The Growth of the Network Economy, Technology or Human Behaviour?
China and America benefit from a growing network economy. This will lead to new prosperity and employment as well as connections on a global scale. This development not only is facilitated by the technology but also needs to be accepted (and adopted) by companies, governments and consumers. This network economy has to form part of the changes that are taking place in the behaviour of consumers and companies.
Technology facilitates and stimulates this development
Technology facilitates change. Technology was initially used in developments to realise greater efficiency, but these days technology is used much more often for connection and communication purposes. Technology is also used to carry out analyses, which helps to bring about a better bond between users and suppliers (commitment and loyalty).
• New methods, such as scrum and micro-services, ensure for a speedy development.
• Modifications of systems, other applications, are based on network facilities.
• The cloud ensures that everyone has access to the desired data at any time and place and that everyone can communicate regardless of where they are.
Although the application of these technological developments has been growing for decades now, it is only in the last few years that we can speak of a convergence, where developments are influencing one another. Both the application and the acceptance have greatly accelerated, in part of course due to the technological possibilities, partly through the economic necessity particularly of China and America and due to the global acceptance by companies and individuals as well.
Products were increasingly no longer made specifically by one single factory; rather, production involved the assembly of various components to form a single product. This not only greatly reinforced the mutual dependency involved in the production but also stimulated specialisation. From a legal point of view, a factory was still an independent entity, but not necessarily when it came to its activities. A factory would sometimes receive semi-manufactured goods, which would then have to be processed further and then sent elsewhere in the world to be finished off and sold to a particular market. This network manufacturing process is also supported by information and communication. Each link in this process is independent yet connected with another link for further processing. And so a chain of independent units, nodes, is created that together formed a single entity. This is the basis for the network economy (Figure 3).
Figure 3. The network structure, independent entities (nodes) are connected.3
The buying behaviour (consumers and companies) is changing
A second development is based on the behaviour of buyers. The behaviour is increasingly individual, and consumers are becoming more assertive and better informed. What’s more, thanks to the Internet everyone has access to sources of information and communication. The penetration of smartphones is above 80% in all age groups. In addition, the old purchasing barrier to online shopping no longer exists; it is just as easy to buy in one’s own country as it is abroad. The disadvantages of not being able to see and touch the product and having to wait for delivery are accepted because of the many advantages, such as access to all the desired information, a wide choice on the Internet, price transparency, the right to return items and home delivery. Target groups, a distinctive feature since the 1960s (the Third Industrial Revolution), are rapidly disappearing due to individualisation. A consequence of this is the demand-driven approach aimed at the individual buyer, which contributes to the individual buying behaviour.
Social economic changes
And finally, there are also socio-economic aspects to this change, which contribute to the rapid growth of the network economy: increased prosperity, the large rise in single-parent families and singles and the choices made by young people (millennials) that are increasingly based on wellbeing rather than on prosperity. This individual behaviour is determined by the individual wishes and circumstances. Furthermore, this new generation has grown up in prosperity, with technology and has very good communication skills. The focus on oneself rather than on a group has also contributed to this.
Adjusting to international developments
For many years, governments have sought to remove trade restrictions. Bilateral and multilateral trade agreements, close collaborations between countries (such as within the European Union, and the European Union with other countries), have led to an increase in global trade and prosperity. The first step, removing barriers, had been taken, but within the old structures (product-based). The second step, as a result of the changing competitive position in the markets, quickly followed. Companies had to meet international norms and international competition conditions. This meant that companies started to strive for both quality improvements and efficiency.
By responding to these changes and applying new possibilities, opportunities for new business models arose. New communities have been created (such as social networks) where like-minded people can find one another. But this has also led to frictions in companies, which suddenly have to become part of a network, which causes major changes to competitive relationships. This requires changes to a company’s business model, to the organisation and to the company’s focus. Organisations are no longer those independent entities working in a stable and predictable market. The market has become difficult to predict and the changes require constant monitoring and adaptation. Dynamism and speed of change are essential in order to be able to compete in the network economy. This requires not only flexibility from an organisation but also the appropriate expertise and skills.
Building Blocks for the Future
• Traditional structures restrict the application of new possibilities.
• New applications of technology not only lead to collaboration within a network but also create different competitive relationships.
• Organisations as independent entities have to join a partnership within a network.
• In addition to the technological changes, it is the acceptance of users, customers and companies that form the basis for disruption.
• The playing field is no longer limited to a traditional target group or protected market. Competition is now global. Purchases are demanddriven. The demand economy is replacing the supply model.
• Competition takes place on the basis of algorithms that often lack transparency.
The traditional platform development is disrupting traditional competitive relationships in a number of ways as follows:
• It reduces barriers to access.
• Everyone can start a new platform. Alternatively, a company can become a member of a platform.
• There is a change in the logic of value creation and value determination.
• The platforms provide a new series of economic relationships, which are dependent upon the Internet (networks). This leads to an ecosystem that is the basis of value creation. The ecosystem determines the conditions users need to meet in order to participate.
• Value is determined by a variety of mechanisms, each of which has different implications for the distribution of profits. Platforms transform the work and the relationships or create new categories of work and relationships.
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