End Of Competition, The: The Impact Of The Network Economy. C N A Molenaar

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СКАЧАТЬ The old rules of competition were based on the old structures, the application of which is now an outdated technology.

      • It is a battle between ‘doing digital’, whereby traditional processes are made more efficient through digital possibilities, and ‘being digital’, whereby the technology forms the basis for new structures and applications.

      • The new businesses mentioned earlier are based on digital technology and make optimal use of the new possibilities of the network economy.

      • It is a battle between traditional structures and new structures, a battle between old technological applications and new possibilities. This is similar to the battle we saw in the past between swords and gunpowder, between the horse and the train, then later the bicycle and the car.

      • The old structures and technologies will increasingly lose strength and power. But what are the new structures and competitive relationships?

      The changes to traditional systems, whereby the customers lead the way, are happening on the basis of these insights. Old physical boundaries are disappearing due to the possibilities offered by networks. A worldwide market is being created where businesses have to compete and customers are able to buy. You could compare this to a site that was initially enclosed by a fence, with a locked gate. Suddenly the lock disappeared, then the gate, and eventually the fence. The site is now freely accessible and merged with the surrounding area. So why would visitors still come to this particular site?

      Join In or Wait?

      The old structures are stubborn, as the old decision-makers continue to hold on to them. Often, the knowledge to identify the consequences of new developments and respond to them is unavailable. Although online sales have been growing in double figures year-on-year for the last two decades, retailers and interest groups have refused to recognise the impact on the shops on the high street. In addition, others look for other causes for the problems in the retail sector: the recession, increased mobility. The true causes of the changes, however, were not recognised.

      • The new Internet-based applications, such as webshops, smartphones and a different buying behaviour, were dismissed for too long.

      • Reduced budgets and young people having other choices led to a different buying behaviour and decreased expenditure on physical products in particular.

      • It was only once the number of empty shop premises in shopping centres reached a certain point that action was taken, but mainly within traditional structures without really responding to the different choices and buying behaviour. External factors continued being blamed. In other words, there is nothing we can do about it!

      First of all, the old structures were made more efficient, such as lower parking costs, longer shop opening hours, Sunday openings and lower prices. In the Dutch town of Drachten, shops are allowed to stay open 24/7 in response to online sales. This is incredibly naive.

      This initial drive towards efficiency is typical for traditional decisionmakers. The decisions could then, after all, be made within one’s own comfort zone. The customers’ buying behaviour, new technology and the unpredictable behaviour of the younger generation lead to uncertainty. But ignoring the changes gives peace of mind. And this can be seen outside the retail sector as well. It is evident in every link of the production and marketing chain. Traditional structures are modified, but not changed.

      Do One’s Own Restrictions Lead to a Tunnel Vision in the Decision-Making?

      Manufacturers are able to supply their goods directly, without calling upon further links in the chain, but are afraid of the consequences. The aggrieved links in the chain might perhaps retaliate by no longer selling or recommending the products (short-term consequences). The power in the chain holds back the changes through fear. That is, until other providers come along, often from other markets or from abroad, who do sell directly, often at lower prices and with services that appeal to the buyer (24/7, return guarantee). Then finally action is taken, and hopefully on time. But the many bankruptcies and takeovers give pause for concern. So how does it get to this situation? It is, of course, to do with this fear of leaving one’s comfort zone, as well as the fear of the consequences of change to the traditional structure. But it can also be due to a reluctance to act or the strict conditions of doing business such as profitability level, stock market prices or company bonuses.

      But there are also other principles that come to play here, such as the consensus approach (trying to keep everyone happy, consensus decisionmaking being typical in the Netherlands), as well as one’s own knowledge and approach as we will see later (applying what we have learned during our studies and deciding on the basis of our own experience). Traditional businesses and decision-makers are stuck to the constraints of the past which slows down decision-making. When making decisions, one calls upon one’s personal knowledge and experience, while the developments simply continue. In addition, information is usually interpreted from the perspective of one’s own field of expertise or vision (no lateral thinking). For a long time, I kept on hearing that Amazon was not a threat; it was, after all, not making any profit. This reveals a complete lack of knowledge of Amazon’s business model, which was not based upon short-term profitability, but on long-term value creation. And the same can be said for Bol.com. As far as these naive decision-makers were concerned, it was not necessary to study the developments, nor to take any action, as these new entrants would not last long.

      Are the Old (Physical) Structures too Oppressive?

      Another problem with change is the traditional structure. Companies continue to rely upon fixed structures, structures that arose within stable markets. Many continue to hold on to the traditional decisions of the supply chain and the decision that every supplier and company has to be an independent entity. This leads to control and less dependence, more certainty therefore. Suppliers (the independent entities) compete with one another for the best proposition for the customer, consumer or business. They often still use the traditional marketing instruments: Product, Place, Promotion and Price, with competition mainly being based on price, while that says nothing about the usability, quality or value within a production process. On the Internet, price is transparent, making price comparisons easy. But do people actually buy just on the basis of price? There is the perception that a low price is always beneficial for the buyer! In the old model, pricing has always been a dominant competitive weapon. In the 1980s, Michael Porter based his competitive strategies on the traditional market structure and the mutual competition between suppliers.

      Old competition models were based on the following traditional structures:

      • greater competitive strength through more efficient processes (the value chain);

      • greater competitive strength through a focus on other suppliers in the market;

      • by protecting the market as much as possible.

      However, in the last decade there has been a growing realisation that there is an actual value proposition and that a sale involves an exchange of values of which price is only one component.

      Control is important within the old structures. Among independent entities, control is often linked to possession and/or ownership. A company has its own premises, factories, machines, fleet of vehicles, staff with permanent contracts and a management board that does not change often. Supervisory boards are often old decision-makers with years of experience with the old structure. The capital of such a company can be personal capital (such as with a PLC), and also borrowed capital (loans) or the property of an investor who has more of a short-term vision (private СКАЧАТЬ