Members Prosper as the Net Prospers
The distinguishing characteristic of networks is that they
contain no clear center and no clear outside boundaries. Within a
network everything is potentially equidistant from everything else.
Therefore the first thing the network economy reforms is
The vital distinction between the self (us) and the nonself
(them)once exemplified by the fierce loyalty of the organization
man in the industrial erabecomes less meaningful in a network
economy. The only "inside" now is whether you are on the
network or off.
Individual allegiance moves away from firms and toward
networks and network platforms.
Are you Windows or are you Mac?
This shift to network loyalty makes the potential of any
network we might want to join a key issue. Is the network waxing or
waning? Is the upside potential meager or tremendous? Is the network
open or closed?
When given the choice between closed or open systems,
consumers show a fierce enthusiasm for open architectures. They choose
the open again and again because an open system has more potential
upside than a closed one. There are more sources from which to recruit
members and more nodes with which to intersect.
Identifying the preferred network to do business in is now a
major chore for firms. Because more and more of a firms future
lies in its networks, firms must evaluate a networks relative
open- and closedness, its circulation, its ability to adapt. Consultant
John Hagel says, "A web limits risk. It allows companies to make
irreversible investments in the face of technological uncertainty.
Companies in a web enjoy expanding sourcing and distribution options,
while their fixed investment and skill requirements fall."
As the destiny of firm and web intertwine, the health of
the matrix becomes paramount.
Maximizing the value of the net itself soon becomes the
number one strategy for a firm. For instance, game companies will devote
as much energy to promoting the platformthe tangle of users, game
developers, and hardware manufacturersas they do to their games.
For unless their web thrives, they die. This represents a momentous
changea complete shift in orientation. Formerly, employees of a
firm focused their attention on two loci: the firm itself and the
The prosperity of a firm is directly linked to the prosperity of its
network. As the platform or standard it operates on flourishes, so does
Now there is a third horizon to consider: the network. The
network consists of subcontractors, vendors and competitors, emerging
standards for exchanges, the technical infrastructure of commerce, and
the web of consumers and clients.
Commerce networks can be thought of as ecologies. Economist
Brian Arthur states: "Players compete not by locking in a product
on their own but by building websloose alliances of companies
organized around a mini-ecologythat amplify positive feedbacks to
the base technology."
During certain phases of growth, feeding the network is as
important as feeding the firm. Some firms that already have large market
shares (such as Intel, which owns 80% of the PC processor market)
channel money, through minority investments, to younger firms whose
success will strengthen the market for their products, directly or
indirectly. They feed the web because it is good business.
In the network economy a firms primary focus shifts
from maximizing the firms value to maximizing the networks
Not every network demands the same investment. The music CD
standard and web of suppliers is well entrenched by now. The new DVD
video standard is not. A publishing company issuing music on a CD has to
devote less energy to making sure the CD platform flourishes than does a
movie company issuing their film on a DVD. The film company must devote
substantial resources to ensuring the spread and survival of this
emerging platform. Theyll work with the hardware manufacturers,
maybe share costs of advertising by seeding the platform logo in their
own ads, send reps to technical committees, and cooperate with other
film studios in getting the new format accepted. The music company
doesnt need to make as heavy an investment with CDs. But they do
need to make investments into new networks if they try to deliver music
onlinebecause online delivery is still in its embryonic phase.
Every network technology follows a natural life cycle,
roughly broken into three stages:
A firms strategy will depend on what phase a network is
The prestandard phase is the most exciting. This period is
marked by tremendous innovation, high hopes, and grand ambition.
"Aha!" ideas flow readily. Since there are no experts,
everyone can compete, and it seems as if everyone does. Easy entry into
the field draws myriad players. For instance, when telephone networks
began, there were few standards and many contenders. In 1899, there were
2,000 local telephone firms in the American telephone network, many of
them running with their own standards of transmission. In a similar
vein, in the 1890s, electricity came in a variety of voltages and
frequencies. Each local power plant chose one of many competing
standards for electrical power. Transportation networks, ditto. As late
in the railroad era as 1880, thousands of railway companies did not
share a universal gauge.
