The Cyberspace Challenge

Professor John M. McCann
Fuqua School of Business
Duke University

Original: 07/19/93
Revised: 05/08/95

Computers will so enrich the power of communications that people will soon be saved the expense, tedium, and energy waste of conventional travel, whether for work, entertainment, or education.[1]

This note introduces cyberspace and explores its implications for work and education.

The Emergence of New Organizations

The industrial revolution resulted in the hierarchical organization that contained layer after layer of managers. When this organizational form was the dominant model, business schools were in their heyday because they were designed to prepare people to march up the corporate managerial ladder. The education model involved giving students a set of courses that would prepare them to succeed in their entry-level specialist position, and to then rise up through various levels of management. We organized ourselves around the typical functional organization, one that had departments such as finance, accounting, marketing, production, and personnel. Our continued success depended upon the existence of this organization form, or at least on the existence of one that contains many, many managers.

Today, there is significant evidence that the hierarchy is giving way to new forms, ones that are described by phrases such as boundaryless, networked, virtual, spider web, team, learning, horizontal, and heterarchy. In most cases, these forms are based upon the use of technology to link specialists into groups that work across time and space to quickly accomplish an important task. Researchers who have observed early instances of these organizations have concluded that the new-style work involves communication and collaboration, and that these activities increasingly occur in a conversational format.

We can see that generating and transferring knowledge is what is happening in this new-style work. We can also see that the organization is composed of knowledge workers, and that these workers may not be employees of the company. They come together as part of a group, where they generate and transmit knowledge to other members of the group, and eventually to other people and groups.

It is evident then that the key activities of the new worker include knowledge generation, knowledge transfer, collaboration, and communication. These people do not have to be in close proximity to each other if the firm possesses the necessary technologies to support the generation and transmission of knowledge among people separated in space and time. In the old hierarchical organization, people worked together in the same building, or they traveled from their buildings to a common building. They worked in large office buildings, and we referred to their environment as office space. Firms spent considerable resources to buy or rent the space, to populate it with desks, filing cabinets, and other equipment, to clean it, and to make sure that a person's environment matched his or her status in the hierarchy.

What is Cyberspace?

We are beginning to see that this use of expensive physical space is no longer optimal in the new organizations. We see that people need a new type of space, one that has been termed Cyberspace . Michael Benedikt, a Professor of Architecture at the University of Texas, provides us with several views of Cyberspace [2]:

Cyberspace: A new universe, a parallel universe created and sustained by the world's computers and communication lines. A world in which the global traffic of knowledge, secrets, measurements, indicators, entertainment, and after-human agency takes on form: sights, sounds, presences never seen on the surface of the earth blossoming in a vast electronic night.

Cyberspace: Accessed through any computer linked into the system: a place, one place, limitless; entered equally from a basement in Vancouver, a boat in Port-au-Prince, a cab in New York, a garage in Texas City, an apartment in Rome, an office in Hong Kong, a bar in Kyoto, a cafe in Kinshasa, a laboratory on the Moon.

Cyberspace: From simple economic survival through the establishment of security and legitimacy, from trade in tokens or approval and confidence and liberty to the pursuit of influence, knowledge, and entertainment for their own sakes, everything informational and important to the life of individuals--and organizations--will be found for sale, or for the taking, in Cyberspace.

Benedikt goes on to tell us that this world does not exist (at least in 1992 when his work was published) but that it is imminent in the technology advanced cultures in Japan, Western Europe, and North America. An early version of Cyberspace came into existence via Internet, and existed in text format only. Audio and images have been added, with video transmission over the Internet the most recent development. Although these capabilities are recent additions to the Internet, they are being pressed into service in many creative ways. For instance, MCA's Universal Studios are developing software that will allow Internet users to interact with each other in the guise of graphical images rather than through text, to speak to each other in voice in real time and navigate their images through three-dimensional, visualized worlds. All of this and operating over ordinary telephone lines.

Another way to think about cyberspace is as computers connected via a Multimedia Public Packet Network (MPPN). The computers will be getting faster, cheaper, and/or smaller. The physicists have discovered the materials and processes, and the engineers will take of the rest. Developments are underway to create a MPPN that will allow multiple forms of media (voice, audio, video, animations, text, etc.) to be transmitted over a public (for instance, our current telephone network is public in the sense that anyone can use it, for a fee) network that transmits packets of information (as opposed to a network like the current telephone network that opens connections between two telephones as long as each party "stays on the line."

Suspend Disbelief and Forget the Past

I have found that when I discuss topics like this with faculty colleagues they quickly recount a stories about a failed attempt at some aspect of education that uses communication technology. The comments are not made to squelch or deny the vision but to place it in doubt. The implied question underlying these comments is "What is different now that will make your vision come about while other visions failed?" My answer is that now we have powerful multimedia computers hooked with similar machines around the world by fast networks. And, we can foresee a world of supercomputers on the desk and super networks ... that is what is different.

We are all familiar with the personal computer revolution, and can imagine what it will mean to move from today's 486 processor to tomorrow's Cray equivalent on our desks. But most of us have very little experience with communications, other than with our 1970s style electronic mail system and with the occasional modem connection. So, let's look at some numbers and see if they will allow us to understand and digest the meaning of the upcoming cyberspace.

