Business in a Virtual World: Exploiting Information for Competitive Advantage (Macmillan Business)

263 Pages·1998·1 MB·English

by  Fiona Czerniawska

Business in a Virtual World
Exploiting information for
competitive advantage
Fiona Czerniawska
and Gavin Potter
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BUSINESS IN AVIRTUALWORLD
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Business in a Virtual World
Exploiting information for competitive advantage
Fiona Czerniawska
and
Gavin Potter
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©Fiona Czerniawska and Gavin Potter 1998
All rights reserved. No reproduction, copy or transmission of
this publication may be made without written permission.
No paragraph of this publication may be reproduced, copied
or transmitted save with written permission or in accordance
with the provisions of the Copyright, Designs and Patents
Act 1988, or under the terms of any licence permitting limited
copying issued by the Copyright Licensing Agency,
90 Tottenham Court Road, London W1P0LP.
Any person who does any unauthorised act in relation to
this publication may be liable to criminal prosectuion and
civil claims for damages.
The authors have asserted their right to be identified as the
authors of this work in accordance with the Copyright,
Designs and Patents Act 1988.
First published 1998 by
MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG21 6XS
and London
Companies and representatives
throughout the world
ISBN 0–333–72121–7 hardcover
Acatalogue record for this book is available
from the British Library.
This book is printed on paper suitable for recycling and
made from fully managed and sustained forest sources.
10 9 8 7 6 5 4 3 2 1
07 06 05 04 03 02 01 00 99 98
Editing and origination by
Aardvark Editorial, Mendham, Suffolk
Printed and bound in Great Britain by
Creative Print and Design (Wales) Ebbw Vale
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For My Mother
FCz
For Jane
GSMP
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Contents
Preface viii
Acknowledgements x
Introduction 1
1 Information and the Virtual Business 1
Part I The New Economics of Information 11
2 The Technological Foundations 13
3 The Competitive Advantage of Information 25
4 The Raw Material of the Future 39
5 The Law of Increasing Returns 52
Part II The Virtual Business in Action 65
6 The Virtual Value Chain 67
7 The Virtual Research and Development Department 72
8 Virtual Manufacturing – Exploiting the Virtual in
Your Product 86
9 Virtual Distribution 99
10 Virtual Marketing: the Economics of Difference 112
Part III Exploiting the Virtual Potential of Your Business 129
11 ANew Way of Managing 131
12 Zero-based Physical Budgeting 137
13 Electronic Commerce 149
14 Computer Modelling and Complexity 168
15 Work–Learn–Share: a Method for Increasing Knowledge 189
16 Getting the Foundations Right 206
17 Selling Your Virtual Assets 222
18 Final Thoughts 236
Appendix: Questions to Consider – a Checklist 241
Index 250
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Preface
Every business consists of two types of element: the physical and the
virtual. The physical elements are items such as buildings, machinery
and people; the virtual elements are items such as information about
customers, knowledge about how to get the best from a manufacturing
process and the rights to exploit a particular invention.
The information revolution provides organisations with an unparal-
leled opportunity to move elements of their business from the physical
domain to the virtual domain. No longer does the development of new
products have to be done on paper, no longer do you have to sell to
your customers within shops, no longer do you have to keep large
stocks of every item that you sell. Almost every element of a business
can be converted from the physical into information that is stored and
manipulated within a computer.
Once that transition is made, new laws of economics take over.
Information can be manipulated in ways that would be impossible
with a physical object, information can be transmitted around the
world at phenomenal speed, information can be duplicated and sold
many times over without incurring additional costs. These attributes
of information mean that organisations that embrace the virtual world
can play to a different set of rules, rules that are often stacked heavily
in their favour.
Yet despite the enormity of the potential changes, our management
methods are still firmly rooted in the physical. We can, for example,
measure, account for and depreciate physical assets, yet there is no
agreed method for accounting for the information we maintain on our
customers, or indeed any other information, assets that in many organ-
isations far exceed the value of the physical goods they sell.
The work that we do with organisations has made us realise that all
businesses are undergoing, or about to undergo, a fundamental revolu-
tion, a revolution so enormous that it dwarfs any changes since the
Industrial Revolution took place in the 19th century. Businesses will
increasingly move their assets and processes from the physical
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PREFACE IX
domain to the virtual domain, new laws of economics will take over,
and different rules and business models will apply.
The purpose of this book is to open your eyes to the revolution that
is taking place, a revolution that will affect every organisation whether
large or small, national or international, manufacturing or service.
Part I – The New Economics of Information – examines why
companies should move their assets from the physical domain to the
virtual domain, and the new laws that will apply once their assets are
transferred. Part II – The Virtual Business in Action – describes how
the leading edge companies are exploiting the new laws of economics
to restructure radically the industries within which they operate, and
Part III – Exploiting the Virtual Potential of Your Business –
describes some of the new management tools that will be required to
operate successfully once the transition is made.