According to Shoshana Zuboff, whatever you've invested in technology, chances are you're not getting your money's worth

Over the past 20 or so years, American business executives have spent billions upon billions of dollars equipping their companies with computers, robots, automatic-control and telecommunications equipment, word processors, and workstations -- not to mention the software and training required to make all this gadgetry work.

But let's say that in your own company you've spent only thousands of dollars, maybe even just hundreds of dollars, on what we're going to call information technology. It doesn't matter. Whatever amount you've spent, however much or little, chances are you aren't getting your money's worth.

Not because you bought the wrong stuff, although you might have. Or not because it doesn't work, although it might not.

You're probably not getting your money's worth because you're not getting out of the equipment everything that it's capable of delivering. Even if the new automated production equipment has replaced exactly the number of assembly workers the salesperson promised, even if the new CAD workstation has cut your design time more than you thought it would, even if your spreadsheet program makes budgeting simpler than you ever believed it could be, even if you couldn't be happier with your investment, the information technology you've purchased has a capability that most users -- including you -- don't use.

Or so contends Shoshana Zuboff.

In the view of Zuboff, an associate professor at Harvard Business School, it's what you're not using, what you're probably not even aware of, that is the truly awesome power of information technology.

For eight years Zuboff followed the daily, hourly experiences of people -- workers, managers, and executives -- in eight companies as they learned to accommodate themselves to a work world rich in electronic-based technology. One result of her study was a book, In the Age of the Smart Machine.

What Zuboff learned about the generally unrecognized power of the technology, its unavoidable consequences, and its largely unrealized potential for improving companies' competitive potential is thought provoking. INC. senior writer Tom Richman read In the Age of the Smart Machine, then had this conversation with the author.

INC.: Why all the fuss about computer technology? Think of all of the technology that we have absorbed over the past hundred years. What's so special about the microprocessor?

ZUBOFF: There's nothing special about it, if you want to use the technology to accomplish the same kinds of things that we used earlier generations of technology to accomplish -- reduce costs, increase productivity, increase control over processes, and eliminate dependence on human beings. If you just want to use information technology to accomplish those things, there isn't anything terribly new about it.

But to make the kinds of investments that companies are making in these technologies, and to use them as though they were just a bigger and better version of the assembly line or a faster typewriter is a terrible waste.

INC.: What should we be using information technology for, if not to reduce costs and raise productivity?

ZUBOFF: This technology represents what I really believe is a radical discontinuity in industrial history.

INC.: Radical discontinuity?

ZUBOFF: All other technologies have had the effect of simplifying and decreasing the intellectual content of work. This technology increases the explicit information content of work. In some ways it makes work not simpler but more complex. So information technology really has a new set of implications for human organization.

INC.: Wait a minute. We have to slow down.

ZUBOFF: OK, most managers approach information technology with the idea that they are going to use it to automate something. The shorthand for that is the more technology, the fewer people; the smarter the technology, the dumber the people can be. But when you apply information technology, even just to automate, it does something else. It takes the very processes that it is designed to automate, and it translates them into data. Then it displays the data -- in a printout, on a video screen, or in some other format. Anyway, you see this parallel set of effects: The processes are being automated, but they are also being translated into and displayed as data.

INC.: An example would help, I think.

ZUBOFF: The simplest example is the industrial robot. It takes over a finite bit of the production process that a human being used to do. But notice that it's not only automating that bit of the production process; it is also generating data about it. The microprocessors might be registering time, temperature, density, geometry -- all kinds of characteristics that, when a human is doing the work, were never made explicit in any way. They were simply part of the action of the person doing the work.

Now, you can be in a control room many floors away monitoring data fed back by those microprocessors, and it gives you insight into that bit of the production process that you never had before -- dozens or even hundreds of variables. The way I explain this is to say that the technology, by this activity of translating and displaying, makes the core processes of the organization -- what really goes on in production, administration, marketing, and so on -- more transparent than they have ever been before.

INC.: What do you mean, transparent?

ZUBOFF: You can see into them and through them and know all kinds of detail about them that you could never have seen before.