Consider a 30 minute video presentation, which can be digitized and compressed to about 300 megabytes of data and then sent over communications lines. How long would it take to send this material? Well, it depends on the speed of the network line, as shown in the following table [3]:

Type               Speed          Available      Time            

Dial up            14.4kb/s       Now            46 hours        
ISDN               128 kb/s       Now            5.2 hours       
T1                 1.5 Mb/s       Now            27 minutes      
T3                  45 Mb/s       Now            53 seconds      
OC3                155 Mb/s       2 years       15 seconds      
OC12               620 Mb/s       4 years        4 seconds       
Super Hwy         1000 Gb/s       4 years        2.4 seconds     

The names in the first column are telecommunications jargon for current and upcoming communications channels. Forget the names, look at the speed and time (the available dates are in relation to 1993 when this table was published). The first entry, the one titled "Dial Up" represents almost all of our direct experiences with computer to computer communications. In fact, most of us have never communicated at this speed: 14.4 kilobits per second. At best, we may have used a 4800 baud modem (4.8 kb/s), which would require almost six days to transmit the file! That is the basis of our experience. When NSFnet is upgraded to OC3 in the next two years, we can move the file in 15 seconds; and then we will be down to 2.4 seconds in the next couple of years.

This analysis shows us one aspect of the new communication media: its ability to transmit a 300 megabyte file. We are moving from the top row of this table to the bottom; this is the essential story of what is happening today.

Today, it is not practical to prepare an hour of video material and distribute it over the public telecommunications network. Great expense and effort is necessary for such distribution. As we can see in the table, moving such video will involve a few seconds of network time and thus become very feasible. This is a discontinuity in our experiences, one that makes it very difficult for us to project our past experiences into the future. So, it is important that the reader suspend disbelief that is based upon past experiences and old stories so that s/he can begin to imagine what the new world might be like.

Why Cyberspace?

One could ask the question: why is this change on the horizon? Why is all of this happening? One answer is that it is in the physics. The physical properties of microprocessors and fiber optics permits the building of cyberspace. But this answer is incomplete because there are many things and spaces that could be built but are not built because of the economics of the situation. So, to arrive at the answer we have to look at the businesses that will potentially benefit from the creation of cyberspace.

The firms who built it would obviously benefit from the purchases of the computers and communication technologies ... IBM, AT&T, Microsoft, etc. Again, these firms are part of the technology side of the equation. The revenue sources for the builders and operators of cyberspace holds the answer because these sources will provide the initial revenue for the new media. That is, cyberspace can be thought of as a new media that might replace old media. To get an idea of the revenue available to cyberspace, let's look at what is being spent in the mediums that it might supplant.

The following is a table of the revenues (in billions of dollars in 1992) associated with 11 industries that cyberspace is likely to impact [4]:

Advertising                    $140  
Promotion                       $65                  
Catalogue shopping              $60  
Residential telephone           $50  
US Postal Service               $50  
Video cassettes                 $15  
Basic cable                     $12  
Video games                     $10  
Theater-based film               $5  
Pay cable                        $5  
Home shopping                    $2  

We can see that over $400 billion dollars will be available (will be "put into play") when cyberspace offers an alternative means of delivering these products and services. This number is large enough to cause firms to make the investments necessary for the creation of cyberspace.

These dollar signs are not the only drivers of cyberspace investments; education itself is another. An estimated $500 billion is spent in the US each year on education and training, with the following breakdown (in billions of dollars in 1992) [5]:

Elementary through High School      $261 
Higher Education                   $1646 
Corporate Training                   $43 

Puruse the Chronicle of Higher Education and you will find story after story about state governments that are investing in information highway-based education programs while cutting back their traditional education budgets. These government officials believe that the emerging computing and communications technologies offer them a way to get more for their education dollars.

These two sources alone amount to almost a trillion dollars per year that subject to attack from cyberspace versions of the same services.

Working in Cyberspace

What will it be like to work in this Cyberspace? We can see a world in which group membership is limited to those who posses or can generate some portion of the knowledge necessary for the group's task, not those who happen to be occupying space in the physical organization. Organizations will come and go as needed, and all residents of the Cyberspace can be part of any organization.

Perhaps the new company will not have an organization, at least as we think of it today. Perhaps organizations will come and go, and people will participate in them as long as they have something to contribute and something to gain. The organization will exist as long as the participants continue to gain something that they cannot gain in another organization.

