1 / 17

Network Economies

Network Economies. Overview Evolution vs. Revolution Generic Network Strategies The Value of Open Standards Discussion. Evolution vs. Revolution. Igniting Positive Feedback: Performance vs. Compatibility. Ideal location, difficult to achieve. Evolution. Improved Design or Adapters.

nessa
Download Presentation

Network Economies

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Network Economies • Overview • Evolution vs. Revolution • Generic Network Strategies • The Value of Open Standards • Discussion

  2. Evolution vs. Revolution • Igniting Positive Feedback: • Performance vs. Compatibility Ideal location, difficult to achieve Evolution Improved Design or Adapters Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion Compatibility Revolution Performance

  3. Evolution vs. Revolution • Evolution • The evolution strategy offers consumers a smooth migration path • Centers around reducing switching costs so that consumers can gradually try new technologies • Gives up some performance to ensure compatibility and thus ease consumer adoption Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion

  4. Evolution vs. Revolution • Evolution Obstacles • Legal Barriers: • Incumbents w/ intellectual property rights for older technology may block migration path • Technical Obstacles: • Difficult to develop products that are superior, yet compatible w/ older technology • Microsoft Office 95  Office 97 ‘one-way’ compatibility Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion

  5. Evolution • Color Television Technology • Borland copying Lotus 123 Commands • Microsoft WordPerfect Converter • Intel’s Merced Chip – 32 bit and 64 bit processing? • Compaq’s ‘Semi’ Legacy Free iPAQ Desktop • Modem Free • Examples Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion

  6. Evolution vs. Revolution • Revolution • Involves Brute Force: Offer a product so much better than what people are using that enough users will bear the switching costs • Offers compelling performance, best product possible • 10X Rule of Thumb: You need performance ten times better than established technology to start a revolution Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion

  7. Evolution vs. Revolution • Revolution Obstacles • Inherently risky, cannot occur on a small scale • Usually requires powerful allies • Requires attractive price/performance ratio Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion

  8. Revolution • Sony & Phillips – CD Technology • Fax Machines • HDTV • Sega over Nintendo in early 1990s • New Internet Computer (NIC) • Legacy Free Networked Computer • Uses App Svc Providers • No Hard Drive • No Windows Operating System • Simple, Easy, User-Friendly • MP3 Technology • Examples Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion

  9. Generic Network Strategies • Questions? • When is compatibility the better choice? • When is incompatibility (performance) the better choice? • When is openness the better choice? • When is control the better choice? Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion

  10. Generic Network Strategies Four Strategies for Igniting Positive Feedback Control Openness Compatibility Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion Performance

  11. Generic Network Strategies • New and improved technologies compatible w/ existing technology • Vendor retains proprietary control • Dynamic form of versioning (ch.3) • Best suited when you have secure domination of your market, industry leaders • Examples: Windows 98, Intel Pentium II, Intuit Turbo Tax Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion Control Openness Compatibility Performance

  12. Generic Network Strategies • Each new generation conforms to agreed upon, existing standards • New product is supplied by many vendors • Requires little switching costs • Friendly to consumers • Best when your advantage is primarily based on manufacturing, allows your economies of scale to excel • Not strong enough to ignite positive feedback on your own • Examples: Hewlett-Packard, multiple generations of modems and faxes Critical Strengths: Existing Market Position Technical Capabilities Control of Intellectual Property Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion Control Openness Compatibility Performance

  13. Generic Network Strategies • New technologies are incompatible w/ existing technologies • New technology is available from many vendors • Favors efficient manufacturers, those most able to easily provide value added services • Not strong enough to ignite positive feedback on your own • Examples: CDs, 3.5” Floppies Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion Control Openness Compatibility Performance

  14. Generic Network Strategies • Boldest and riskiest strategy • New, incompatible technology • Vendor retains strong proprietary control • Especially attractive to ‘outsider’ firms w/ no installed base to worry about • New entrants and upstarts w/ compelling new technologies don’t need to worry about backward compatibility • Examples: Nintendo 1980s, Palm Pilot, Iomega’s Zip Drive Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion Control Openness Compatibility Performance

  15. Open Standards • The Value of Open Standards • Open standards are critical when no one firm is strong enough to dictate technology standards • Opening up technology can generate positive feedback and maximize added value • Openness will bolster your chances of success by attracting allies and assuring consumers they will have multiple options in the future • Open technologies have a better chance of being accepted, however rewards are usually far greater for innovators that can retain control Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion

  16. Open Standards • The Value of Open Standards? • Examples: Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion Beta

  17. Network Economies • Discussion • Are openness and compatibility always best for the consumer? • Who decides? • Hello! • Windows vs. Apple • Intel • Telecommunications (AT&T – Bell Labs) • Network Solutions • Local Cable Overview Evolution vs. Revolution Generic Network Strategies Value of Open Standards Discussion

More Related