processors, vats of pulp, drying rooms, etc., developing a keen intuitive sense for how to keep them working at their best. Only the managers, however, knew what was going on in the plant as a whole: Given production and other goals by their bosses, the middle managers used the operators as tools to control the plant and meet the goals.

After automation, however, the operators spent most of their time in a central computer room from which they could operate most of the equipment. But that central computer room also gave the operators a chance to get a far better sense of overall plant operations, to learn for themselves what only the managers had known before. Soon the computer system was enhanced with a cost-control program that helped to do what managers had once done: adjust the manufacturing systems so as to meet cost and production goals.

The result, in both plants at first, was that many managers began to feel uneasy. They feared for their status and even their jobs, viewing the operators as competitors and even enemies. In the less successful plant these anxieties dominated: Managers chastised for laziness operators who made good use of the computer instead of sticking with "real work." Managers tried to keep information from operators, discouraged them from taking on new responsibilities, or refused to share their expertise. Morale suffered, workers began to shy away from learning the system, and automation fell far short of its goals. As one worker complained to Zuboff: "[The managers] don't want us to know very much, and the more they keep us in the dark, the more they can order us around."[61]  An engineer from the same plant agreed: "They tend to try and keep the operators in the dark as a form of job security."[62]  And upper management was indeed considering whether many of the middle managers might have become obsolete.

At the more successful plant, however, some middle managers did find a new and genuine role: that of teacher. The operators, after all, were blue-collar workers whose main tools had been experience and intuition, not the abstract skills demanded by the new system. They needed teachers.

The managers who understood this and worked to become teachers got the most out of the operators and were happiest with their jobs. As one particularly eloquent operator told Zuboff: "In a traditional system managers are drivers of people. You focus on driving people to work as hard as possible.

We do not now generally recruit managers for their teaching ability. But as information becomes an ever more essential ingredient of production, teaching will become one of the most important management skills. To become more productive, companies must turn more laboring workers into knowledge workers. To do this we will have to tell managers "right out loud" that teaching is part of their job. They will have to adopt for themselves a teacher's ethic in which the greatest triumph is to be surpassed by one's student. Losing the old power of closely held knowledge, they must learn to cherish the new power of those who spread knowledge. One manager Zuboff interviewed learned this lesson particularly well:

In this environment, the key to influence is not telling people what to do but in helping to shape the way they interpret the data. For example, in our unit, information is available to everyone, but I am the only one who can interpret it. I can either give them the result of my interpretations, or I can show them how to interpret it. If I choose the latter, I increase my influence. .[64] 

The successful teacher-manager creates a new challenge for himself: leading men and women who have to a considerable extent become his peers. A company in which the vast majority of employees have become knowledge workers cannot be managed in the same way as a company of laborers. Organizing, even regimenting, the industrial work force was a great achievement in its day, making possible the assembly line, mass production and distribution, and fantastically productive economies of scale. But the work required of today's workers depends too much on creativity, autonomy, and personal judgment to be successfully regimented. Obedience to instructions was a great virtue in the industrial laborer, but

The fruits of this change will be tasted not only by the business organization but by the entire society and the sovereign state itself. A work force on the Information Standard will require more sophisticated corporate leadership; a nation composed largely of information workers will require the same. As more people become information users and fewer do jobs that can be comprehended by the military model of management, we must expect the rise of a work force that is better educated, more independent in judgement, more conscious of the value and bargaining power of its knowledge, and less willing to fit itself in to an aging power structure.

In the industrial age, work taught men to make themselves interchangeable parts in vast organizations not only in the factory but in the union, and even in the political organizations that claimed to represent the common interests of common men. Under the Information Standard men are likely to be less deferential to their former corporate sovereigns. But will a society of men and women who have learned that deference is due to knowledge rather than rank find it easy to defer to their sovereigns, the regulators and would-be regulators of trade and technology, capital and labor?

It seems more likely that the regulators, usually a few steps behind in comprehending the onrush of new technologies and new opportunities, will find themselves gradually surrendering power, not perhaps over the essentials of public health

The information corporation makes colleagues and citizens, not subalterns and subjects. In societies already free and democratic the fathers and grandfathers of these men fought to strengthen the power of government in the hope of checking the abuse of workers who had little leverage beyond that provided by numbers, courage, and good organization. But they themselves will fight to reduce government power over the corporations for which they work, organizations far more democratic, collegial, and tolerant than distant state bureaucracies inhabited by men and women who never seem to have enough knowledge to temper or justify their power. In the burgeoning number of societies only now tasting or preparing to taste freedom and democracy, the change will be even greater. The bureaucrats are even less informed and more powerful and destructive. Consequently, there is so much more to be gained by breaking their power, and much more exertion is necessary to achieve the goal.

