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Twenty years from now, some $50 trillion of globally integrated economic activity will permit an extraordinary degree of specialization. An economy of this size could easily be disaggregated into 5,000 global business arenas, each representing $10 billion of production. Or perhaps, 50,000 "global microbusiness arenas," each of which would represent $1 billion of production. Or, more likely still, 5,000,000 tightly defined "global nanostructures" representing $10 million of production each.
Slivers and Microindustries
This is specialization to a different degree and business on a
different scale than that which occurs in local, regional, and
even national economies. For example, it is accurate to say that
the dry cleaner down the street offers a specialized service to
the neighborhood. We are talking about something else entirely. A
sliver is a specialized product or service that is
economically viable at the global level. In the investment
banking business, a sliver can be a hot new financing technique.
In the software business, a sliver can be a "killer
app."
The ability of any individual participant to deliver a sliver profitably is limited by its access to a sufficient volume of customers and the scale effects—particularly the intangible scale effects—of delivering that product. The advantages of delivering specialized output must be balanced against the costs: both the costs of acquiring access to customers and the related ability to spread fixed costs over as much volume as possible.
Companies that succeed in delivering slivers to an ever-widening market do so by developing infrastructures specifically geared to the task. These microindustry structures are significantly different from the industry structures, even the global ones, familiar to most of us. Traditional industry structures were built by integrated companies that controlled or owned every aspect of the value chain. "Microindustry" structures are complex webs of alliances, counterparty agreements, standards, and protocols that allow companies to participate in a discrete element of the value chain without owning the whole thing.
The transition economy is dynamic. Geographic barriers erode in different places, at different times, at different rates. This makes it easier to find customers across geographic markets, which makes it possible for companies to establish the scale to specialize. Interaction costs fall. This lowers the costs of specializing and the minimum efficient size of production. But customers become more demanding. Competitors enter established industries from unpredictable directions. The pace of technological innovation increases. Companies must tailor and retailer their offerings—always balancing customer needs with the scale effects—to suit these ever-changing conditions.
Issues of access, specialization, and scale exist, of course, in every economy. But these issues are of particular importance in the transition economy because of the sheer size of the opportunities and the speed at which companies must move to capture them. The transition economy can provide enormous scale benefits to extremely specialized products. But the pace at which these scale-versus-specialization trade-offs change can be very rapid. In this volatile situation, timing is everything. Being in the right place at the right time with the right sliver creates the opportunity to shape new microindustry structures. This is the way to win the race for the world.
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