Businesses in Crisis: Learning from Good and Bad Management Decisions

The last fifty years has witnessed a shift in internal management procedures, brought on by a new revolution – the Information Revolution.  Some companies have recognized the need to meet these changing demands within the marketplace and have excelled by doing so.  However, other companies have ignored the need to meet the challenges of the 21^st century and suffered the consequences.

This chapter will focus primarily on how history has affected the practice of business today. There is no doubt that the Industrial and Information Revolutions have made a dynamic impact on how organizations now make decisions and how organizations will continue to make decisions in the future.

Industrial Revolution

In the eighteenth century, England led the Industrial Revolution as it initiated manufacturing practices to combat vanishing natural resources (Business Wire, 2000).  The Industrial Revolution led to increased inventions, and manufacturing eventually spread from the Western world to the East.  It was a time of dramatic change, from hand tools and handmade items, to products that were mass-produced by machinery (Business Wire, 2000).  Workers became more productive, and since more items were manufactured, prices dropped, making exclusive and hard-to-make items available to the poor, as well as the rich and elite (Business Wire, 2000). Life generally improved, but the Industrial Revolution also proved harmful. Pollution increased, working conditions were harmful, and women and young children were forced to work long and hard hours (Business Wire, 2000).

The effects of the Industrial Revolution played a huge role in how business is conducted in today’s society. Working conditions have been greatly improved and many problems that existed during the Industrial Revolution have been resolved with policies and laws.  The Environmental Protection Agency and the Occupational Safety and Health Administration are two agencies that enforce these laws. In addition, labor unions were formed to promote communication between employees and managers, resulting in increased safety and equality in the workplace.

Information Revolution

Today’s challenge is the impact of the Information Revolution, which is just beginning to be felt (Business Wire, 2000).  Like the Industrial Revolution, the Information Revolution is a time of drastic change.  Today’s society is constantly affected by the technology that is fueling the Information Revolution.   It is not only information or the effect of computers and data processing that fuels this impact on decision-making, policymaking, and strategy as discussed in Business Wire (2000):

The impact is felt most from something that very few anticipated or talked about ten or fifteen years ago: e-commerce -- that is, the explosive emergence of the Internet as a major, perhaps eventually the major, worldwide distribution channel for goods, for services, and, surprisingly, for managerial and professional jobs.

This effect is profoundly changing economies, markets, and industry structures; products and services and their flow; consumer segmentation, consumer values, and consumer behavior, as well as jobs and labor markets. However, the impact may be even greater on societies and politics and, above all, on the way we see the world and ourselves in it (Business Wire, 2000).

Businesses are seeking new ways to use the Internet to create real-world value (Business Wire, 2001). “Take any manufacturing firm in a vertical industry and you will notice the need to bridge the gap between product and distribution” (Business Wire, 2000). In the old-school manufacturing supply chain, the distributor held the power. However, manufacturers realize that the possibility of Internet-powered distribution through multiple channels, and even direct consumer sales, gives them greater control (Keough, 2002).  This new information business model allows the consumer to order directly from the manufacturer, but the distributor still packs and ships the goods.  “This allows the distributor to take greater care for the consumer since they spend less time taking orders” (Keough, 2002).

Today, this business model demonstrates why many businesses are successful and others have failed.  Kmart''''s strategy in the year 2000 was to buy through wholesalers rather than buy direct – three-step versus two-step (Wirebach, 2002). Kmart’s competitors chose another route, as detailed in this response by Wirebach (2002), “Remember, Wal-Mart doesn''''t deal with middlemen. It only deals directly with the suppliers that can cut the price.” There was “no way” Kmart could compete with Wal-Mart without buying direct.

The Industrial Revolution, when the goal was to provide massive amounts of goods by manufacturing at low prices, is long gone.  Today’s Information Revolution requires attention, strategy, and competitive gain.  The challenge is to use the technologies of today to effectively and efficiently disseminate information transfer, while improving processes and gaining business value.

The companies that are not integrating e-commerce into their long-term strategic planning are falling far behind.  Many dot-coms have fallen behind as well, but they did not have a business model to follow that represented a long-term strategy.  Many dot-coms failed to see the consum