Now, on a large scale the same thing is happening to entire organizations. Information systems get linked to one another and to the text-processing network. Companies that are sophisticated about information systems are moving toward environments in which general information about the business is consolidated into one database that is also linked to various information, text-processing, and communication systems. So literally through one network you can access financial data, computer-conferencing dialogues, personnel data, text processing or transmissions, sales data, market information, and so on. Furthermore, programmers are taking information that used to be in people's heads, in their file drawers, on pieces of paper, or otherwise scattered about in private, uncodified formats, and they are transferring it into the system.

What you begin to get is a database that is a detailed kind of mirror, increasingly a reflection of the internal dynamics and external transactions of the business. If you have the skill to navigate your way through these systems and to interpret and use the rich information available there, then you have a window into the business that never existed before. The whole organization, not just one bit of the production process, has become transparent.

I call this "informating." It's a word I coined reluctantly, but I found no other word in our vocabulary that describes this unique capability of information technology to take three-dimensional objects, processes, and behavior and translate them into data to make them transparent and knowable in this new way.

The technology creates an opportunity to learn more about the functioning and the nature of the business than ever before. Informating, in fact, is the way the new technology can make its biggest contribution to the organization. The informating capacity of the technology can help companies identify opportunities -- new services or products, ways of operating, ways of getting closer to and understanding the marketplace.

INC.: Let's say that I'm running a business. I've got some computers. I'm not antitechnology. How do I find out about informating? How can I use it?

ZUBOFF: Remember, I said that information technology represents a radical discontinuity in industrial history? Well, if you want to harness the informating power of technology, you've got to reorient your thinking about technology. You've got to move from what I call the automating paradigm into the informating paradigm. It means changing your fundamental assumptions about what business organizations are supposed to look like.

INC.: Which assumptions?

ZUBOFF: For instance, you need to abandon the assumption that managers are different from the people they manage. One of the things that made them appear different in the past was that they had information that the people they managed didn't have. Managers, we said, were the people uniquely equipped to deal with information, and for that reason we granted them authority.

But the informating process upsets this logic. By making the organization and its processes transparent, technology allows almost anyone in the organization to see what's going on in the business. Workers can see more and know more than they were ever able to see or know before. If you used to think that what separated managers from workers was information, you have to abandon that assumption. Workers will have information, too.

INC.: Say I do drop that assumption. How does that benefit my company?

ZUBOFF: It means that you can now think of your workers -- and by workers, I mean the people who are at the front line of whatever business you are in -- as being capable of thinking and acting on the information they have. After all, they are the ones closest to the production process, to the customer, and to the actual operations of the business. If you also give them the skills to exploit that information, then you've created very powerful organizational resources. You've engaged those people closest to the work in the value-adding strategies of the organization.

INC.: Another example, please.

ZUBOFF: One company I've worked with is based in London, but it has thousands of shops all over the world that rent televisions and other electronic equipment. They used to run those shops from London. Shop managers were told what inventory to carry, how much to charge for items, what rental policies to follow, and so on.

New leadership developed a new business strategy based on quality service delivery. It became clear that the shops had an important role to play in providing service and developing new businesses. Corporate management's job would be to see that they had both the information and the authority they needed to do that. So, the company put in place the technology that gives the store employees all kinds of information about their customers, the market, their competitors, their inventory, and their service.

INC.: And what happened?

ZUBOFF: Now, those shop employees have the capacity to manage and grow their businesses -- to see new things they can do, new ways they can serve customers, new niches they can open up. They can operate in a way that they never could before.

What happened was that the nature of the shop employee's job changed. It went from being a low-skill, low-wage, high-turnover job to being a managerial job with different career implications and requiring a good deal of business knowledge, training, imagination, and the intellectual skills to deal with abstract, electronically based information.

INC.: And the company looks different now?

ZUBOFF: Six years ago there were 13 levels of management and probably a hundred people in corporate headquarters, lodged in a fancy London building. Now, there are 3 or 4 levels of management, and instead of the fancy building, corporate headquarters is in a rented space above a suburban grocery store.

INC.: What does this paradigm shift that you talk about mean for entrepreneurs who are in the process of building companies from scratch?

ZUBOFF: It should alert entrepreneurs to the fact that creating an organization will no longer imply certain preset rules about what an organization should look like. Instead, you can develop the people and the organization to fit the problem -- satisfying your market -- and then develop the technology that will support that organizational structure, whatever it is.

