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In recent years, it seems as though the only constant in business has been upheaval. Changes have occurred at every level, from the way entire industries are structured, to the way companies interact with customers, to the way basic tasks are carried out in individual organizations. In response, many managers and management thinkers have thrown up their hands, proclaiming an era of radical uncertainty. Business has become so complex, they say, that trying to predict what lies ahead is futile. Plotting strategy is a fool's game. The best you can do is become as flexible as possible and hope you'll be able to ride out the waves of disruption.
There's some truth in that view. The business world has become much more complicated, and the ability to adapt and respond is now as important as the ability to anticipate and act. But we take issue with the assumption that the changes we've been seeing are random, disconnected events and thus unpredictable. We have studied the myriad upheavals taking place in business, and we've concluded that many of them have a common root, which lies in the nature of intelligence in networks. Put simply, the digitization of information, combined with the advances in computing and communications, has fundamentally changed how all networks operate, human as well as technological, and that change is having profound consequences for they way work is done and value is created throughout the economy. Network intelligence is the Rosetta Stone that can enable executives and entrepreneurs to decipher many of the phenomena shaping the future of business.
The evolution of network intelligence may sound like an awfully abstract topic, but it has immediate and very concrete implications. The future of many technology companies, from Dell to AT&T to hordes of Internet start-ups, hinges on their ability to recognize and adapt to shifts in network intelligence. And even if your company is not directly involved in the communications or computing business, it will not be immune to the impact of shifts in network intelligence. In a highly connected world, the location and mobility of network intelligence directly influences the way companies organize their people, market products, manage information, and work with partners. "The network is the computer," Sun Microsystems has famously proclaimed. We would go even further: the network is the economy.
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Deval Parikh is a management consultant in the Silicon Valley office of Pittiglio, Rabin, Todd & McGrath (PRTM).
Value Trends in the Network Age
In a networked world, where everyone and everything is connected, economic value behaves very differently than it does in the traditional, bounded world. Here are four high-level value trends that all companies should be conscious of as the position themselves in the digital economy.
Value at the Ends. Most economic value will be created at the ends of networks. At the corethe end most distant from usersgeneric, scale-intensive functions will consolidate. At the peripherythe end closest to usershighly customized connections with customers will be made. This trend pertains not only to technological networks like the Internet but to networks of companies engaged in shared tasks and even to the human networks that exist within companies.
Value in Common Infrastructure. Elements of infrastructure that were once distributed among different machines, organizational units, and companies will be brought together and operated as utilities. Shared infrastructure will take the form not only of basic computing and data-storage functions but also of common business functions, such as order processing, warehousing and distribution, and even manufacturing and customer service.
Value in Modularity. Devices, software, organizational capabilities, and business processes will increasingly be restructured as well-defined, self-contained modules that can be quickly and seamlessly connected with other modules. Value will lie in creating modules that can be plugged into as many different value chains as possible. Companies and individuals will want to distribute their capabilities as broadly as possible rather than protect them as proprietary assets.
Value in Orchestration. As modularization takes hold, the ability to coordinate among modules will become the most valuable business skill. Much of the competition in the business world will center on gaining and maintaining the orchestration role for a value chain or an industry.