Business Technology

Business technology marches on....no, sorry, that sounds like something that's about to sell you a new meeting planner, doesn't it. Rather, the technology of business changes, by which I mean the technology of how we actually arrange a business.

Yes, business structure is just as much a technology as anything else is. For example:

The executives behind the Kaiser Chiefs and Primal Scream are backing a new website to allow people to buy a stake in the artist.

It could provide musicians with an alternative to large labels and give unsigned acts the chance for much-needed finance.

“Bandstocks” will let the public buy a share in the artist in increments of £10 and once the pot reaches a certain level it will be released to the musician to record an album.

Investors will then get a copy of the album, a credit on the sleeve and a share of the profits.

Ronald Coase rather unwrapped the point about why we form companies at all. Why not just have contracts with everyone to do what is required? Why have anything at all inhouse?

The answer is transaction costs (in his view). It can be more expensive to write and enforce such contracts than it is to simply employ someone with all the attendant inefficiences.

But we can go further than that. When other technologies change, so do those transaction costs. It could be something as simple as standardised contracts: or abitration rather than court cases to enforce them. Or it could be the rise of something like Lulu.com which makes the traditional publisher unneccessary (although still highly desirable to many writers). Or in this case, the web makes both distribution and capital financing so much less costly to assemble that the traditional record company is no longer needed.

The takeway point though is not about the music or publishing businesses. Rather, that the structure of a business is just as much a technology as any thing else and we should expect it to change, in ways presently unknown, as the other technologies around it change.

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