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 platform–the tangle of users, game developers, and hardware manufacturers–as they do to their games. For unless their web thrives, they die. This represents a momentous change–a complete shift in orientation. Formerly, employees of a firm focused their attention on two loci: the firm itself and the marketplace.

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 the firm.

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 webs–loose alliances of companies organized around a mini-ecology–that 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.



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