Two examples of networks in the prestandard stage today are
online video and e-money. You have the choice of many competing
protocols with equal prospects. With both domains, the uncertainty level
is high, but the consequences of being wrong are minimal. Little is
locked in, so its easy to change.
Networks in the fluid phase have a different dynamic. The
plethora of choices in the prestandard phase gradually reduces to two or
three. Allegiances are mobile, and drift over time. During this period,
networks demand the strongest commitment to their survival. Participants
have to feed the web of their choice first, and the narrowing of choices
allows substantial investment to spur rapid growth. The effects of
plentitude and increasing returns kick inmore breeds more. Feeding
the web on any of several standards still produces gains for all
participants. Yet it is inevitable that only one standard will
ultimately prevail while the other ones fail. The uncertainty level is
nearly as high as during the prestandard phase, but the risks for being
wrong are greater. Anyone who remembers the demise of 8-track audiotapes
will appreciate the perils of this painful stage. Today such networks as
digital photographs and desktop operating systems are in this fluid
phase: Several well-established standards vie for ultimate dominance.
The final stage in the life cycle of networks is the
embedded phase, where one standard is so widely accepted that it becomes
embedded in the fabric of the technology and is thereafter nearly
impossible to dislodgeat least as long as the network exists.
Regular 110-volt AC power is well embedded at this point (although, as
the power grid becomes global, there could be some surprises). ASCII
text is likewise deeply embeddedat least for phonetic languages.
Some of the conventions of voice dial tone are so ubiquitous worldwide
as to be permanent.
In any phase of innovationprestandard, fluid, or
embeddedstandards are valuable because they hasten innovation.
Agreements are constraints on uncertainty. The constraints of a standard
solidify one pathway out of many, allowing further innovation and
evolution to accelerate along that stable route. So central is the need
to cultivate certainty that organizations must make the common standard
their first allegiance. As standards are established, growth takes
For maximum prosperity, feed the web first.
Arriving at standards is often easier said than done.
Standard-making is a torturous, bickering process every time. And the
end result is universally condemnedsince it is the child of
compromise. But for a standard to be effective, its adoption must be
voluntary. There must be room to dissent by pursuing alternative
standards at any time.
Standards play an increasingly vital role in the new
economy. In the industrial age, relatively few products demanded
standards. You didnt need a consensual network to make a chair and
table. If you obeyed some basic ergonomic conventionsmake table
height 30 inchesyou were on your way. Those industrial products
that operated in networkssuch as the electrical or transportation
networksdemanded sophisticated standard-making. Anything plugged
into the electrical grid had to be standard. Automobiles manufactured by
separate factories shared standards on such things as axle width, fuel
mixtures, placement of turn signals, not to mention the many standards
of road construction and signage.
All information and communication products and services
demand extensive consensus. Participants at both ends of any
conversation have to understand each others language. Multiply one
conversation by a billion, factor in a thousand different media choices,
and then start to count three-way, four-way, n-way conversations,
and the amount of consensus-setting skyrockets.
In the network economy, ever-less energy is needed to
complete a single transaction, but ever-more effort is needed to agree
on what pattern the transaction should follow.
Thus "feeding the web first" increases in
necessity. Businesses can expect to devote great intellectual capital
on formulating, negotiating, deciding, forecasting, and adhering to
emerging standards. The question "Which platform do we back?"
will not be confined to PCs. It will be asked in regard to calendars,
cars, accounting principles, and even currencies.
As more of the economy migrates to intangibles, more of
the economy will require standards.
But consumers will groan under the load of decisions. There
is a yin-yang tradeoff in the new economy. The yin, or positive side, is
that consumers keep most of the gains in productivity that are earned
by technology. Competition is so severe, and transactions so
"friction-free," that most of each cycles betterment
goes not to corporate profits but to consumers in the form of cheaper
prices and higher quality.
The yang, or downside, is that consumers have a never-ending
onslaught of decisions to make about what to buy, what standard to join,
when to upgrade or switch, and whether backward compatibility is more
important than superior performance. The fatigue of sorting out options
and allegiances, or recovering from them, is underappreciated at the
moment, but will mount. The joy of the new economy is that the next
version is almost free; the bane is that no one wants the hassle of
upgrading to it, even if you pay them to do it.
