13 Jul Brief Breakdown Of Philip Evans
Hi Guys. As promised, below is a brief dot-pointed breakdown of Philip Evan’s TED talk. I also added a PDF version of this breakdown to the Lecture Two content area.
Philip Evans – How Data Will Change Business
“… business strategy has always been premised on assumptions about technology and those assumptions are changing …”
Strategy in business owes its origins to Bruce Henderson and Michael Porter
- Henderson’s central idea was the idea of ‘concentrating mass against weakness’, of overwhelming the enemy.
- And that there are many phenomena in business that economists would call ‘increasing returns’ – for example scale and experience.
- The more you do of something the disproportionately better you get at it
- There is therefore a logic in investing in such kinds of overwhelming mass to achieve a competitive advantage.
- Agrees but qualifies it.
- States that businesses actually have multiple steps to them …
- … different components – and each of those components could be driven by a different kind of strategy.
- Porter formed the concept of the ‘value chain’.
- A value chain is the sequence of steps with for example, a raw material becomes and finished product and that product is then distributed …
- … and a business can accrue an advantage to each of those components – so competitive advantage could be considered the sum or average of the advantage accrued at each of those steps
- Businesses can also accrue a disadvantage at each of those steps.
- It is important to note that the concept of the value chain was predicated on the recognition that what holds business together is transaction costs …
- … and transaction costs have two components – one is about processing information – the other is about communicating information.
“It was on those two ideas – Henderson’s idea of concentrating mass against weakness and Porter’s idea of the value chain – that the whole edifice of business strategy was erected”
Evan’s principle argument is that those premises are now being invalidated – by technology. In short, the internet has drastically reduced transaction costs – in particular communication costs – and this has had profound consequences.
” … because if transaction costs are the glue that hold value chains together, and they are falling, there is less to economize on”
He gave the example of the collapse of the encyclopedia industry as an example of this. And stated that Wikipedia is an example of a new and altered business model – facilitated by technology – a model where the product is created by its users – the second decade of the internet economy.
“the internet as a noun has become the internet as a verb”. “It became a set of conversations, the era in which user-generated content and social networks became the dominant phenomenon”
What this does is generate a substitute for traditional corporate production. And generates a power shift – a shift in the way we perceive control. One of Evan’s most profound statements was the following:
“It means, we need to work out a way to accommodate collaboration and competition simultaneously”
Hope it helps guys.
Talk soon. Jason.