Gary Hamel on the impact of the Internet

March 21, 2001

Download powerpoint show (pdf 77K)

INTRODUCTION: Gary Hamel a former Harvard Business School professor is the author of the well known book “Competing for the Future”. He is currently the chairman of the consulting firm Strategos, based in San Francisco. We took an excerpt of the interview Gary gave to Businessweek which was published recently to create this map. His thoughts in that interview are covered from map 1 to 3. Using our mapping technique, it was straightforward to take it to map 4. This forms a key idea map for us. It was used to build an earlier map, “Opportunities in the Tech Innovation cycle” dated March 20, 2001. Gary drew important lessons from the first “E” - Electricity to understand the present “E”, i.e., E-Commerce.	How to Read Maps Maps Investment Maps Business Maps Experts Maps Other Maps Local Interest
(Fig 1) As the Internet advance, the businesses which use to hold their own with friction barriers falls away. E.g., the recording industry control of the distribution system to charge high prices is being eroded by the Internet. This is an accelerating process, a reinforcing loop between Box 1 and Box 2
(Fig 2) As barriers fall, once niche products become commodities (box 3) and prices decline. Box 1 and Box 2 are already driving organizations to recognize a premium for innovation. Box 3 is providing added pressure. Together they are sufficient to make even the largest and most hidebound companies react.
(Fig 3) These trends result in a vast majority of average performers and losers with a very small number of extraordinarily successful winners (box 5)
(Fig 4) As usual the exceptional are often the in the minority. The majority has made much progress in product, service offering and cost control. Their problem is so have many of their competitors (box 6). Falling prices and keen competition mean that the consumer is king (box 7). But most consumers are also employees of firms under pressure (box 6). However on balance, the promotion arrow from Box 3 is stronger than the demoting arrow from Box 6 to Box 7. The benefits can be tricky to measure, and as the fruits are not equally shared, there will be a rising constituency claiming that the negative wind from Box 6 is stronger than the positive influence from Box 7. For the US, many of them would be in the manufacturing sector. If the drivers in Box 1 to 5 push on too quickly, there is always a risk of a backlash from Box 6. See the demotion arrow from Box 6 to Box 2. Conclusion The Americans have created and embraced these trends. The Europeans and Japanese are much further behind, so much so that in the present US slow down, few foreign investors are willing to turn cool towards the US.