Low cost flexibility

Industrial Age business strategists also build businesses in a modular way, but, they are very different from the modular structures possible in the Information age. Modular functionality will be added by treating the new modules as projects and appointing managed teams to develop the functions.

The conventional Industrial Age sequence of events would be:

1) plan the construction of the function,

2) submit those plans to a funding authority

and, if the funding is agreed:

3) appoint a team and a team leader

4) build and test the new modular extension to the business.

In the environment of the Information Age, there is seldom a need to custom build a modular function. Almost invariably, somewhere on the Internet, there will be somebody providing a suitable service to carry out any particular function needed. Therefore, the Information Age strategist will not have to plan a design, spend capital to build the function or take time to test it - they will simply select a ready functioning service and start using it straight away.

If Industrial Age strategists find a functional module unsuitable, or becoming redundant, they will have to write off the capital investment. For the Information Age specialist there will be no capital investment to write off – they simply cancel the renting of any functional service if it proves unsuitable or becomes redundant.

The cost of continually adapting a business to a fast changing competitive environment might require many sequences of modular replacements. For the Industrial Age strategist this will involve innumerable delays and capital costs. For the Information Age strategist, adapting the business to change is simply a matter of exchanging functional services – instantaneous changes, involving no capital costs.

Renting functional services, instead of custom designing them, also changes the nature of the funding requirements for business expansions. With Industrial Age strategies, large sums of capital have to be allocated to allow a company to expand. But, with an Information Age strategy, expansion is arranged simply by increasing the total amount of the outgoing service agreement rentals to cover the rentals for any new modules needed for the expansion.

The ability to expand and contract a business easily and cheaply is vital in the e-business environment. New technological developments, competitive initiatives, rapidly changing trends and fashions can leave a business high and dry almost overnight. A business needs to be able to survive these periods without extensive financial loss or having to suffer debilitating cash hemorrhaging with the burn rate eroding the capital base.

This marks the difference between Industrial Age and Information Age businesses: one is designed for stability in a stable environment, the other is designed for adaptability and survival in a chaotic and unpredictable environment.