Old ways of thinking about the new ways of thinking

One from the archives: Circa 2012

Of course the problem with the one rule is an economy doesn't function particularly well if everybody is trying harvest everybody else's effort. It quickly becomes dysfunctional. Historically this is the economic function of Government and the Finance Industry.

So let's take a quick step back and employ some old ways of thinking to explore the realities of the new ways of thinking.

Here once again are Treacy & Wiersema's Value Drivers. This time mapping the drivers through to the Networked Economy we see today of Harvesters, Optimisers and Fragmentors.

Ants

Putting aside the impact of the harvesters on the network economy we see this tension between Operational Efficiency and Agility reflects the optimisation and fragmentation of the corporation that we have discussed before. So where as eBusiness was the optimisation of smart people, smart processes and smart technology to drive down costs and improve performance. The So.Biz revolution is about reducing the value of any digital goods or services to free by fragmenting the market.

Ants

Fragmentation delivers a zero sum networked economy simply because in the "real world" brand A can offer the services of Brand B for free, or at least at a discount rate, to attract customers for product 2B. The problem on the network of course is curious things happen when you connect all to all: Everybody disrupts everybody by offering their competitors' service for free... so inevitably everything in a "perfect" networked economy becomes free.

The harsh reality is in a networked economy where everybody - incumbents and new entrants -is gearing to win by employing the loss leader (i.e. what we now call Freemium) strategy everybody loses.

This of course is contrary to 7 The Law of Generosity of the New Rules for the New Economy which clearly states that "while one product is free, this usually positions other services to be valuable."

This of course is the key difference between employing the Supply Side vs. the Sell Side Freemium strategy.

Supply side, properly implemented, is always a winner.

Sell side, no matter how well it is implemented, is always going to be a loser in a "perfect' network economy without the cost efficiencies of supply side to fund it .

Till next time...