GISPRI No. 14, 1996

Social Organizations and Electronic Network

By Akio Sugii
Infomation Coordinator

1. Use of Communication Networks in Corporations Today

The explosive growth in electronic networks in recent years is having a large impact on corporations. In actual numbers, a survey by the New Media Development Association confirmed around 2.6 million users of personal computer communications in Japan as of June 30 last year, 30% up on the previous year. Extrapolating from this rate of growth, by the end of this current fiscal year, the number of users could be well over 3 million. (The Association announced recently that at the close of June 1995 there were 3.69 million users, excluding users in independent corporate networks.)

According to a 1994 study entitled "Internal Corporate Communication Networks Today" (Ministry of Posts and Telecommunications) based on a survey of 1,500 companies, 17.2% of Japanese companies use electronic mail (E-mail). The study predicted that in the near future, companies using or preparing to use E-mail should increase by about 9%, to 26%. Moreover, if we limit the figures to companies with 5,000 or more employees, at the time of the survey, 49% were already using E-mail. If we add those intending to introduce E-mail, the figure jumps to 71%. Thus, there is a strong correlation ship between the spread of E-mail and corporate size (in terms of employees). Interestingly, there is little correlation ship between use of E-mail and capital or sales.

Looking at the pattern of use, 9.8% of companies use E-mail only within the company, while 7.4% also communicate with the outside world. These figures together give the 17.2% of Japanese companies using E-mail as identified in the 1994 Ministry of Posts and Telecommunications study. However, the number of companies also able to communicate outside through their network has increased dramatically in recent years. As a mean of communication, the use of E-mail is outward bound.

On the other hand, the percentage of companies using data networks has reached 77.2%. More than half of data network use is in three areas: sales and inventory management, ordering control, and accounts and finance management. Accordingly, corporate networks tend to be used as data rather than communication networks because of the past influence of office automation (OA).

To date, individuals have typically led the way in the use of new media, particularly in personal computer communications. The main reason companies have lagged behind is the very low rate of PC networking in Japan. In contrast to the United States, where two of every three PC are already linked in a network, only 15-20% of computers in Japan are networked. In addition, there is concern in Japan that the introduction of electronic networks could greatly change the flow of information. In fact, not all companies that introduced networking made a success of it. In the early stages of even the comparatively successful Gundam Network of Matsushita Electric's Accounts Division, some mid-level management feared that information would be passed over their heads, sidelining them.

Today, with public networks like the Internet promoting non-corporate network use, the need has arisen to protect the security of corporate information. Computer networking has led to a re-investigation of the fundamental question of what a company should be.

2. Aims and Results of Introducing Networks in Corporation

Advantages commonly attributed to corporate electronic networks are a flattening of corporate structure and an improvement in creativity. However, attaining these right from the beginning is not so easy. In many cases, two types of needs appear: the needs of individuals and needs that promote corporate rationalization as an extension of conventional OA.

First, electronic networks can improve limitations on time. While the telephone is a major tool of communication within corporations, in recent years, far fewer calls in companies easily find the right person as people are at their desks less often. E-mail is an asynchronous medium that can sidestep time limitations and improve work efficiency.

Second, electronic networks can improve limitations on space. In the past, corporations allocated space among various job categories. For example, accounting took place within a prescribed location inhabited by the Accounts Division. However, in the future, there will be a growing necessity to form new types of structures such as project teams that straddle divisions. In this, electronic networks can overcome location-based restrictions and allow people to perform new tasks while remaining in their usual locations.

Third, electronic networks can improve work efficiency, which includes the paperlessness advanced in the past by OA. While companies naturally expect cost savings because of increased work efficiency, very few companies actually achieve those savings. Judging the network's value on cost effectiveness alone is actually very difficult. For work efficiency, perhaps such areas as common document formats and the transmission and processing of work files are more important.

If the above three aims are rationalization-related, the following aims could be aspects of a corporate challenge of the communication environment. These are harder to investigate than rationalization-related aims, and at the present stage, there are few examples that connect with results.

First of all, there is the sharing of information, based on the potential benefits of mutual utilization of individually held information. Second, by improving the flow of information through a company, a network can provide a way of overcoming the "corporate bloat" that goes with increased corporate size. In addition, under conditions of sluggish economic growth, an electronic network can revitalize personnel and organizations within the company. A future issue and a further aim could be to provide a new information environment for the coming age.

