Philip Evans: How data will transform business

Summary

The speaker examines the transformation of business strategy in light of technological advancements, arguing that traditional frameworks, rooted in the theories of Bruce Henderson and Michael Porter, are becoming obsolete. As transaction costs decline, value chains fragment, allowing for disintermediation and a shift from vertical to horizontal business structures. This evolution is driven by the explosion of digital data and user-generated content, which creates new opportunities for collaboration and competition. Ultimately, the speaker suggests that businesses must rethink their strategies to adapt to these changes, making strategy more relevant and exciting in today's context.

Takeaways

• 😀 Business strategy has historically been based on assumptions about technology, which are currently evolving.
• 😀 Bruce Henderson introduced the idea of concentrating mass against weakness in business strategy, likened to military strategy.
• 😀 Michael Porter emphasized the importance of the value chain, where each component's advantage contributes to overall competitive advantage.
• 😀 Transaction costs, which coordinate business activities, have significantly decreased, impacting the structure of value chains.
• 😀 The internet and technological advancements have allowed for disintermediation, where traditional roles in value chains can be disrupted.
• 😀 The encyclopedia industry is a prime example of how new technologies have drastically changed distribution methods and business models.
• 😀 The second decade of the internet saw the rise of user-generated content, exemplified by platforms like Wikipedia, challenging traditional professional content creation.
• 😀 The growth of digital data, especially with IP addresses, allows for unprecedented connections and pattern recognition in vast datasets.
• 😀 The cost of mapping genomes has dropped dramatically, transforming genomic research from a high-cost venture to a retail, clinical application.
• 😀 The shift towards horizontal organizational structures in industries necessitates a rethinking of business strategy to accommodate collaboration and competition simultaneously.

Q & A

What is the main argument presented about the relationship between business strategy and technology?

The main argument is that business strategy has always relied on assumptions about technology, which are now changing dramatically, necessitating a redefinition of business strategy.

Who are the two intellectual giants mentioned as foundational figures in business strategy?

The two figures are Bruce Henderson, the founder of BCG, and Michael Porter, a professor at Harvard Business School.

What was Bruce Henderson's central idea regarding strategy?

Henderson's central idea was based on concentrating resources to exploit weaknesses in competitors, drawing a parallel with military strategy.

How does Michael Porter’s concept of the value chain differ from Henderson’s idea?

Porter's value chain concept acknowledges that businesses consist of multiple components, each driven by different strategies, and that competitive advantage may vary across these components.

What impact have falling transaction costs had on business structures?

Falling transaction costs have reduced the need for vertically integrated organizations, allowing for the fragmentation of value chains and enabling competitors to penetrate different business areas more easily.

Can you provide an example of how technology has disrupted traditional business models?

The transition from traditional encyclopedia sales to platforms like Wikipedia illustrates how technology enabled user-generated content to replace established, hierarchical distribution models.

What significant change occurred in the production of knowledge in the Internet era?

The Internet evolved from a medium of information (a noun) to a platform for interaction and content creation (a verb), emphasizing user participation over traditional professional roles.

What revolution in medicine does the speaker predict as a result of advancements in genomic mapping?

The speaker predicts a revolution in medicine driven by personalized treatment options made possible by affordable genomic mapping and the integration of various data sources.

How do the changes in data economics challenge traditional business models?

As data becomes more accessible and less proprietary, businesses that rely on exclusive data for competitive advantage may struggle to capitalize on the collaborative potential of shared information.

What is meant by the 'horizontalization' of industry structures?

Horizontalization refers to the shift from traditional vertical business structures to more collaborative, decentralized models that allow for both competition and cooperation among diverse participants.