This change in the internal power structure of the business corporation is not the only new challenge the corporation presents to the prerogatives of the sovereign state. The emerging business corporation not only transmits information more efficiently within the ranks but does a much better job capturing and capitalizing on information resources from all sources. Information technology makes the business environment far more competitive and unsettling, speeding up the "creative destruction" that Joseph Schumpeter identified as the essence of capitalism, doubling and redoubling the rewards of innovation or the prize for getting right information at the right time.

Sovereign governments, so often hostile to innovation, may try to frustrate such opportunistic organizations. But in the

The job that Poul Anderson's Serendipity computer performed for its clients -- sorting out opportunities from an overwhelming flow of information -- is now the prime mission of every good corporate management. True, under the Information Standard, information remains a management tool, but is also great deal more. Information is the raw material of wealth and opportunity. New scientific discoveries and technical capabilities provide a wish list of ways to add value to matter. Within new demographic, sociological, marketing, and economic data are hidden endless ideas for products, services, and marketing strategies. The knowledge explosion is an explosion of opportunities.

But how do we turn wish list into reality? Today more than ever, having a business strategy means having an information strategy, a strategy for recognizing opportunities in the onrush of change, a strategy for transforming data flows that now look like a necessary evil into new products, services, and sources of profit, a strategy for ensuring that a company derives full value from the knowledge accumulated by its workers rather than allowing that knowledge to languish or leak away.

Consider computerized airline reservation systems. American Airlines' Sabre system, by getting there first with the most enhancements, captured the lion's share of travel agents' computerized reservation business. But American went further. It built a data base of frequent flyers and used that information to develop not only marketing strategies, but the American Airlines Advantage program as well. Today every major airline has a similar frequent-flyer program. They are so common we forget that they are the by-product of hundreds of millions of dollars and many years of effort spent to build huge data bases that in the first instance served another purpose entirely.

The essence of an information strategy is to turn the burden of burgeoning business data into a bounty of business opportunity. The business organization has to be rebuilt around the goal of managing information productively. The object of the game is to get information to the person or company that needs and can use it in a timely way.

Ian Sharp has built a data base in Toronto containing information about every commercial airplane that took off in the United States during the past decade and a half. There are seventy pieces of data about each flight, ranging from time of takeoff and landing to number of passengers carried, yield per passenger, fuel consumed, and time and distance of flight. Sharp's data base can provide a crucial advantage for an airplane manufacturer contemplating a new design. With Sharp's data he can target specific routes, building planes of appropriate size, fuel economy, speed, maintenance requirements, etc. The estimations can make the difference between selling many planes or none. Knowing the market is what it is all about.

Over 90 percent of American goods now have a Universal Product Code, those familiar black stripes commonly known as a bar code. The checkout scanners that read those codes are creating a staggeringly informative, brand-new data base on what products are sold, in what volume, from what shelf, in what store, to what kinds of people. The long-term impact of this kind of data is still unclear, but we do know that as stores get a more detailed picture of their own customers, they are beginning to use more in-store advertising, "narrow-casting" their sales pitches to their prime audience rather than broadcasting to a less well understood audience through traditional media.

The banking business for generations depended on the loan officer's knowing more about his customer's needs and capabilities than other people did. This comparative advantage permitted the bank to lend money with a solid expectation that it would be paid back at maturity. But in the information

In this environment the banks lost much of its comparative advantage. Soon the treasurer of General Electric knew as much about the credit of General Motors as did a bank lending officer. A new flow of information created a new market for commercial paper: corporations selling their unsecured notes directly to other corporations and bypassing the banks. Today the volume of commercial paper outstanding exceeds the total of commercial loans at all the New York banks put together.

As "copyrights" on business information break down, the manager will continue to shift away from procuring and carrying information to using it. New managers will be recruited for these new skills, but it is also important to reeducate older managers, who in a frantically innovative economy may "age" before their time. Today's businesses do devote an enormous amount of time and energy to executive reeducation, sponsoring hordes of conferences and executive retreats to consider new possibilities and chew over common problems. Many companies also hold such conferences for customers so both sides can learn together how they can get the most from their relationships. Joint design efforts by customers and suppliers are becoming more common, shortening delivery time, preventing costly first-time mistakes, and lowering costs. These conferences not only absorb considerable effort and expense; they are tantamount to admitting that thinking is work, always a hard point for management to concede but crucial in today's world.