The fatigue will only worsen. The net is a possibility
factory, churning out novel opportunities by the screenful. Unharnessed,
this explosion can drown the unprepared. Standardizing choices helps
tame the debilitating abundance of competing possibilities. This is why
the most popular sites on the web today are meta-sites that sort the
abundance and point you to the best.
Since the network economy is so new, we as a society have
paid little attention to how standards are created and how they grow.
But we should notice, because once implemented, a successful standard
tends to remain forever. And standards themselves shape behavior.
I was associated with the genesis of the Well, one of the
first public computer conferencing systems to be plugged into the
internet. The Well was conceived and built by others, but as director of
the poor nonprofit that owned it, and as one of the first participants
to join when it opened, I was involved in creating its policies. It
became clear almost from day one that the technical specifications of
the software that the Well used directly shaped the kind of community
growing within it. Other models of conferencing software used elsewhere
produced different kinds of communities. The Wells
softwareas implemented by the Wellencouraged linear
conversations and community memory; it discouraged anonymity, but
encouraged responsibility for words and topics; it permitted limited
forms of dissent and retraction, and it allowed users to invent their
own tools. It did all this primarily by means of Unix codeby the
software standards set up within the Wellrather than by posted
rules. The community it shaped was distinctive and long-lived. In fact
the community, with all its quirks, is still going, even though the
software that runs it has evolved into a web browser interface. The
behavior-changing standards remain. The power to mold a community by
code rather than regulation was eventually articulated by Well users
into a serviceable maxim: Peace through tools, not rules.
The internet and the web also contain toolish standards that
invisibly shape our behavior. We have ideas about ownership, about
accessibility, about privacy, and about identity that are all shaped by
the code of HTML and TCP/IP, among others. Currently only a small
portion of our lives flow through these webs, but as cyberspace
subsumes televisionspace and phonespace and much of retailspace, the
influence of standards upon social behavior will grow.
Eventually technical standards will become as important as
Laws are codified social standards; but in the future,
codified technical standards will be just as important as laws. Harvard
Law professor Lawrence Lessig says, "Law is becoming irrelevant.
The real locus of regulation is going to be (computer) code." As
networks mature, and make the transition from ad hoc prestandard
free-for-alls to fluid hot spots of innovation, and then into
full-fledged systems with deeply embedded standards, standards
increasingly ossify into something like laws.
Standards also harden with age. They become resistant to
change and they descend into hardware. Their code gets wired into
the backs of chips, and as the chips spread, the standard infiltrates
ever more deeply.
An elaborate process of legal overview monitors and analyzes
our lawmaking. So far we have little of the sort for our
standard-making, although these agencies, such as the ITU
(International Telecom Union) will soon be as influential as courts.
Standards are not just about technology. They are about soft and fuzzy
things such as options and relationships and trust. They are social
instruments. They create social territory.
A network is like a country in that it is a web of
relationships regulated by standards. In a country citizens pay taxes
and adhere to laws for the benefit of all. In a network, netizens feed
the web first for the benefit of all. The network economy is a
meta-country. Its web of relationships differ from those of a country in
- No geographical or temporal boundaries
existrelations flow ceaselessly 24 by 7 by 365.
- Relations in the network economy are more tightly
coupled, more intense, more persistent, more diverse, and more intimate
in many ways than most of those in a country.
- Multiple overlapping networks exist, with multiple
These hyperconnections can either strengthen or weaken
traditional relationships. The extremely personal, highly trust-bound
relations in a family stand to be strengthened, while the diffuse and
nearly contractual relations in a nation-state are liable to weaken.
