Aug 24, 2010

The Network Economy Shifts from Places to Spaces

In the new realm of high dimensional spaces, the network economy exhibits the following space-based behaviors.
  • A different kind of bigness
  • Rampant clustering
  • Peer authority
  • Re-intermediation
The industrial economy made it impossible to live next door to the source of all the goods consumers desired. If you wanted bananas, many intermediaries had to handle the fruit between the plantation in Honduras and your kitchen. Between the author of a book and youthere needed to be a chain of editors, bankers, printers, distributors, wholesalers, and booksellers. Between you and good health care were doctors, nurses, insurance behemoths, and hospital staff. Between you and the car of your dreams stood a line of miners, smelters, engineers, manufacturers, railroad yards, showrooms, and salesmen. Each one of these agents moved the good or service along; some by completing the product (the car engineer) or customizing the service (the hospital staff), and some simply by physically moving it toward you (the banana boat). In business theory this line came to be known as the value chain. Each intermediate link in the long chain of creation added some measure of extra value, justifying the cost the link added to the good's final price. Companies competed to insert themselves into a value chain, then to expand their control of greater lengths of the chain.

One of the very first noticeable effects of computers and networked communications was the alarming way they disrupted traditional value chains. Futurist Paul Saffo calls the multiple interactions needed to survive in the new economy a move "from value chain to value web."

Courtesy of KK