There are a few dozen scholars, consultants, and journalists who are following and reporting on these developments, and their messages are in relatively close agreement. Let's look at how one of them, Tom Peters, characterizes this new world:

Organizations as knowledge-based societies. Organizations that have learned how to learn, that are engaged by electronic bulletin board with outsider organizations to which they are just slightly related, that are hooked into universities and other learning centers -- they alone will thrive. The 'knowledge component' of every 'product' and every 'service' and every producing network is shooting up. The ability to rope in knowledge, learn from what other parts of the organization/network are doing, and reinvent the organization/network in a flash become, arguably, the principal source of future value-added -- for corporations and nations alike. [7]

Peters reports on dozens of firms that have implemented some aspect of this vision. For example, he tells us about Bob Buckman, CEO of Buckman Laboratories International, who has transformed his company to focus on knowledge as a means of gaining a strategic advantage: "The most powerful individuals in the antibureaucratic future of Buckman Labs will be those anywhere who do the best job of transmitting knowledge to others."[8] Notice the key phrases in this sentence: "people anywhere" and "transmitting knowledge." Can we envision knowledge workers cruising around the Cyberspace looking for a group to join, just as we used to have cowboys riding around the range looking for work? Can we envision people posting "Knowledge Wanted" notices in the Cyberspace, just as ranch owners used to post "Help Wanted" notices on their gates? Are the knowledge workers of the future the cowpokes of the past? Perhaps the cyberpokes.

Yes, we can envision this world because it exists today in forms such as the Internet. But we can also envision a world where knowledge workers congregate, sort of the "bunk house" of the Cyberspace. Some people cherish the freedom and loneliness of the cowboy, others do not; they want to be around people of like minds. Today, they congregate in consulting firms, advertising agencies, marketing research firms, computer systems houses, and other organizations that serve companies on a contract basis. And, they congregate in the firms that employ these contract organizations. These congregations will still exist, but they will congregate in the Cyberspace, not the physical space. "Help Wanted" and "Services Offered" notices will flow among the cyberpokes and congregations. As Peter Drucker sees it, people will move from assignment to assignment, not from job to job.

Education in Cyberspace

If people live and work in the Cyberspace, what will be the role of universities in general, and business schools in particular? Clearly, we will continue to prepare people for the world of work. But we may have to change our terminology so that we no longer speak of positions, careers, or jobs. Our students must be as comfortable saying "I work in the Cyberspace" as they are today saying "I work in General Electric." Perhaps we will change our mission statement to read something like: Our education mission is to prepare students to accumulate, apply, and transmit knowledge to others in the Cyberspace. On a higher plane, we could say that we also prepare students to form organizations that accomplish tasks via the application and transmission of knowledge in the Cyberspace. This fits the old saying that knowing what to do is more important than knowing how to do it. Can we thus say that those people who get to live in the physical space and have titles such as CEO will be those who know what to do and how to put together the team that accumulates, applies, and transmits the requisite knowledge? Are these people the spiders who are constantly spinning and weaving the spider webs?

These activities are not very different from what we do today. We clearly prepare students to accumulate, apply, and transmit knowledge. And we strive to prepare them to put together organizations that accumulate, apply, and transmit knowledge. We just have to get into the Cyberspace ... that is our challenge.

But not only do we have an education mission, we have a research mission: a mission to perform research that impacts the practice of business. Most of us can and will conduct research that has nothing to do with Cyberspace; we will not care whether people are working in a shared physical space or a Cyberspace ... our research will be useful or irrelevant in either environment, even in outer space.

But the creation of Cyberspace will give some of us new research opportunities because it gives us the ability to communicate with other people who "live in," or occasionally visit, Cyberspace. Better yet, Cyberspace provides a new media for collaboration. "What's now emerging is a new hybrid of text, video, sound, image, and computation that frames a different mode of human interaction: collaboration."[9] For those academics who desire to work with people in other universities and in businesses, the widespread growth of Cyberspace will be a boon to their research programs because it will allow them to communicate and collaborate with their colleagues and contacts almost as if they were in the same room.

This collaboration will take advantage of distributed multimedia learning environments that are emerging on several fronts and being implemented, for instance, for high school science education in Northwestern University's Institute for Learning Sciences. The collaboratory concept could also be explored for use in Executive Education programs that extend a participant's stay at FSB into collaborations with faculty and/or MBA students.

All of my studies point to a new opportunity for business schools and business professors to change their relationships with businesses in the dual aspects of learning: education and research. These opportunities are being presented to us by those firms that accept the challenge of operating in Cyberspace and thus seek knowledge wherever they can find it. Since knowledge is our game, we can thrive in Cyberspace ... if we elect to play the new game. That is our Cyberspace Challenge.


[1] George Gilder, Microcosm, Simon and Schuster, 1989, p. 315 [2] Michael Benedikt, Cyberspace: First Steps, Cambridge: MIT Press, 1992, p. 1.
[3] Gary Welz, "Science and Engineering Television on the Internet: Scientific Publishing in a New Medium," presentation at the Conference of the International Federation of Science Editors, Consorzio Mario Negri Sud, Italy, July 1993
[4] Leo A. Lucas, “NII-Based Education and Training Project,” Online Chronicle of Distance Education, Vol 8, Issue 1, December 1994
[5] Digest of Education Statistics, 1992. U.S. Department of Education, October 1992
[6] Training Magazine, Lakewood Publications, October 1994
[7] Tom Peters, Liberation Management: Necessary Disorganization for the Nanosecond Nineties, Knopf, 1992, p. 123
[8] Tom Peters, op. cit., p. 427
[9] Michael Schrage, Shared Minds: The New Technologies of Collaboration, Random House, 1990, p. 16.