Yet, as Peter Drucker points out, "The nation-state is not going to
wither away. It may remain the most powerful political organ around for
a long time to come, but it will no longer be the indispensable
one." In its stead well rely on nongovernmental agencies such
as the Red Cross, ACLU, HMOs, insurance giants, the net and the web, and
UN-like entities. These parapolitical organizations will supplement the
embedded nation-state. They will be the indispensable networks we care
In both country and network, the surest route to raising
ones own prosperity is raising the systems prosperity. The
one clear effect of the industrial age is that the prosperity
individuals achieve is more closely related to their nations
prosperity than to their own efforts. Lester Thurow, an MIT economist,
has pointed out that enabling the lowest paid to earn more is the best
way to raise wages for the highest paidthe theory being that a
rising tide lifts all boats. The network economy will only amplify
To raise your product, lift the networks it ties into. To
raise your company, lift the standards it supports. To raise your
country, increase the connections (in quality and quantity) that allow
others to prosper.
To prosper, feed the web first.
The web is underfed right now. It is small compared to the
rest of the world. In 1998 the internet boasted of an estimated 120
million people with access. But that means only 2% of human adults have
a direct line to the online network.
But the net is growing exponentially fast. If current rates
continue, by early in the new century, 1 billion people will have
internet access, 75% of adults will access to some kind of phone, and,
according to Nicholas Negroponte, there will be 10 billion electronic
objects connected together online. Every year the net engulfs more of
The net is moving irreversibly to include everything of
As the net takes over, many observers have noted the gradual
displacement in our economy of materials by information. Automobiles
weigh less than they once did and yet perform better. Industrial
materials have been replaced by nearly weightless high-tech know-how in
the form of plastics and composite fiber materials. Stationary objects
are gaining information and losing mass, too. Because of improved
materials, high-tech construction methods, and smarter office equipment,
new buildings today weigh less than comparable ones from the 1950s. So
it isnt only your radio that is shrinking, the entire economy is
losing weight too.
Even industrial objects like atuomobiles follow new rules. An
automobile's average weight is dropping and will continue to drop as
information replaces its mass.
Even when mass is conserved, information increases. An
average piece of steel manufactured in 1998 was vastly different from an
average piece of steel made in 1950. Both pieces weighed approximately
the same, but the one made recently is far superior in performance
because of the amount of design, research, and knowledge that went into
its creation. Its superior value is not due to extra atoms, but to
The wholesale migration from mass to bits began with the
arrival of computer chips. This subtle disembodiment was first viewed as
a unique dynamic of the high-tech corridors of Silicon Valley. Software
was so strangepart body, part spiritthat nobody was
surprised when the computer industry itself behaved strangely. The
principles of the net, such as increasing returns, were seen as special
cases, anomalies within the larger "real" economy of steel,
oil, automobiles, and farms. What did such weirdness have to do with,
say, making cars, or selling lettuce? At first, nothing. But by now
every industry (shoe retail, glass manufacturing, hamburgers) has an
information component, and that component is increasing. There is not a
single company of consequence that does not use computers and
communication technology. All U.S. companies (low as well as high-tech)
together spent $212 billion on information technology in 1996. Often,
the digital component of the firm, say the IT or MIS department, or the
wizards running the technology, will be the first to feel the influence
of the new rules and network dynamics. Consultants Larry Downes and
Chunka Mui say, "Even though the primary technology of many
industries may not be in transition ... every industry is going
through a revolution in its information technology." As more of a
company "goes online" nerd ideas begin to seep into the whole
organization, reshaping the firms understanding of what it is
doing. Over time, more and more employees will chase the opportunities
that intensive information and communication networks bring.
New network technology and globalization accelerates the
disembodiment of goods and services. The new dynamics of information
will gradually supersede the old dynamics of industrialization until
network behavior becomes the entire economy.
Bit by bit, the logic of the network will overtake every
atom we deal with.
The logic of the network will spread from its base in silicon
chips, to infiltrate steel, plywood, chemical dyes, and potato chips.
All manufacturing, whether seeded with silicon wafers or not, will
respond to network principles.
Consider oilthe quintessential atom-based resource. The
classical theory of diminishing returns was practically invented to
explain the oil industry. Easy oil is extracted cheaply at first; then
at a certain point the expense of extraction doesnt justify the
cost unless the price goes up. But by now the oil industry is so invaded
by chip technology that it is beginning to obey the laws of the new
economy. Sophisticated 3D viewing software allows geologists to map
oil-yielding layers to within a few meters; computer-guided flexible
drills can burrow sideways with precision, reaching small pockets of
oil. Superior pumps extract more oil with less energy and maintenance.
