Compass Points Reviews Blown to Bits: How the New Economics of Information Transforms Strategy

Blown to Bits: How the New Economics of Information Transforms Strategy

by Philip Evans and Thomas Wurster
Harvard Business School Press 2000 - 261 pages $27.50

The huge disruptions and dislocations occurring in many industries today cause as much stress for strategists outside those industries as it does for those within. Not only do managers wonder if their industry is next, but they also eye the tremendous success of the dot-com stars and wonder how they can get a piece of that success. This combination, fear and ambition, has driven a new genre of management books to the top of the bestseller lists: the "New Economy" management book. Blown to Bits is one of the best in this new genre, using clear terminology, a wide range of useful examples, and a multitude of graphs and prescriptive tasks for managers. In Blown to Bits, Evans and Wurster focus on three major concepts that are dramatically affected by the rise of the digital economy: Richness, Reach, and Deconstruction.

Richness can be summarized as the total information flow that can add to your ability to meet needs and preferences. Reach is the penetration of channels and, ultimately, the market. Classically, there has been a very close relationship between these two, as there is a clear trade-off between richness and reach at a given level of technology. Most consumers are almost instinctively aware that a business that sells more richness will appeal to them when they are specialty buyers and companies that sell more reach are appealing when they are commodity buyers.

One of the key arguments put forward in Blown to Bits is that the traditional trade-off between richness and reach has been transformed by the information age. Put more specifically, the application of ness while at the same time affording the supplier opportunities for more reach. Thus Amazon.com can provide more customized service at the same time their lower cost-per-transaction enables them to reach millions more customers profitably.

Deconstruction is something that happens to the entire value chain whenever technology permits efficient value-creation on a smaller scale. Simply put, deconstruction causes goods and services that were once bundled to become un-bundled and strategic competencies to become more refined as a basis for competitive advantage. Where once there were banks, there are now online brokerages and payment service companies, mortgage brokers and financial planners, and a host of other services that might have been bundled into a traditional banking relationship thirty years ago. Deconstruction happens because it can, and Evans and Wurster contend that this has the important effect of "deaveraging" value chains. What this means, practically, is that traditional value-chain relationships are becoming "unglued" and resorted into value chains where there are players competing to provide the greatest value at each point in the chain. Industries where this has not yet occurred are ripe for revolution, according to this theory.

One of the key lessons of Blown to Bits is that strategy is becoming more and more critical to success in the digitally transformed world of business. However, it is critical to note that the need for flexibility and the ability to quickly recognize and respond to key changes in your marketplace mean that your strategic planning must be more flexible and time-efficient than ever.

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