The Dark Matter of the Business Universe
According to NASA, over 95% of the universe is made up mysterious substances known as dark matter and dark energy. We only really understand less than 5% of the cosmos.
Modern biology suggests that 98% of the human genome is non-protein coding, or so-called ‘junk’ DNA. We are just beginning to figure out how the vast majority of our genetic material works.
In physics and biology, progress comes in the form of “knowing what we don’t know”, opening up promising new lines of research and technology development. Is there an equivalent in the business world–something that is fundamental, yet we know very little about? I can think of at least two possibilities.
My first candidate for the ‘dark matter’ of the business universe is services.
Though services make up almost 80% of the US economy, they are defined more by what they aren’t–not manufacturing, not agriculture–than what they are. Recent research papers are arguing that most of our definitions of services are wrong. It’s not about the lack of a physical product. Services are a fundamental challenge because they require businesses to treat customers as both a ‘wave’ and a ‘particle’: simultaneously as a customer to be served, and as a supplier or a producer to be managed.
My second ‘dark matter’ candidate, perhaps even more mysterious, is knowledge.
Economists will tell you that intangible, knowledge-based assets have made up the majority of capital in the US economy since the late 1960’s, and businesses “know” that knowledge is fundamental to innovation and competitiveness. But knowledge is not just another asset to be managed in the same way, or another form of property to be bought and sold. There is a fundamental ‘uncertainty principle’ around knowledge. Unlike information, knowledge is a capacity for action based on human understanding, placing limits on how easily it can be created, shared, and applied to different situations.
How can the ‘dark matter’ of the business universe open up promising new directions for business theory, and business practice?
In terms of theory, both services and knowledge challenge our most fundamental understanding of what it means to be a business firm operating in a market. The boundaries of the firm are much less solid, as knowledge-centered business depends on complicated relationships between shared knowledge in the outside world, and the businesses that try to exploit it for private gain. The inside-out relationship with customers in service-centered business also challenges traditional firm boundaries.
The concept of a well-functioning competitive market gets stretched to the limit because knowledge-based and service-based products are the opposite of well-defined commodities, and because of the extreme lack of ‘perfect information’ held by buyers and sellers. Rather than seeing ‘dark matter’ as an extreme but rare case of normal reality, we have to change our thinking to make knowledge-centered or service-centered business the norm, not the exception.
In terms of business practice, we have the emergence of the ultimate global, open, low-cost technology for sharing knowledge and delivering services–our old friend the Internet. Don’t be fooled into thinking that you know what the Internet is capable of. We are only today getting reasonable broadband, always-on penetration in the developed word. Only one-sixth of humanity is on the Internet. And we are just beginning to figure out how to use the Internet in truly innovative ways that don’t simply automate what came before (see e-commerce). It took us almost ten years to figure out how to blog! We might speed things up by focusing on fundamental business unknowns, rather than just reacting to new applications that emerge from geekdom.
Do we know how little we know about the business universe?
Thanks to my colleague Steve Alter for the recent research on services.
I’m pleased to present the paper lineup for the Social Theory in Information systems Research (STIR) track at the AMCIS (AMericas Conference on Information Systems) 2007 conference. For the past five years, my fellow track chairs and I have tried to bring together an international mix of research that shows how social theory, and social research methods, are useful for answering questions about the future of information technology.
J.P. Allen is an Associate Professor of Information Technology at the School of Business and Management, University of San Francisco. 