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Economies and diseconomies of scale in the information society

Ubiquity, Volume 2003 Issue July, July 1 - July 31, 2003 | BY Adamantios Koumpis , Bob Roberts 

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Economies and Diseconomies of Scale in the Information Society
By Adamantios Koumpis and Bob Roberts


An assessment by means of Situation Room Analysis



An economy is an environment in which specific laws are applied facilitating or governing organized transactions as well as their underlying infrastructures. A diseconomy is those negative aftereffects of some newly introduced economy.

Our main postulate is that concepts, technologies, applications and services -- as well as any of their combinations -- are to a great extent responsible for diseconomies that are not usually examined as they should be. If we consider the fall of the dotcoms for example, what they presented as their contributing input to the e- (or digital) economy was followed by a set of diseconomies that actually triggered slowdowns in both the organizations themselves as well as the markets these dotcoms were addressing and operating in.

We came to recognize the need for assessing both economies and diseconomies that relate to a technology as part of a wider research carried out in our organizations in defining a methodological framework for Situation Room Analysis (SRA), and its employment for complex (business enterprise) systems study.

More specifically, we started from investigating the area of multi-party collaboration and decision making activities by using the central metaphor of a Situation Room (SR). The latter term is broadly used in the context of military operations and has specific semantical connotations. These connotations are deliberately exploited in order to propose an analytical scheme based on it, which aims to assist planning initiatives and decision making in a particular application domain.

Trying to link theoretical concepts with the reality faced in corporate decision-making activities, we carried out a set of case studies. One of the studies was based on a private research institute in the area of adhesive materials which is also the Research and Innovation Division of a big international wood chemicals group.

Our contacts there participated in a project related with the introduction of Knowledge Management (KM) techniques into their everyday business. In regard to their case, they currently operate a set of procedures for many steps of the knowledge lifecycle management process. However, some key issues are highlighted regarding their approach:

-- They do not operate in an integrated way and by looking at the sub-processes as independent partitions they lack the bigger picture.

-- They do not adopt a holistic approach. "Holistic" for them takes the meaning of "generic", and because they are (correctly in a great extent) from their experiences not believing in generic solutions, they are also negative in networking the various parts into a greater "system".

Our goal was to support high-level corporate operations by means of defining the Situation Room Analysis as an expressively powerful vehicle to support this need. The main entities for defining the basics of Situation Room Analysis are related with:

-- the concept of the Situation Room (SR) per se,
-- the managed information within the SR, and
-- the main items of the conducted analysis which in our case focus on products and services in the IT market.

In regard to all three of them three corresponding models are defined, namely: -- The Situation Room Model (SRM),
-- The Information Management Model (IMM), and
-- The Situation Analysis Model (SAM)

They all concern descriptive conceptualisations of entities and activities, annotated with the interactions and possible relationships amongst them, which results in a super-model, namely the Situation Room Analysis.

Furthermore, we elaborate on this by providing the specifications for setting up the implementation of this to an IT framework using emerging technologies (XML, software agent, Semantic Web and ontology technologies) and established system design approaches (UML). In both modeling and interpreting the impact of information in the context of the virtual network the research is also informed by game theory and transaction cost theory.

To better explain the concepts of economy and diseconomy as approached in our research, we consider the area of Mobile Agents technologies. There, one can see concepts and basic core implementation approaches dating back to the 1980s. However, its comeback, pushed by (supply from) research in academia rather than pulled by (demand in) industry, succeeded in extending functionalities and elaborating the potential covered by this technology.

Once people from academia and industry are investing their time in this field, results will start to emerge and the first signs of an economy are there: those people whose names appear in a paper on a conference with a marginally relevant (sub)thematic in the field may possibly organise their own conference.

After some time, they may "jump" to the industry either as key drivers for the development of these technologies or as entrepreneurs. If the overall economy is growing, they will easily find money, and if the economy is in its "highs" money will find them, even if they did not plan to do so.

In such a situation, the first seeds of a diseconomy appear. The artificially increased rise of expectations that originally aims to support the demand level will backfire sooner or later.

The difficult question here is "how soon" (or "how late"). One may relate this with a slope in the economy and this may be partially correct. However, the main responsibility still lies with the company itself in that it is a market actor participating in the particular segment of an economy and positioning itself through executing decisions of a strategic, tactical and operational nature.

It also typically interacts with other market actors, establishing coalitions or alliances that may be of a commercial business nature, while some others might have attempted to pose barriers for entry.

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