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5 of 5 people found the following review helpful:
5.0 out of 5 stars
The ROI of Innovation, March 15, 2002
I've just re-read this book and think more highly of it now than I did previously. Larry Downes & Chunka Mui define a "killer application" as "a new good or service that establishes an entirely new category and, by being first, dominates it, returning several hundred percent on the initial investment." As they explain, the primary forces at work in spawning today's "killer apps" are both technological and economic in nature. "The technology we are concerned with is the transformation of information into digital form, where it can be manipulated by computers and transmitted by networks." Digital strategies are needed to achieve market dominance. The co-authors divide their book into three parts: Digital Strategy, Designing the Killer App, and Unleashing the Killer App. In Part I, there is a brief discussion of one "killer app" in the Middle Ages, the stirrup, which added mounted cavalry to the battle equation. The "lowly stirrup" played a singular role in rearranging the political, social, and economic structure of medieval Europe. In The Lever of Riches, Joel Mokyr identifies countless other "killer apps" throughout history such as paved streets and sewerage disposal; the lever, wedge, and screw; the heavy plow and three-field system; the weight-driven mechanical clock; spectacles; the printing press; the steam engine; the telegraph; the bicycle; ...each of which also had a truly profound impact. To repeat, Larry Downes & Chunka Mui concern themselves with the technology of transforming information into digital form. Thus in Part I, they examine the "killer app", explain what they call "the new economics", and then shift their attention to the nature of a digital strategy. They dully acknowledge the disruptive power of "killer apps" which can suddenly destroy the equilibrium of what appeared to be stable systems of commerce and government. For them, business change now originates with digital technology; more specifically, with "killer apps." Strategies are needed to manage (to the extent possible) their impact to achieve sustainable competitive advantage. These strategies must accommodate three new forces: digitization, globalization, and deregulation. The "dirty little secret" to which Gary Hamel has referred is that the strategy industry "doesn't have any theory of strategy creation." The success of any digital strategy may well be the result of what Hamel calls "lucky foresight." Downes & Mui seem to agree with Hamel while offering, in Part II, what they refer to as "a few rules of thumb." They suggest three stages of "killer app" design and carefully explain each. They identify 12 specific principles on which to base the design process. In Part III, they shift their attention to "Unleashing the Killer App" and correctly stress the importance of communication, one which "speaks with the language of ideas, scenarios, options, and what-ifs." In Chapter 7, the reader's attention is directed to two major corporations, McDonald's and VEBA AG, which illustrate digital strategy in practice. These are, in effect, mini-case studies. It is important to point out, however, that effective digital strategies are not the sole province of major corporations such as these. A "killer app" can quickly increase or reduce the size of any company. Consider the fact that a single dry goods store in Kemmerer (Wyoming) can become the J.C. Penney Company which, in turn, now struggles (with mixed results) to compete successfully with a company whose own history can be traced back to the Walton 5&10 in Bentonville (Arkansas). Downes & Mui assert that "Developing digital strategy...requires components of both problem-pull and technology-push...operating together in a well-functioning organization [in which] the process becomes not only circular but indistinguishable...in a pragmatic, indeed opportunistic, response to the new digital environment." In the final chapter of their brilliant analysis, Downes & Mui suggest that cyberspace "is fueled by free computing power and free bandwidth...and free software." Consequently, "the social conditions that resulted are raw, and the nature of the business climate, by necessity, less developed." As with The Golden Rule dry goods store (in 1902) and then the Walton 5&10 (in 1950), today's companies must seek out new areas of opportunity and start doing business there. "Those who make the transformation by developing a digital strategy are choosing to engage the frontier on its own terms, just as their counterparts from Europe did in settling the New World." Larry Downes & Chunka Mui have outlined the process of digital strategy, explained the twelve design principles, and described the experiences of organizations that are transforming themselves so that they can unleash "killer apps." Which companies will conquer the "frontier", whatever and wherever it may be? Which companies will not? In the Digital Marketplace, we won't have to wait very long for the answers. Probably in what seems to be about five minutes. Those who share my high regard for this book are urged to read Malcolm Gladwell's The Tipping Point.
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