THE END OF
COMPETITION
The Impact of the Network Economy
THE END OF
COMPETITION
The Impact of the Network Economy
COR MOLENAAR
Erasmus University Rotterdam, The Netherlands
Published by
World Scientific Publishing Co. Pte. Ltd.
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Library of Congress Cataloging-in-Publication Data
Names: Molenaar, Cor, author.
Title: The end of competition : the impact of the network economy / Cor Molenaar, Erasmus University Rotterdam, The Netherlands.
Description: Singapore ; Hackensack, NJ : World Scientific Publishing Co. Pte. Ltd., [2020] | Includes bibliographical references and index.
Identifiers: LCCN 2019053557 | ISBN 9789811212314 (hardcover) | ISBN 9789811212321 (ebook)
Subjects: LCSH: Competition. | Business networks. | Business--Technological innovations.
Classification: LCC HB238 .M65 2020 | DDC 658.4/06--dc23
LC record available at https://lccn.loc.gov/2019053557
British Library Cataloguing-in-Publication Data
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Copyright © 2020 by World Scientific Publishing Co. Pte. Ltd.
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Despite all the technology it always comes down to customers, people of flesh and blood with their own emotions.
Co Konijn (2000)
Preface
The frictions that we experience when doing business, and in fact also in society, result from the impact of technology. There is a transition period from ‘doing digital’ to ‘being digital’. This affects every aspect of our lives, both private and professional. Merely observing the changes, reading about conflicts of the old model in relation to the new model, is confusing. The current developments and frictions require more in-depth examination. Insights into these developments will be necessary in order to achieve success. Many more partnerships will develop; organisations will come together and combine forces and borders will disappear. This will lead to the changes from order entry to new digital business ecosystems, or rather from ‘doing digital’ to ‘being digital’.
How is it that these new concepts can suddenly grow so quickly (network effects)? And that the international growth is a question of months, or even shorter, where previously it required decades or longer? And how is it that new businesses can continue to exist despite massive losses? The transition from a transaction-based model to a value model requires modifications in the organisation, in the focus as well as in the strategy. We suddenly see old terms being used such as ‘commodification’, a term that was important for Karl Marx, which indicates that each transaction is a value component. So why then are prices determined on the basis of an exchange of products (transaction-oriented) and not on the basis of budgets (value-oriented)? This change alone requires a new vision, whereby old criteria and (marketing) instruments have to be modified on the basis of a value exchange.
This also explains the discussions on returning articles from online sales in this transition period. In the traditional model, the buyer was the weaker party and had to be protected with legislation and guarantees. However, with the new resources, technology forms the basis. Purchases made through digital media may be returned within two weeks in Europe. But why two weeks? Why can items that have clearly been used be returned, and why do potential buyers order so many articles that they later send back? Customers are abusing the new possibilities and the old legislation. This is a change from ‘caveat emptor’ to ‘caveat venditor’. A shift of dependency, from the customer to the supplier. I have actually not come across these terms in the marketing literature. Blockchain can lead to modifications in this.
A study into buying motives and buying behaviour has led to new insights that form the basis of the current changes. The necessity to buy has disappeared and has been replaced by a choice in what is bought and where. In the old, supply-based model it is all to do with comparative cost advantages. The price as a weapon against the competition. This involved protecting markets against new entrants, international suppliers and substitute products. Defence as the basis for success. These days this protective approach is no longer workable; defence leads to shrinkage and eventual disappearance. Also relevant these days are buying motives and motivating customers to buy. It comes down to developing a vision of value exchange instead of price. But what does a customer actually buy? The product, the service, the imaginary value, the experience or the acceptance within an intended group? Businesses have to delve deeper into these, often individual, buying motives. New analysis systems based on artificial intelligence are necessary, and lead to the formulation of algorithms. The future competition will no longer be about comparative competitive advantages but will involve customer loyalty and algorithms. These are new technological applications that will form the basis of doing business. And this change process has only just begun.
Many companies are still busy optimising or digitalising the current processes (doing digital), although this is based on an outdated, traditional model, with a supply chain, the sale of services and a customer journey. New concepts, however, are rapidly conquering markets, such as Airbnb, Uber, dating sites, booking.com, Deliveroo and many more. These involve new revenue models, strong market positions and are based on collaboration. Existing organisations can no longer compete with these. Complaints and bans are only temporary solutions. Often the management is so restricted by old regulations, outdated KPIs and a redundant pursuit of profits that it is difficult, if not impossible, to adapt. So the question is, what sort of future do these businesses have? Should they join existing platforms, develop one’s own platform or become a niche player?
Customers do not let themselves be pushed anymore, and loyalty systems that reward transactions no longer lead to the desired impulses. A ‘net promoter score’ is too subjective to base any policy on it; data analyses, on the other hand, are objective. But a customer also has to want to feel loyal to a product, brand or supplier. An affinity. A positive feeling. After all, isn’t