Diminishing returns are halted. The oil flows steadily at steady prices,
as the oil industry slides into the new economy.
And what could be more industrial-age than automobiles? Yet,
chips and networks can take the industrial age out of cars, too. Most of
the energy a car consumes is used to move the car itself, not the
passenger. So if the cars body and engine can be diminished in
size, less power is needed to move the car, meaning the engine can be
made yet smaller. A smaller engine requires a yet smaller engine, and so
on down the slide of compounded value that microprocessors followed. The
cars body can be reduced substantially using smart
materialsstuff that requires increasing knowledge to invent and
makewhich in turn means a smaller, more efficient engine can power
Detroit and Japan have designed cars that weigh only 500
kilograms. Built out of ultra-lightweight composite fiber material,
these prototypes are powered by high-tech hybrid engine motors. They
reduce the mass of radiator, axle, and driveshaft by substituting
networked chips. They insert chips to let the car self-diagnose its
performance, in real time. They put chips in brakes, making them less
likely to skid. They put microprocessors in the dashboard to ease
navigation and optimize fuel use. They use hydrogen fuel cells that do
not pollute, and electric motors with low noise pollution. And just as
embedding chips in brakes made them better, these lightweight cars will
be wired with network intelligence to make them safer: A crash will
inflate intelligent multiple air bagsthink "smart
The accumulated effect of this substitution of knowledge for
material in automobiles is what energy visionary Amory Lovins, director
of the Rocky Mountain Institute, calls a hypercar: an automobile that
will be safer than todays car, yet can cross the continental
United States on one tank of hydrogen fuel.
Already, the typical car boasts more computing power than
your typical desktop PC. Already the electronics in a car cost more
($728) than the steel in the car ($675). But what the hypercar promises,
says Lovins, is a car remade by silicon. A hypercar can be viewed as
step toward a vehicle that is (and behaves like) a solid state module. A
car becomes not wheels with chips, but a chip with wheels. And this chip
with wheels will drive on a road system increasingly wired as a
decentralized electronic network obeying the network economys laws
Once we visualize cars as chips with wheels, its
easier to imagine airplanes as chips with wings, farms as chips with
soil, houses as chips with inhabitants. Yes, they will have mass, but
that mass will be subjugated by the overwhelming amount of knowledge
and information flowing through it. In economic terms, these objects
will behave as if they had no mass at all. In that way, they migrate to
the network economy.
Because information trumps mass, all commerce migrates to
the network economy.
MIT Media Lab director Nicholas Negroponte guesstimates that
the online economy will have reached $1 trillion by 2000. Most tenured
economists think that figure is terribly optimistic. But actually that
optimistic figure is terribly underestimated. It doesnt anticipate
the scale on which the economic world will move on to the internet as
the network economy infiltrates cars and traffic and steel and corn.
Even if all cars arent sold online immediately, the way cars are
designed, manufactured, built, and operated will depend on network logic
and chip power.
The current concern about the size of the online market will
have diminishing relevance, because all commerce is jumping on to
the internet. The distinctions between the network economy and the
industrial economy will likewise blur and fade, as all economic activity
is touched in some way by network rules. The key distinction remaining
will be between the animated versus the inert.
The realm of the inert encompasses any object that is
divorced from its economic information. A head of lettuce today for
instance does not contain any financial information beyond a price
sticker. Once applied, that price is fixed, too. It doesnt change
unless a human changes it. The economic consequences of lettuce sales
elsewhere, or a change in the general global economy do not affect the
head of lettuce itself. Instead, lettuce-related information flows
through wholly separate channelsnews programs or business
newslettersthat are divorced from the lettuce itself. The lettuce
is economically inert.
The realm of the animated is different. Its vastly
interconnected. In this coming world a head of lettuce carries its own
identity and price, displayed perhaps on an LED slab nearby, or on a
disposable chip attached to its stem. The price changes as the lettuce
ages, as lettuce down the street is discounted, as the weather in
California changes, as the dollar surges in relation to the Mexican
peso. Traders back in supermarket headquarters manage the
"yield" of lettuce prices using the same algorithms that
airlines use to maximize their profits from airline seats. (An unsold
seat on a 747 is as perishable as an unsold head of lettuce.) In
relation to the net, the lettuce is animated. It is dynamic, adaptive,
and interacting with events. A river of money and information flows
through it. And if money and information flow through something, then
its part of the network economy.
