Network economy and digital economy are inseparable

The concept of a digital economy emerged in the late nineties. Nicholas Negroponte (1995)  used a metaphor of shifting from moving  atoms to moving bits.

With the globalization, increased mobilization, decreasing economies in the western world and the position the Internet  a digital economy have emerged. A network economy in combination with a digital economy is not limited to business trading and services only. It encompasses every aspect of life from health to education, from business to social awareness and geopolitical changes.  We have all become eCitizens.

How does this influence how we do business? The customer base is the company’s you are able to connect to and provide value for. -No connections, no values.- We are moving from an industrial economy (now fading out) into a network- /Internet- /digital economy. (That has started to fade in). Stewart Brand points out that commerce is being accelerated by the digital and network revolutions and that the role of commerce is to both exploit and absorb these shocks.

Open economy
This means that there are a lot of things that need to change, rapidly if one want to take part in, and conduct business into the near future. In network economies one party doesn’t control the value chain, property- and copy rights are under pressure, the drop of production and distribution costs reduces the prices one can charge and put profit creation under stress. Information and knowledge, products and services aren’t scares resources anymore. “Everything has become commodity”. You need to know how to provide added value for something that’s free and you need to know what is considered value for your customers.

Relations / networks are pairs of the main assets for enabling added value for customers. Knowing how to create added value for customers creates an economic flow where we have the opportunity for a fair share of the value created.

Decentralized organization
In a network economy it’s vital that the decisions are made as far out in the organization as possible. One important reason for this is the “need for speed”, if we aren’t able to decide quickly enough, our customer have no need for us. Their need is to be dynamic, and rapid towards their markets, and shifts in them. We cannot afford to report “to base, await a decision and act when we finally have a go – no-go from HQ. Not only is the network and relations we build our selves the sum of our network economy, also our customers network and relations are of value for us, since we have the possibility to take part in their networks. The relations our customers have between themselves are added values for us and increase the opportunities we have.

The elements of network economy
So what are the parts these kinds of networks consist of?  First it’s the customer which is the core of all business. It shouldn’t be necessary to name it, but surprisingly often a firm forgets this simple fact. Secondly it’s your partners. Partners are other companies that contribute to add value for the customer, either directly with you, or indirectly in some manner. In any event, you should look upon these entities as partnerships. Thirdly you will need “Node Management”. A node is the connection points where the network/ relations are interconnected. The last, but most important element in the chain of a network economy is the services and products delivered, implemented and maintained. This is typically consultants, experts and solution implementers.

Node Management
The Node manager’s task is to develop and grow relations and networks relevant for the customers and the firm the Node Manager is working for. The needed skills for a Node manager is, beside having excellent social skills, to have deep and real insight in the challenges the customers are facing and providing the correct means to convert those challenges into added value for the customer. A Node Manager needs to have a profound understanding of how network economies and digital economies work because this are fundamentals for solving customers challenges in the present and the future.

Do we need the firm?
The connection to the firm needs to be strong and have clear objectives to benefit from the creation of value and accumulate the gained knowledge from the ongoing processes at the customers. This is where the economic flow is ensured for the firm.

The “Hub”
The focal point for the firm is to establish itself as a “Hub”. On the one side the “Hub” need to “depersonalize” relations and networks in order to “secure” the value of the network and make it independent from a singular person.  On the other hand the “Hub” needs to provide Node Mangers, consultants, experts and solution implementers with added value. Employees need to see the benefits for them otherwise they could might as well be self employed.

The “Hub” needs to be able to provide day to day assistance, have all the assets a given project needs and can direct partners, skilled people, information, know-how and administrative support, easily to the one with a need in order to solve a customer project rapidly.

The elements for the firm are to offer added value for the employees: Excellent collaboration options, extended networks and partnerships, collective awareness of customer needs and collective insights in customer’s challenges. In addition the “Hub” needs to create and maintain a brand that is attractive, that signalize a culture where working for a better environment and a better world is the essence. In short this is the replacement of what was defined as “the production apparatus” (“means”) in the industry economy era.

UPDATE : Read what Capgemini Consulting says here


2 Responses to “Network economy and digital economy are inseparable”

  1. […] Network economy and digital economy are inseparable « Geir Stene's … […]

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