The Internet v.s the Washing machine – Does the washing machine have a greater impact on society than the Internet?

There is a great discussion going on in forumoxford about my blog post – Why facebook will make an economic impact beyond advertising   and apparently an author called Ha Joon Chang says in his book 23 things they dont tell you about capitalism - The washing machine has changed society more than the Internet.

I have not read the book .. but from the posts in forumoxford from people who have, the argument is based on the idea that:

The purely economic value of knowledge tends to depend on some people having the knowledge and others not, so in that sense the internet devalues knowledge

This is a common fallacy

The Internet does not devalue knowledge

The Internet democratises it ..

It makes knowledge equally accessible to all

This means it destroys old business models which depend on ‘ignorant customers’

Take retail

In any shop, the customer can access a price comparison site on their mobile and check relative prices. They can even ‘ask their friends’ (again gain insights through social media) via twitter, facebook etc. all a part of the Internet. So, no it is a common fallacy that the Internet devalues knowledge but rather the Internet devalues old business models based on ignorant customers.

Related to this is the question: Does Open always (commercially) win?

The answer is no ..

BUT Open changes the status quo of any market and over a very short time – changes the total dynamics of a market creating new winners and losers

This is because of many factors but one of the reasons is: Open systems have a higher rate of change (which was the point of the Facebook post) ..

And secondly

Open systems change the business model towards two extremes – A connectivity-network led business model and a ‘QOS’ led model.

a)  The connectivity led business model which the Internet is leaning towards tends to lower costs, mass markets, lower marketing costs(ex via recommendations). So, the business model is 80/20 i.e. 80 percent of your products or services would be cheap or free but the 20 percent will be highly profitable. To make this work, you need a critical mass. The critical mass provides a ‘barrier to entry’ + brand (try setting up an amazon or a ebay now?). This leads to sustained profit

b)  The QOS led business model leans to providing a ‘better’ service. This is initial the strategy of most players who are impacted by the Internet ex IMS. But end to end QOS is hard. So that fails. But there are instances of success (ex HD TV where people will pay more for better quality)

This all applies more for information type businesses i.e. not if you are selling oil or in construction

Most companies(for example telecom operators) are ill suited to handle these changes. I said before that the most innovative people will not want to join a company whose primary motivation was to preserve the status quo business model. Operators are in that category. So are old ‘traditional’ businesses – ex – would an ambitious young person want to join Foyles? Or Amazon? ( Foyles was once listed in the Guinness Book of Records  as the world’s largest bookshop in terms of shelf area (30 miles/50 kilometres) and number of titles on display. In the past, it was famed for its anachronistic, eccentric and sometimes infuriating business practices, so much that they made it a tourist attraction).

Finally, John Hagel posted in FB a sarcastic reinterpretation of a famous quote – ie as a joke he said that ‘The best way to predict the future is to prevent it!’

I smiled when I saw it on my FB timeline .. But sadly (and amusingly!) some companies do try to do just that!

They then end up in the worst possible places in the pendulum of openness .. at neither of the two extremes – ie they are not connectivity led (Amazon) nor niche and high value (Apple)

They ‘hang’ in the middle ..

Image source: Wikipedia – washing machine