Blown to Bits Chapters 68

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Blown to BitsChapters 6-8
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Chapter 6Competing on Reach

• Link to the consumer is one of the most important
  glues in the business world.
• Its called brand, franchise or
  relationship.
• It is the basis of competitive advantage.
• Blowing up the richness/reach trade-off leaves
  only cost, produce feature, and technology.

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Hierarchical Search

• Works on both the supplier side and the consumer
  side.
• Hierarchical relationships on the supply side.
• Hierarchical search for the consumer.
• It means, crawling along the richness/reach
  trade-off Fig. 6-1

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Fig. 6-1Hierarchical Search
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Fig. 6-2Increasing Richness
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Navigating a Hierarchy

• Hierarchical search is inefficient and costly.
• Navigation is an attempt to make it more
  efficient.
• Yellow pages, salespeople, stock broker,
• Some navigators serve the buyer, some serve the
  seller.

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The Sellers Advantage

• Sellers dominate the navigation process.
• Advertising, image development, and brand
  promotion.
• Push-based marketing.
• Companion products, bundled products.
• Inefficiencies in hierarchical search are the
  foundation of competitive advantage.

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Reach without Navigation

• Leading brands gain from a proliferation of
  alternatives.
• Look at hits on the WWW
• Stickiness is a consequence of the undeveloped
  state of navigation.
• Electronic media is inherently predisposed to
  navigation.

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The Brave New World of Navigation

• Abundant connectivity
• Common Information Standards
• Infinite Choice
• Negligible searching/switching costs.
• Fluidity varied combination of participants.
• Lack of a Center
• Adaptability

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Competing on Reach

• Amazon.com
• Navigation function (catalog) is separated from
  the physical function (inventory).
• If reach matters to the consumer, the navigator
  with the greatest reach has an advantage.
• Is there a point to being second?

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Fig. 6-3 The Three Dimensions of Competitive
Advantage
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Critical Mass

• The first competitor to reach some threshold of
  critical mass will take off.
• Others will have to compete on richness or
  affiliation.
• Cut prices, give product away, merge, etc. to
  reach critical mass.
• Level of critical mass depends on the search
  domain defined by the searcher.

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The Competitive Struggle

• Getting to critical mass is the principal
  challenge.
• Incumbents have a lot to lose.
• Incumbents can block critical mass by their
  control of products lists, supply chains, price
  lists, and willingness to accept customers
  switched by a new navigator.

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A Corollary of the Economics of Information/Things

• The domain of search that defines critical mass
  bears no necessary relation to the domains of the
  physical supplier or distribution industries.
  The critical mass in question may not relate to
  the incumbents business at all.

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Two Fundamental Propositions

• Critical mass is a precondition for value
  creation, but there is no guarantee that it will
  be achieved.
• Critical mass is relative to a domain defined by
  the economics of information, not by the
  economics of things.

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Chapter 6Sound Bits

• The new navigators compete on reach, affiliation
  and richness.
• Reach is clutter w/o navigation.
• Push is a function of high search costs. Lower
  costs leads to pull.
• Stickiness occurs because reach as developed
  faster than navigation.
• Random, small-scale innovation may never achieve
  critical massbig bets.

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Chapter 7Competing on Affiliation

• New Navigators gain competitive advantage by
  affiliating with consumers rather than with
  sellers.
• The tilt toward consumers is a consequence of the
  richness/reach blow-up.
• It shifts the balance of power from sellers
  toward buyers.

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The Affiliation Spectrum

• Its not caring for the customer
• It is not the positive sum activity where
  furthering my interests is accomplished by
  furthering the customers interest.
• The test is where the consumers gain is the
  sellers loss.
• Navigational features in the consumers interest.

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The Logic of Affiliation

• Navigators usually affiliate with sellers.
• Rich navigation tends to be specific to suppliers
  because they have access to rich information
  supplied by suppliers.
• Consumers are reluctant to pay for navigation.

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The Competitive Advantage of Navigators

• With the richness/reach trade-off, navigator
  naturally affiliate with sellers.
• With the richness/reach trade-off broken,
  navigators cease to be specific to sellers and
  may become cheap.
• Navigators than must compete for the attention of
  consumers via reach and affiliation with
  consumers interests.

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Competitive Advantage of Navigators

• The pursuit of competitive advantage should push
  navigators toward higher reach and closer
  affiliation with consumers interests.
• Wal-Mart became a consumers affiliate by virtue
  of it economies of scale and resulting lower
  costs/price and its wide reach of products.

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Implications for Sellers

• Richness/Reach Trade-off Blows UP
• Universal Search Replaces Hierarchical Search
• Navigators compete with each other on reach and
  affiliation.
• Navigators push for reach, merge and concentrate.
• Some reach critical mass and monopolize the
  market.
• Retailers are demoted to distributors.
• Forced to compete on cost, features, etc.

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Seven Countervailing Forces

• Continue the richness/reach trade-off
• No value in competitive navigation.
• Denial of critical mass.
• Greater Affiliation with Customers
• Co-option of the Navigator
• Deconstruct your value chain
• Escalate Richness.

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Chapter 7Sound Bits

• Reach constraints led to navigators affiliation
  with sellers.
• Agency shift will promote affiliation with
  consumers and greater reach.
• It is surprising that navigators have not
  affiliated with consumers in the past.
• The navigator business may be worth more than the
  supplier business.

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Chapter 8Competing on Richness

• Reach and affiliation can undermine established
  structures and drain away competitive advantage.
• Increased richness through customer relationships
  and brand equity, is a competitive weapon of both
  incumbents and insurgents.

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Fig. 8-1
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Analysis of Fig. 8-1

• As the trade-off shifts, reach will go up.
• However, greater richness is possible.
• The greater the increase in richness, the lesser
  the increase in reach.
• The strategic priority is to tilt north rather
  than east.
• East is toward commoditization and
  disintermediation.
• North is toward informational glue.

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Richness Strategies

• Rich about the product
• Rich about the consumer
• Segment of one marketing.
• Both consumer and product information are
  shortcuts through the hierarchy

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The Impact of Exploding Reach

• It impacts the two richness strategies in
  opposite manner.
• Increased reach without increased navigability
  means segment of one and branding become more
  powerful.
• Infinite choice leads to infinite confusion
  without navigation.
• Efficient navigation weakens segment of one and
  branding

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Chapter 8Sound Bits

• Adding richness is the most powerful way to
  forestall deconstruction.
• Privacy is the Achilles Heel of the information
  economy.
• The consumer is your competitor what are you
  doing for him that he cannot do for himself?
• The value of sellers richness goes up as reach
  increases.

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