We cannot, however, deal with the new opportunities of information simply by encouraging manager make-overs. The organizations people manage must be made over as well. Flattening organizations and squashing hierarchies simplify and

As we have seen, information technology itself can flatten organizations and focus a company's intellectual resources. The former chief scientist of IBM, Dr. Ralph E. Gomory, told me that when a software writer gets stuck for a solution to a problem he or she may "post" the problem on IBM's electronic bulletin board, which can be accessed by thousands of IBM employees all over the globe. The bulletin board and often elicits an answer overnight from a fellow programmer thousands of miles away.

Many of our most innovative, fastest-growing companies tend to be "flat" by definition: they are small, and often built around a few key pieces of information. Most of the growth, new jobs, and new ideas in the American economy come from small, innovative firms -- that is to say, from companies that have created new information. In such firms employees tend to understand and share the company's goals, and information pathways are usually uncomplicated.

In the most advanced, high-tech sectors of the economy, this "entrepreneurial flattening" has been vindicated repeatedly. In microelectronics industry, new and profitable information is created at a stunning rate. Yet older and larger, firms (which in this sector can mean firms that have reached the ripe old age of fifteen or twenty years) have frequently been unable to capitalize on new technologies spawned in their own labs. The numerous Silicon Valley spin-off firms represent the sobering truth that the information pathway from the older company's lab to the venture capitalist's may be shorter and easier than the path to the company president's ear.

More than ever it has become important to recognize opportunities early. Yet as business and government bureaucracies expand and age, they tend to develop a kind of administrative arthritis: They move more slowly and are less agile in response to market demands. Examples abound.

In each of these cases, companies with vast stores of expertise and information capital proved dull students of opportunity. The corporate graveyards of the world are littered with other companies with impressive, indeed intimidating "technology assessment" programs loaded with experts but cut off from the marketing people. Edison dismissed the phonograph he invented as an instrument of no commercial value.

Similarly, most of the management information systems (MIS) that exist today are too narrowly focused on the company itself. They are good for measuring a steady state of business, but fail to tell us what we need to know to prosper in rapidly changing markets. Jack Kilby, who, along with Robert Noyce, has been credited with inventing the integrated circuit, is quoted by T. R. Reid as saying:

"At first, the problem solver has to look things over with a wide-angle lens, hunting down every fact that might conceivably be related to some kind of solution. This involves extensive reading, including all the obvious technical literature but also a broad range of other publications -- books, broadsides, newspapers, magazines, speeches, catalogues, whatever happens in view."

In the same way, internal MIS systems must be integrated with external market data if they are to be really useful. One new tool that helps do this goes by the name of electronic

The need for formal information systems, the need to flatten business organizations, the need to reeducate managers, all arise from the competitive imperatives of an information-rich, and therefore , economy. Nations that wish to flourish in such an economy will have to foster a climate of innovation. But allowing maximum freedom to innovate may upset traditional sovereign prerogatives. Many of the innovations of the information age, for instance, present significant challenges to seemingly long-settled law and custom. Is a computer terminal a branch of a bank? That is an important question for states in which sharp limitations on branch banking have been a cherished institution for generations. How do we protect intellectual property in the age of the Xerox machine, the VCR, and direct dialing to most places in the world? Who owns and assigns the radio frequencies of the world? How should the two hundred slots in the geosynchronous belt be allocated and by whom? International law and the laws of nations are being repeatedly challenged by onrushing technology. To the extent that U.S.

Competition under the Information Standard will force companies to develop just those qualities that make them hard for governments to control. They will be international. They will be built to respond quickly to new opportunities. They will be well informed, more expert in their fields than their competitors or their regulators, and able to exploit new productive capabilities before regulatory bureaucracies can fully comprehend them. Because the bulk of their capital will be intellectual, they will be highly mobile, sensitive to their political and social environments, and always ready to shift operations to countries with more favorable climates. Indeed, as we shall see in the next chapter, the richest and most powerful nations in the world are already losing some of their traditional advantages in the global competition for information leadership.

[55] Poul Anderson, Satan's World (New York: Berkley Publishing Corporation, 1989).

[56] James R. Beniger, The Control Revolution (Cambridge, Mass.: Harvard University Press, 1986), p.224.

[57] Ibid., pp. 224-25.

[58] Ibid., p. 243.

[59] Ibid., pp. 393, 398.

[60] Peter F. Drucker, The New Realities (New York: Harper & Row, 1989), p. 212.

[61] Shoshana Zuboff, In the Age of the Smart Machine (New York: Basic Books, 1988), p. 252.

[62] Ibid., p. 252.

[63] Ibid., p. 280.

[64] Ibid., p. 290.

[65] Ibid., p. 291.