The New Factors Of Production

by Brian Gentile

Classical economic theory describes three primary factors, or inputs, to the production of any good or service: land, labor, and capital. These factors facilitate production, but do not become part of the end product (as a raw material would). While these three factors have been much discussed and extended at different points in economic evolution, I believe that they, in any of the advanced economies of the world today, are vastly antiquated.

Sometime even prior to this new millennium, the primary factors of production have now assuredly become:  Time, Information and Capital.  I submit that the primary relevance of land and labor has diminished, not completely but measurably, from their prominence during agrarian and industrial economic times. In a sense, owning land and employing lots of people no longer highly correlate to a valuable and successful enterprise. Although in certain industries these two factors will remain prominent (think mining and energy production, for example). By and large, land and labor have yielded to two more important factors – time and information. The third factor, capital, has been and will continue to be of primary importance in any Western-style, capitalistic economy. Or perhaps more to the point, an enterprise’s ability to raise and efficiently deploy capital will continue in its historic prominence.

Time

Competing based upon speed and time delivers a primary marketplace advantage. Understanding and translating customer needs swiftly from concept to practice, in many ways, determines the success rate of an enterprise.  In part, the pace of technology innovation itself has set a blistering schedule for the rest of the business world.  And in turn, technology innovation enables all organizations to compete on the basis of time (and speed).

Many timelines describe technology advancements that have accelerated markedly and consistently, quickening even more so during the past 40 years. Now, the “Internet of things,” hastened by cloud computing and network ubiquity, unprecedented gains in microprocessor performance, rapidly declining memory prices (while capacities have skyrocketed), and the more efficient use of computing power and energy (virtualization of most every computing resources) provide new possibilities for dramatically reducing the time to learn, innovate, and execute on a business plan.

It’s claimed that Toyota developed the Prius in 15 months, using techniques and technologies specifically designed to accelerate their product development process. As the first mainstream hybrid drive vehicle, the Prius represents a substantial amount of complex software development (it’s basically a computer on wheels), providing a great case study for both software and manufacturing engineers. Its speed from design through development and deployment enables Toyota to stay ahead of its competitors and better satisfy customers first. To learn more about the concepts behind “Competing on the Basis of Speed,” a fun and interesting Google Tech Talk video provides ample illustration here.

[By the way, speed in project and product development also enables fast failure, which is actually a good thing and probably should be the subject of a completely separate article.]

Toyota offers a great example of using “Time” for competitive advantage, which absolutely relies on putting more data and information to work, bringing us to our second new factor of production.

Information

Much research has chronicled the onslaught of data and its growth, especially during the past decade. A recent study by IDC (and sponsored by EMC) predicts that the amount of digital information created annually will grow by a factor of 44 from 2009 to 2020, as all major forms of media – voice, TV, radio, print – complete the journey from analog to digital.  Speaking at a tech industry conference in the summer of 2010, Google’s Eric Schmidt warned about both the opportunity and the responsibility this much information represents.  “People aren’t ready for the technology revolution that’s going to happen to them,” said Schmidt.

Indeed, Google and countless other companies are thriving at the epicenter of this data explosion, both enabling and taking advantage of it. In many ways, they represent models for any organization to more effectively use information to its own advantage.

To this end, harnessing information as a primary factor of production will mean recognizing and effectively planning for the four “V’s” of data:  volume, velocity, variety and veracity.

• Volume: The sheer amount of data being digitized, maintained, secured, and then used. Knowing the organization’s current needs and having a plan for its growth is fundamental.
• Velocity: The speed at which data must be moved, stored, transformed, managed, analyzed or reported on in order to maintain competitiveness. This will vary by organization and application or usage.
• Variety: The different types of data, from source (origin) to storage and usage, must be well understood because competitiveness requires access to the right types of data more than ever.  From aged flat files to spatial and unstructured data, a plan must be in place.
• Veracity: The truthfulness or quality of data can either lead to poor understanding and decisions that belie progress or deliver a powerful jolt of reality that fuels new insight and ideas. Ultimately, data quality may be the most important frontier.

Being a master of the four Vs puts one in much better position to use information broadly for competitive advantage.  To be sure, broad usage of information is key, because of the need for speed. The greater the latency to insight and decisions, the more likely your competitor will out-maneuver, using the advantages of time and information to his advantage. 

From: https://www.forbes.com/sites/ciocentral/2011/10/31/the-new-factors-of-production-and-the-rise-of-data-driven-applications/#19f10b6817da