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Network logic culmination of the cluster of new technologies based on the electric motor, developed in the late nineteenth century and diffused during the early twentieth century, as culminating in the Fordist model of production and mass consumer society. The economies of scale and high initial capital requirements for these mass-production plants favoured the emergence of very large conglomerate companies. The early part of the twentieth century saw a period of dramatic industrial consolidation, with the number of firms in most industries shrinking from the hundreds to the handfuls – most dramatically in the automobile and electrical goods industries themselves. Today’s new technologies and the flow of service It would be an exaggeration to say that these earlier forces shaping corporate organisation have been swept away. On the contrary, economies of scale are more important than ever in many significant industries – more important because if they can be exploited on a global scale they can give a business a near impregnable competitive advantage. And more important too because of the network externalities or initial research and development costs involved in many important new goods – consider software or biotech products. In these cases spending on research and development is a kind of strategic arms race in which it is getting harder and harder for new competitors to enter the business. Big is definitely better in these cases. On the other hand, new opportunities are opening up due to the fragmentation of demand. There has been an explosion in the choice offered to consumers thanks to the increased flow of information. Consumers are better able to communicate their specific preferences to companies. Companies are better able to collect and act on that information, through improved logistics and vastly more flexible networked production systems. Nobody ever thought quantity was the spice of life. When our basic needs are met, we seek to meet additional wants in varied ways. So we have seen in recent years an explosion in quality and variety. Henry 172 Demos
Organising for success Ford famously said of the Model T: ‘The customer can have any colour he wants so long as it is black.’ The choice of new vehicle models in US is now nearly 300; Ford offers 46 colours. The paradigm now isn’t Ford but Dell. It gives customers who order online 16 million theoretical combinations of specifications for a desktop PC. Amazon has 2.3 million books available compared with 250,000 in the biggest New York book superstore, and 40,000 to 100,000 in most big bookstores. Nearly half the books ordered from Amazon.com are titles not likely to be in stock in any physical store. In addition the ability to search for titles and discover books online has also increased special orders through physical stores by an unknown amount. MIT Press estimates that online discovery has helped increase orders for its backlist titles by 12 per cent. These spillovers, increasing market size, improve the viability of publishing titles for a non-mass readership and further increase variety in a virtuous circle. MIT economist Erik Brynjolfsson estimates that the welfare gain to American consumers from being able to choose books not available in stock in big bookstores at about $1 billion a year, roughly five times the biggest estimates of gains from lower prices online. 2 Within this massively expanded array of choice in all kinds of products, from toothpaste to computers, there are many niche markets in which relatively small companies can compete effectively. Even where they are selling tangible products, they are adding value essentially through providing a service. The service can be thought of as information-broking – or more creatively as the satisfaction of desires, the desires of individuals to step outside the mass market and craft themselves. This is a product of the fact that value added in the advanced economies is increasingly weightless (literally so – UK GDP weighed roughly the same in 1999 as in 1990, although it had grown by a quarter in real terms, according to the ONS). 3 The way companies can attract customers is through the service-like elements of what they sell, not through processing stuff. The essence of service is customisation – something one person does for another. While there’s plenty of scope for standardisation in Demos 173
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Network Logic Who governs in an int
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About Demos Demos is a greenhouse f
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Open access. Some rights reserved.
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Network logic 10. Your friendship n
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We are some way from being able to
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Network logic urban communities, re
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Network logic a weblog called DearR
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Network logic Power The changing na
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Network logic Boundaries of identit
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Network logic framework for the und
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3. Towards a theory of government K
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Towards a theory of government What
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Seeing the connectedness of things
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Network logic against risk: protect
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Network logic the actions to tackle
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Editors’ note A significant featu
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5. Untangling the threads networks,
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Untangling the threads Given the co
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Untangling the threads teachers exp
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Untangling the threads districts, a
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Networks, knowledge and innovation
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Asked about leadership, most people
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Network logic Finally, in the refor
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Disparities of wealth appear as a l
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Network logic But might there be a
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Network logic ago. Under the networ
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Network logic honestly. If it is no
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9. Old boys and new girls women’s
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women’s networking movement. This
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