In the network economy a firm’s primary focus…

…shifts from maximizing the firm’s value to maximizing the network’s value.

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. They’ll 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 doesn’t 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 online–because online delivery is still in its embryonic phase.

Every network technology follows a natural life cycle, roughly broken into three stages:

    * Prestandard
    * Fluid
    * Embedded

A firm’s strategy will depend on what phase a network is in.



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