The progression by which the old economy migrates toward the
new follows a relentless logic:
- Increasing numbers of inert objects are animated by
- Once the inert is touched by a network, it obeys the
rules of information.
- Networks dont retreat; they tend to multiply into
- Eventually all objects and transactions will run by
One is tempted to add "resistance is futile." The
overwhelming long-term trend toward universal connection may seem
Borg-like, as if all things will lose their identity and become part of
one large mindless swarm. Two things should be made clear: 1) constant,
ubiquitous connections do not per se eliminate individuality; and 2) by
"all" I mean an ongoing trend that approaches an asymptote,
not a finality.
One might say that industrialization eradicated hand-crafted
production to the point where all objects are machine-made. That
is true by and large, and it accurately describes the destination of a
trend. But the trend has a few notable exceptions. In an era of objects
made completely by machines, hand-made items are a scarcity and thus
command very high prices. A fewbut only a fewshrewd artisans
and entrepreneurs can make a living crafting items by hand, items such
as bicycles, furniture, guitars, that would ordinarily be stamped out in
a factory. Resistance is marginal, but profitable.
The same will be true in the networking of the economy.
Resistance will not be futile. In a world of ubiquitous connection,
where everything is connected to everything else, scarce will be the
person not connected at all, or the company not pushing ideas and
intangibles. If these mavericks are able to interface with the networked
economy without losing their distinctivness or value, then they will be
sought out, and their products priced high. One can imagine a successful
idea-artist in the year 2005 who does no email, no phone, no
videoconferences, no VR, no books, and who does not travel. The only way
to get her fabulous ideas is in person, face-to-face at her hideout,
live. The fact that she is booked 8 months in advance only adds to her
MIT economist Paul Krugman has an alternative vision of how
information technology will invert the expected order. He writes:
"The time may come when most tax lawyers are replaced by expert
systems software, but human beings are still neededand well
paidfor such truly difficult occupations as gardening, house
cleaning, and the thousands of other services that will receive an
ever-growing share of our expenditure as mere consumer goods become
steadily cheaper." Actually we dont need to wait for the
future. Recently I had to hire two different freelancers. One sat in her
office moving symbols around. She transcribes tape-recorded interviews
and charges $25 per hour. The other is a guy who works out of his home
repairing greasy kitchen appliances. He charges $50 per hour, and as far
as I could tell had more business of the two. Krugmans argument is
that these "manual crafts" (as they are bound to be labeled
when so high-priced) will level the salary discrepancies that now exist
between high tech and low tech occupations.
My argument is that great gardeners will be high-priced not
only because they are scarce and exceptions, but also because they, like
everyone else, will be using technology to eliminate as much of the
tedious repetitive work as possible, leaving them time to do what humans
are so good at: working with the irregular and unexpected.
At the dawn of the industrial age it would have been
difficult to imagine how such quintessential agrarian jobs as farming,
husbandry, and forestry could become so industrialized. But that is what
happened. Not just agrarian work, but just about every imaginable
occupation of that periodespecially menial laborwas
intensely affected by industrialization. The trend was steady: The
entire economy eventually became subjected to the machine.
The full-scale trend toward the network economy is equally
hard to imagine, but its progression is steady. It follows a predictable
pattern. The first jobs to be absorbed by the network economy are new
jobs that could only exist in the new world: code hackers, cool hunters,
webmasters, and Wall Street quants. Next to succumb are occupations with
old goals that can be accomplished faster or better with new tools: real
estate brokers, scientists, insurance actuaries, wholesalers, and anyone
else who sits at a desk. Finally, the network economy engulfs all the
unlikely restthe butchers, bakers, and candlestick
makersuntil the entire economy is suffused by networked
The three great currents of the network economy: vast
globalization, steady dematerialization into knowledge, and deep,
ubiquitous networkingthese three tides are washing over all
shores. Their encroachment is steady, and self-reinforcing. Their
combined effect can be rendered simply: The net wins.
