HISTORY & NEED OF CORPORATE GOVERNANCE

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The Basis and Concepts behind Creating Value in the New Business Model

"The core concept is that companies will lose their competitiveness if they deny four current

trends and how the convergence of these trends is changing the way we think about

innovation and value creation. It does not matter whether the business is selling tires,

insurance or health care, or whether it's one of the new age businesses like Facebook, Google

or eBay.

For the last four years, I've been asking myself: in the age of the Internet, what is going to be

the underlying source of competitive advantage for companies? What will endure for the next

ten years? I noticed four trends.

First, connectivity - and I think it's the core issue that will change the competitive landscape

for all of us, whether it's through PCs or cell phones. Second, the cost of digitization is going

down, so the cost of technology is not going to be a limiting factor for deploying it across the

world. A third trend is the convergence of technology. Is your cell phone a telephone, a

computer, a camera, a watch or all of the above? And industry boundaries are breaking down

like technology boundaries. The fourth trend is the emergence of social networks.

If you take globalization, which feeds on connectivity, digitization, convergence and social

networks - and the other way around - all of them together will change the way we think

about innovation and value creation."

To Stay Competitive, Companies Need to Adopt the New Way of Doing Business

How will it change the way companies do business and innovate to create value for their

customers?

"It causes the relative balance of power between the consumer and the firm to change. Ten

years ago, the firm had significantly more influence than the consumers. Now consumers can

have as much influence and, in some cases, more influence than the firm.

As an example, Google does not create firm content. The content is sourced from a large

number of suppliers around the world, none of whom Google owns, but to whom Google has

privileged access. In the new business model, the firm does not have to own the resources but

must have the capacity to access the resources."

Besides ownership of resources, are there any other characteristics of this new

"connected" business model?

"The second part is how the value is created. Even when Google may have a hundred million

consumers, it may still have to treat each consumer's experience as unique. You and I can

decide what content we want to look at and how we want to experience Google at any point

in time. So one consumer experience, which is co-created with Google, is what creates value.

This is a huge shift from the Model-T's unappreciated consumer, where Henry Ford said they

could have any kind of colour they wanted as long as it was black. And all the resources for

the Model T were within the company.

In the new business model, it's not one consumer; it's one consumer experience at a time. So

the new game will be co-creation of a personalized experience. Co-creation is important

because I am involved as a person in constructing my own experience. And that is true,

whether I go to Starbuck's, or iPod, Google or eBay. Co-creation means two joint problem-

solvers: the company and me. And it is about experience, not about products. So we have a

co-created, virtualized experience real value instead of a product-centric real value."

Isn't this just a new concept or new way of viewing value, rather than a new model that

requires actually changing the way a company does business?

"No; in order to create co-created, personalized experiences, the resources will not be in one

company. A large number of facilities may have to work collaboratively. That is a shift.

Resources based upon a supply chain have a predetermined sequential process. In a co-

created customer experience, there cannot be a predetermined sequence or positioning of

activities and vendors. For example, if I want to get some information from BBC, Google has

to access BBC for that particular request. The next request may not involve BBC at all. Each

one is new and different.

Instead of a predetermined supply chain as you would use for creating products, you will now

need to create a web with various elements that can be articulated depending on the consumer

experience you want to create. You must access multi-institutional and, in some cases, multi-

geographic, vendors in order to fulfill that one unique experience at a time."

Examples of Successful Businesses Using the New Model

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The Basis and Concepts behind Creating Value in the New Business Model "The core concept is that companies will lose their competitiveness if they deny four current trends and how the convergence of these trends is changing the way we think about innovation and value creation. It does not matter whether the business is selling tires, insurance or health care, or whether it's one of the new age businesses like Facebook, Google or eBay. For the last four years, I've been asking myself: in the age of the Internet, what is going to be the underlying source of competitive advantage for companies? What will endure for the next ten years? I noticed four trends. First, connectivity - and I think it's the core issue that will change the competitive landscape for all of us, whether it's through PCs or cell phones. Second, the cost of digitization is going down, so the cost of technology is not going to be a limiting factor for deploying it across the world. A third trend is the convergence of technology. Is your cell phone a telephone, a computer, a camera, a watch or all of the above? And industry boundaries are breaking down like technology boundaries. The fourth trend is the emergence of social networks. If you take globalization, which feeds on connectivity, digitization, convergence and social networks - and the other way around - all of them together will change the way we think about innovation and value creation." To Stay Competitive, Companies Need to Adopt the New Way o ...
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