COMMENTS

 

            Of all the books available on the digital age, this is probably the best.

 

A Killer App is 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.  Several examples are the personal computer, electronic funds transfer and the first word processor.

11 OF THE BEST IDEAS

 

1. The science of semiconductors, has shifted the World’s economy from an industrial to an information base in a little over 25 years.

2. Moore’s Law – Gordon Moore, the founder of Intel predicted in 1970 that computing power would double every 18 months and the price would remain the same.

3. Metcalf’s Law – Robert Metcalf, founder of 3 Com Corporation, stated that the value of a network is directly related to the number of users of the network -–the utility of a network is the square of the number of users.
   
   The value of telephones, fax machines, standardized electronical outlets, e-mail, etc., increases dramatically as the number of users increases.
   
   New technologies are valuable only if may people use them.  Closed, proprietary networks are much less valuable than open, public networks.  The single most important factor in the success of the Internet is its openness.
   
   In 1994, Marc Andressen, a 23 year old computer programmer, developed Mosaic, the first web browser.  In 1995, he went to Netscape Corporation and developed Netscape Navigator.  By offering Navigator free to the public, Netscape was able to capture 80% of the browser market in a matter of months.  Netscape stock debuted in 1995 and went from $14 a share to $150 in just a few days.  Market valuation was $3 billion.

4. The ideas of Ronald Couse – firms organized to reduce the transaction costs of repeated and complicated activities involved in creating, selling and distributing their goods and services.  With modern technology, this need no longer exists.  This results in significant downsizing, outsourcing and decentralized management.
   
   Search costs – the cost of buyers and sellers finding each other.
   
   Information costs – the cost to buyers of learning about products and services and the cost of sellers learning about the needs of buyers.
   
   Bargaining costs – the cost of meetings, phone calls, letters, faxes, brochures and legal costs.
   
   Decision costs – the cost to buyers of comparing prices and getting purchasing approval.  The cost to seller of deciding which buyers to sell to.
   
   Policing costs – the cost of inspections, late deliveries and late payments.
   
   Enforcement costs – the cost of enforcing agreements.

5. The Law of Diminishing Firms – as the market becomes more efficient, the size and complexity of the modern industrial firm becomes uneconomic.  As transaction costs in the open market approach zero, so does the size of the firm.

6. Dealers, agents and brokers in information and service businesses are the first victims.
   
   E-trade.com is a virtual stock broker on the Internet.  Merrill Lynch has tens of thousands of agents.
   
   Quickgoute is an agentless company on the Internet that sells term life insurance.  At present, there are 650,000 insurance agents in the U.S.
   
   Security First is a bank on the Internet.  Transaction costs can be reduced from $1.10 to $.10 per transaction by going to the Internet.

7. Law of Disruption – where social systems change, incrementally, technology changes exponentially.

8. Disintermediation – the movement to eliminate intermediaries. 
   
   Nearly every distribution activity includes intermediaries such as wholesalers, financiers, insurers, transporters and warehousers.
   
   With improved communication, computing and transportation, the need for intermediaries is decreasing.

9. Trends
   
   As transaction costs fall, many organizations are outsourcing.
   
   Employment is moving from large firms to small firms.
   
   Entrepreneurism is on the rise – the U.S. Department of Labor is predicting that by the year 2005, the largest employer in the country will be “self”.
   
   The first things to be eliminated are people and fixed assets.
   
   The definition of assets is changing.  What use to be considered assets (inventory, buildings, etc.) are now considered liabilities.
   
   Modern day assets are soft assets such as expertise, trademarks, market intelligence, good will, process, corporate culture, identity and information.

10. Designing the Killer App
    
    Outsource to the customer such things as data collection, customer service and product development.
    
    Cannibalize your markets.  If you don’t, somebody else will.
    
    Treat each customer as a market segment of one – mass customization.

11. The organizational structure of the future is the network organization.
    
    Nike sees itself as a sports company, not a shoe company.  It focuses on brand management, the relentless development of the Nike world view, the Nike lifestyle and the Nike experiences.  It outsources product design, production, distribution and advertising.

"The combined experiences with Ron Wiley and CEBI members provide me with ideas, role models and recommendations for sound & successful business practices. As a result, I gained the courage to buy out my partners and restructure my business." Norma Delp Managing Partner Signal Tree Resolutions, LLC