The entrepreneur can be very creative and imaginative and doesn't have to be tied to the past. He or she can ask, what organization and what kind of people make sense to tackle this problem in the most successful way? It's a clean slate for people who are just beginning to build organizations -- provided they recognize that the technology gives them that freedom.

INC.: Companies don't want to be different. They want to be better. How is my company a better competitor for having and using this technology?

ZUBOFF: A lot of people make the mistake of saying that competitiveness is about having a new product or a new service and getting it to the market first. My view is that no matter how unique the product or the service, your competitors are rather quickly going to figure out how to launch that same product or provide that same service. I worked with one bank that was very excited about being the first to bring certificates of deposit to market in the country in which it was operating. Six weeks later every other bank in that country was also offering CDs.

The real source of competitive advantage is having the organization that can exploit information to learn and to innovate more quickly and more regularly than the competitors. Sure, other people will catch up with the product or the service, but you've got the process that makes sure you're already working on the next one.

INC.: In the example you used of the London company, the organization turned out much flatter -- from 13 to 3 or 4 layers. Is that what companies operating in the informating paradigm are going to look like?

ZUBOFF: They are flatter. But that's not where I think it's useful to start. I think it's about creating organizations that are geared to learning, and you have as many people in the organization as you need to make that happen.

Even when you've got people at the front line with the information and skills to drive the business, you have to give them the authority, accountability, and motivation that they need to use their minds to exploit that information. So that means that your career systems -- the conception of promotions, reward, and development -- all of these policies have to be geared to creating and sustaining a learning environment.

INC.: Those policies all have to be rethought?

ZUBOFF: That's right. They all have to be consistent with supporting a front line that's empowered to drive a business by exploiting information. When you begin to get your mind around that, you see very different implications for what's important organizationally from what you would have seen otherwise.

It's not about creating a chain of command and getting the work more and more routinized. It's about getting the people closest to the marketplace into a position to do work that will make a difference. The organization has to support them. That means educating them, developing their skills, and creating an enabling environment.

INC.: Simply installing new technology doesn't mean that a company has entered the posthierarchical promised land?

ZUBOFF: Far from it. What you end up getting is this new technology with potentially revolutionary business benefits being installed in organizations that are still structured to pass all the data up the chain of command. They still have the idea that some people at the top will figure out what to do with the information, then they'll send the results back down, and the people at the bottom will implement their decisions. They still operate according to a class system that assumes that some people are going to have information and points of view worth communicating and others are not.

It is important to keep in mind that I'm not talking about a fad or this month's organizational gimmick. I'm talking about a fundamental organizational change that occurs as a response to basic shifts in the structure of markets, the nature of competition, and the nature of the technological infrastructure that hold our organizations together.

What will drive these changes is competition. One of the realities of global business is that communications systems have already transformed our notion of what it means to communicate -- we do it in nanoseconds now instead of months, weeks, or days. We can have data about our business and about customer reactions to our business almost as it is occurring. The strongest competitors will be those businesses that are the first to learn how to use those data faster and in a smart way.

INC.: You talk about empowering people at the front line -- what we now call the lower levels of the organization. That begs the question of where companies are supposed to find trained or trainable people.

ZUBOFF: They're not as rare as you think. More people can make this transition than we think. We have created organizations that essentially tell people in the front line that you don't have to think, you just have to do. People are socialized into those expectations.

We need to shift our managers' roles. In our new organizations, they won't be the guardians of information. Instead, we have to show managers that we really need them to be the educators -- to create, manage, sustain, and nurture the environment in which learning and value creation can occur. When we give that kind of role to managers, it lowers the threatening quality of this change.

INC.: Are you also suggesting that there won't be a great number of of middle-management layoffs?

ZUBOFF: I am not suggesting that there won't be streamlining. People talk about eliminating middle management because they're still operating in the automate paradigm. They think that because technology can move around the information that managers once moved around, we should eliminate managers. But I'm working off the informating paradigm, and what I see is that technology is not just about substituting machines for managers, it's about creating learning opportunities. If you are going to create learning opportunities, then there is more, not less, to do.