Economies of Style

1
Economies of Style

• Necessary and Sufficient Qualities

2
Economies of STYLE

• The network economy has introduced a third kind
  of economy style
• An economy of style occurs when the whole
  business proposition can be reengineered at will
• This allows the producer and customer (or
  producer and supplier) to have almost any
  relationship desired.

3
Comparing Industrial and Networked Economies

• IT and the Internet can create weightless
  production in which N can be very small, thus
  obviating the need for a mass market.
• In addition, both transaction and coordination
  costs for sales and production can be
  dramatically decreased (sometimes close to zero).

4
Comparing Industrial and Networked Economies

• The following can then be tailored
• Delivery time, place, style
• Item instruction (how to use, etc.)
• Item integration with other items
• Item integration with (business) processes
• (End-to-end) consulting
• In effect, an economy of style allows the
  producer to reengineer customers.

5
Networked Economies
Focal Firm
Each of these implied relationships is now
customizable rather than fixed. Now the focal
firm has implicit control over all aspects of the
model, including all aspects of the supply chain.
In the extreme, the focal firm can disappear
6
Economies of StyleRequired
Implications

• Replicability of input factors
• Business model is relatively weightless in terms
  of product, process
• Intense Intelligence, knowledge of suppliers,
  buyers, employees
• Flexibility, agility in design, relationships
• Expenditure on intelligence, marketing

• Lots of variation in relationships
• Increased complexity of supply chain
• Potential role conflict and vagueness
• Increased reliance on knowledge
• Blurring of organizational boundaries
• Ratcheting up of competition

7
IT and Economies of Style

• All functions required for economy of scope PLUS
• Network required to integrate along supply chain
• Intelligence gathering critical to develop and
  monitor new relationships
• Accounting is much more complex as new
  businesses develop.

8
Summary

• EOStyle comes about by making the business model
  extremely flexible, not tied to specific
  weighty products and the machinery for
  producing, distributing, etc.
• But the key is integration of the value network
  (an extension of the value chain).
• Flexibility (or agility) integration means that
  the firm can move around the value network (for
  business model purposes)

9
Conclusion

• Thus the firm may seek profit from any junction
  between buyer and seller (that means any
  interface in the value network)
• The firm can be buyer, supplier, consultant,
  critic, broker, designer, etc.

10
The Value Network and Its Opportunities
Each interface is an opportunity for profit.
Buyer
Economies of style allow focal firm to move
around value network at will, extracting profit
Integration Turning products into services
Agility from weightlessness New or variable
business model