Here is a brief excerpt from a “classic” article (1997) written by Patrick Butler, Ted W. Hall, Alistair M. Hanna, Lenny Mendonca, Byron Auguste, James Manyika, and Anupam Sahay for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.
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A new study of interactions reveals how pervasive they are. As they increase in number, answers to fundamental questions about integration, scale, and scope will change. But what will happen when workers can carry out their jobs in half the time?
A new study of interactions reveals how pervasive they are. As they increase in number, answers to fundamental questions about intergration, scale, and scope will change. But what will happen when workers can carry out their jobs in half the time?
The modern world economy is in the early stages of a profound change in the shape of business activity. Two centuries ago, dramatic shifts in the economics of transformation—of production and transportation—precipitated the Industrial Revolution. An upheaval of equal proportions is about to be triggered by unprecedented changes in the economics of interaction.
Interactions—the searching, coordinating, and monitoring that people and firms do when they exchange goods, services, or ideas—pervade all economies, particularly those of modern developed nations. They account for over a third of economic activity in the United States, for example. More than that, interactions exert a potent but little understood influence on how industries are structured, how firms are organized, and how customers behave. Any major change in their level or nature would trigger a new dynamic in economic activity.
Just such a change is now beginning to occur. A convergence of technologies is set to increase our capacity to interact by a factor of between two and five in the near future. This enhanced interactive capacity will create new ways to configure businesses, organize companies, and serve customers, and have profound effects on the structure, strategy, and competitive dynamics of industries.
Yet business leaders will find it difficult to anticipate the opportunities and threats this change will present because our assumptions and thinking about strategy and organization are based much more on the economics of transformation than on the economics of interaction. To recognize, understand, and act on the hidden power of interactions, we will need to adopt new mindsets, new measurements, and new vocabularies.
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