A point to keep in mind in introducing and promoting electronic networks is to target the network on what is most interesting to the user, using such interesting information to encourage users to access more information. To promote use of the network, users must be provided with information of particular interest to them. The information most accessed in a corporation is related to personnel changes. This point tends to be often overlooked in corporate networks.

3. Problems in Introducing and Promoting Networks in Corporation

The most common problem with introducing electronic networks is poor operability. This often includes "keyboard allergy" or resistance to environmental change. Another problem is the cost of installing an electronic network. Some lose heart when they realize that the cost-effect ratio cannot be evaluated simply from a generalized improvement in work efficiency. Others simply cannot warm to computers as a medium communication. Many are satisfied with the status quo and do not want a new communication medium. On the other hand, network supporters sometimes also have misgivings. Although plenty of information can be sent, it is not always satisfactorily evaluated by recipients. In addition, some feel anxious about increased volumes of information and the difficulty of keeping up. To be sure, companies actively using E-mail generate more than 100 messages a day. Most of these messages are "carbon copies," that is, copies of messages sent out to everybody on-line and not one-to-one messages to a particular address. Seeking equity of information, people tend to send a carbon copy to the whole list whenever they generate a message, resulting in a great increase in amounts of mail received in mailboxes. Another problem in introducing E-mail is the fear people have of their workloads increasing. While some welcome the flexibility of being able to work at home, there is the danger of having to work at home as well as in the office as the "job-first" emphasis of Japan's work culture goes on-line. Responding to these anxieties with vague replies that systems must change does not result in change. Without specific answers to the above problems it will be difficult for networks to develop in corporations.

4. Proposals for Introducing Networks in Corporation

Let us look at examples of companies introducing electronic networks. This installation is a kind of two-stage process, and at the first stage the company should not rush the fruits of the network. The network should be implemented carefully without expecting too much. We should expect the nature of the company or organization itself to change through developing use of the network. Actual cases of network construction suggest this is very likely. In fact it should be recognized in advance that this is a characteristic of E-mail. In addition, the group promoting the network's installation should contain a person who is familiar with operating networks. The presence of such a person will signal to others the importance the company attaches to the network. In fact, a company was successful by making their top sales person the promotional manager for a limited period.

Companies must also try to create an environment with one machine per person. Where it is not possible to achieve this ratio at the outset, instead of placing one machine in each department as in conventional OA, a more successful strategy is to install the machines only in the departments that need them. It is also important to create a support system that is close to users; companies that have created such systems have been more successful. Also ensure that there are clear examples of the network contributing to work success so that the network is supported by word of mouth.

From a business viewpoint, it is also necessary to create a final vision of the network. Just copying other companies often ends in failure as the value of networks cannot be judged properly. Speaking from my own experience, companies where the top management actively uses the electronic network themselves are the most successful with its introduction. It is very important that everyone in the company recognizes that the company officially endorses the network and guarantees its value and results as a company. This will have a large effect on the success of the network.

In running the network, supporting system is becoming a major theme. Too much control dampens communication. A completely hands-off approach undermines the company's position in the network. It has become very important to maintain a balance between the two extremes. Users should be independent in using the network, while corporate output must be valuable, just as in ordinary PC communications.

The nature of the company is also affected by the introduction of the electronic network. Corporate systems must be modified to allow more employee discretion and to support a results-oriented approach, while new systems are required to evaluate employee contributions to creativity. As corporations' outside links increase, company information becomes more public. As this happens, users must be trained in media literacy which is different from conventional computer literacy. Some companies have already added communication and business literacy to their personnel training curriculums as separate subjects to conventional computer operation. In some companies, everyone from the president down has a personal key-in name, a sort of nickname for using on the network, and can access all the company's internal information. In such large companies, a network can facilitate business as staff talk through the network and learn about the doings of others they have never met face to face.

As electronic networks steadily spread within companies as well as outside them, many companies are seeking ways of successfully applying these internal networks.

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Note:
This article is a summary of "Social Organizations and Electronic Networks," which was part of a Research Committee report entitled "Social Changes Brought by Advanced Information and Responses" prepared in fiscal 1994 by this Research Institute.