Maximize the value of the network. Feed the web first.
Networks are nurtured by making it as easy as possible to participate.
The more diverse the players in your networkcompetitors,
customers, associations, and criticsthe better. Becoming a member
should be a breeze. You want to know who your customers are, but you
dont want to make it hard for them to get to you (IDs, yes;
passwords, no). You want to make it easy for your competitors to join
too (all their customers could potentially be yours as well). Be open to
the power of network effects: Relationships are more powerful than
technical quality. Especially beware of the
"not-invented-here" syndrome. The surest sign of a great
network player is its willingness to let go of its own standard
(especially if it is "superior") and adopt someones
elses to leverage the networks effect.
Seek the highest common denominator. Because of the
laws of plentitude and increasing returns, the most valuable innovations
are not the ones with the highest performance, but the ones with the
highest performance on the widest basisthe "highest per
widest." Feeding the web first means ignoring state-of-the-art
advances, and choosing instead the highest common denominatorthe
highest quality that is widely accepted. One practical reason to pick
the highest-per-widest techniques and technologies is because complex
technologies require passionate and informed users who can share
experience and context, and you want the maximum dispersion of usage
that doesnt sacrifice quality.
Dont invest in Esperanto. No matter how superior
another way of doing something is, it cant displace an embedded
standardlike English. Avoid any scheme that requires the purchase
of brand new protocols when usable ones are widely adopted.
Apply an embedded standard in a new territory. Is
there a way to accomplish what you want using existing standards and
existing webs in a different context? Inventing a novel standard for an
existing network is quixotic. But some of the greatest success stories
in current times are about firms that master one network and then use
its embedded standards to exploit an established network in need of
improvement. This process is called "interfection." The
present revolution in telephony is all about zealous internet firms that
are interfecting the old Bell-head world of moving voices with newly
established protocols for moving data on the internet (known as internet
protocols, or IP). The huge increasing returns that spin off the
internet give them a great advantage. Indeed, one telephony standard
after another is falling before the relentless march of IP. Likewise,
aggressive companies are leveraging the established desktop standard of
Windows NTwith all its plentitude effectsto interfect new
domains such as telephone switching gear. Even the huge cable TV
networks have something to offer. The emerging standards for video
transmission, such as MPEG, are trying to migrate onto the internet. In
choosing which standard to back, consider dominant standards outside
your current network that could interfect your own turf.
Animate it. As the network economy unfolds, more firms
will begin to ask themselves this question: How do we put what we do
into the logic of networks? How do we prepare a product to behave with
network effects? How do we "netize" our product or service?
(The answer is not "put it on a web site.") Architects, for
instance, generate huge volumes of data. How can they be standardized?
How can the data about a physical object (say a door) flow through or
with that object? What are the fewest functions we can add to glass
windows to incorporate them into networks? What steps can a contractor
take to allow the networked flow of information from any architect to
any contractor to any builder to any client? How do we increase the
number of networks our service embraces?
Side with the net. Imagine that in 1960 an elf let you
in on a secret: For the next 50 years computers would shrink drastically
and cheapen yearly on a predictable basis. Subsequently, whenever you
needed to make a technological decision, if you had counted on the
smaller and cheaper, you would have always been right. Indeed you could
have performed financial miracles knowing little more than this rule.
Here is todays secret: In the coming 50 years, the net will expand
and thicken yearly on a predictable basisits value growing
exponentially as it embraces more members, and its costs of transactions
drop toward zero. Whenever you need to make a technological decision, if
you err on the side of choosing the more connected, the more open
system, the more widely linked standard, you will always be right.
Employ Evangelists. Economic webs are not alliances.
There are often few financial ties among members of a web. An effective
way of establishing standards and coordinating development is through
evangelists. These are not salespeople, nor executives. Their job is
simply to extend the web, to identify others with common interests and
then assist in bringing them together. In the early days when Apple was
a cocreator of the emerging PC web, it successfully employed evangelists
to find third-party vendors to make plug-in boards, or to develop
software for their machines. Go and do likewise.