Henry Ford, Uber and the Innovation Revolution

Analyst: Owen Rogers

History is repeating itself. In the same way that the Industrial Revolution changed the lives of normal people, we are on the cusp of another revolution. The assembly line pioneered by Henry Ford is now used to great affect by the likes of Uber and Airbnb. And with little capital and just a few skills, the 'common man' has the opportunity to develop his or her ideas into profits. Innovation is no longer restricted to the big R&D departments – we are undergoing an Innovation Revolution.

The 451 Take

Revolution is a term commonly overused in marketing material. A revolution is a fundamental change in power – do most of the product features described in brochures as revolutions really shift power? No. But over the past few years, low capital access to technology, a vast array of educational material and the division of IT management have caused a shift in power. Innovation is no longer restricted to highly skilled, highly funded IT departments. Anyone with access to the Internet – some three billion people globally – can now learn, develop and innovate IT technologies. The power has shifted: service providers need to ensure that they can play a role in the revolution via interoperability, education and on-demand pricing.

As a teenager working at a microwave TV dinner factory, I didn't appreciate the production line. At the time, I'd barely heard of Henry Ford, clouds were just in the sky, and the concept of Uber would be completely alien. As an economist, I now appreciate the division of labor as an innovation that drove one of mankind's greatest periods of advancement: the Industrial Revolution. History is repeating itself. Technologies such as cloud and innovators like Uber are initiating a new revolution: the Innovation Revolution.

The Industrial Revolution was a perfect storm of new and easier access to manufacturing processes and technologies. Although the division of labor had been around for centuries, it was a key feature of the mills and factories of industrial Britain. Now, a team of people working an assembly line could produce goods quicker and cheaper than as individuals. Each individual would have responsibility for crafting just a single part of the good, which would be assembled sequentially. As an individual only needed to know a single skill, training became simpler. Each individual could hone his or her skill to produce a large quantity productively. Handicrafts disappeared from view, with a whole movement – Luddites – being initiated to fight back against the industrialization of their tasks.

The Industrial Revolution spread to the US, with Henry Ford becoming an expert in the use of the assembly line to manufacture cars. Ford revolutionized not only the industry but also the world, making mass manufacturing a reality. The process was so efficient that the automobile went from being a luxury to a day-to-day part of our lives.

In the IT industry, such a revolution has yet to occur, but we are on the cusp. To some degree, division of labor has already taken place. In a typical application stack, one vendor manufactures servers, others produce operating systems and software, and a datacenter operator provides colocation and bandwidth. But there is still one labor process that is typically not divided: management. One application owner will usually be responsible for software and hardware, and potentially the whole stack. Before cloud, a developer or administrator would have purchased a server, taken it to the datacenter, configured it, implemented the OS and software, and then been responsible for its operation, at least to some degree. Even in the days of managed hosting, those working in IT must have a varied array of skills. Picture now how much you, as an individual, know about networking, hardware, software, mobile, operating systems – could you do your job without this broad view? Chances are you have a wide variety of broad knowledge, even if you have a deep specialism – you are still a craftsman. Ford had other ideas.


Uber: the ultimate example


Cloud and other technologies have changed this process, and Uber is the ultimate example. The company owns very little: it uses other people's vehicles, which are all self-managed by the individual; it uses cloud services and platforms operated by third parties; it uses cell phones owned by the end user and manufactured by OEMs; and it uses Internet connectivity built on an infrastructure operated by mobile operators. For each of these technologies, a specific team covers only that aspect of Uber's product – the company has its own team that works on top of all of these technologies. Uber's whole value proposition is built on the division of labor: it is a production line that assembles all of these services together. True, it adds some value via intellectual property, but without all of these components, it could not operate.

Correction: it could operate, but it would be cost prohibitive. In the same way that manufacturing enabled the 'man in the street' to buy a Model T Ford rather than the privileged few, the componentization of IT enables all of us to develop services. And it allows us to do it at a cost that consumers can afford. This is a revolution because innovation is no longer restricted to those with the broad skills and the capital. In the same way that the Industrial Revolution gave the common man access to better living standards (at least eventually), the Innovation Revolution is giving the common man access to greater opportunity.

Could Netflix have afforded to grow and scale internationally if it wasn't for the componentization of cloud and network? Airbnb's whole value proposition revolves around the use of individuals managing their own property – this is a huge division of labor relative to hotels, for instance. Pinterest started with just 12 employees: without third-party cloud services, could it have grown to be as big as it is now?

The Innovation Revolution essentially enables pretty much everyone to have access to technologies that previously would have required advanced skills and significant capital. This new access gives all of us opportunities to innovate in ways we could never had before, and it gives all of us access to services that previously would not have been possible. It is a revolution because it impacts individuals.


Potential drawbacks


Are there downsides? Henry Ford found that shrinking individuals' broad skillsets to smaller ones reduced job satisfaction. The repetitive nature of tasks was clearly not attractive to employees. Is this a risk in the IT industry? Perhaps. Most of us like the variety in our jobs – being responsible just for swapping out servers or just for plugging in network cables might be a painful new world. But then again, IT is complex enough that no two situations are the same, so there will always be variety. And Ford got around the problem by paying staff more, while at the same time reducing the cost of his Model T.

How can businesses ensure that they can take part in this revolution? How can they ensure that they are one of the components of this innovation? Service providers must give end users the ability to pick, choose and consume the services they offer. APIs and interoperability are key to this division of labor – without them, how are developers supposed to build these services into their 'assembly lines?' Customers may still want end-to-end services, but they will want to decide how the end-to-end process is assembled, and they'll want to be able to reconfigure the production line as business requirements change.

Ford's new factories can be reconfigured to make different cars, with minor changes to machinery and process: IT innovators want the same scalable, on-demand access to quickly take advantage of new opportunities. Education and open source is a massive component of the Innovation Revolution. Open source programming languages, online documentation and forums mean that consumers of your products don't need to spend years studying computer science – they can just jump in, experiment, and learn as they go. Companies that want to participate in this revolution need to ensure that the consumers of the services have the tools they need to get started immediately, without any barriers such as paywalls, or limited or non-standard languages.

All of us have been impacted by the Industrial Revolution in ways we cannot even imagine, just 100 years later. How will the Innovation Revolution affect us? Only time will tell. But we can be confident that we will experience it at a faster rate than the millworkers of Britain.

This report was published in our Market Insight. Click here for more information on Market Insight, or to request trial access to our research. 


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