1. The Economy of Style Idea From Platform to Business Plan

2. Platform Review Hunting, gathering preceded the pushcart peddlar, who brought the business to the customer. The market provided a fixed but inconstant venue for farmers and consumers to meet and transact Main street has fixed business venues; the customers come to the business The Internet substitutes an electronic analogue of Main Street and the market.

3. The Unmediated Business Transaction Buyer Seller Seller’s goods Buyer’s goods Payment Exchange Agency Other Goods M

4. “Weight” Buyer Seller Seller’s goods Buyer’s goods These goods and everything connected with the transaction have “weight” and involve physical actions with costs

5. Costs of Weight PlatformCost of Weight PushcartGoods to sell, cart, energy to push cart, security, maintenance of cart MarketLand for market, security, oppty costs, maintenance of market Main StreetBuildings, maintenance, security, signage, planning, strategy

6. Collateral Effects of Weight Need for investment implies planning Investment implies opportunity costs Investment implies recoup time and costs Change becomes expensive, hence risky Hence innovation is decreased proportional to weight Intermediation becomes important as efficiency becomes necessary to reduce costs Cost control becomes most important.

7. Weight Implies Cost Control Economies are sought Economies can be found within and outside Inside economies are efficiencies of production Outside economies are efficiencies of the supply chain (=value network)

8. Inside Economies Economy of scale: Amortizing the cost of producing goods by producing large numbers. “Mass production” hopes to make the marginal cost of the nth item about zero. Mass production also requires mass marketing, efficient distribution, etc., to generate profits. Economy of scope: Amortizing the cost of designing goods by making flexible designs. The hope is to make the marginal cost of designing and setting up production of the mth variation about zero. Mass customization requires extremely flexible designing. IT makes this possible. Also requires relatively sophisticated marketplace.

9. The Value Network FOCAL FIRM Network of Suppliers Network of Buyers In the value network suppliers provide material and services …to one another, adding value and receiving payment. Each focal firm works to create a supplier and buyer network to maximize profit. This network also has “weight” and thus has costs to create and maintain.

10. Achieving Value Network Economies Integration: Cutting down the number of “handovers” of weight Outsourcing, offloading: Finding less expensive vendors of products and services BUT these economies also carry costs, since these relationships are difficult to change after expensive cultivation

11. Economy of Style If some way were found to have these value network relationships change more inexpensively, quicker, more reliably, economies could be discovered that make the pth relationship effectively zero cost. This economy is called an economy of Style. Internet-based e-commerce can achieve them.

12. Some Economies of Style Amazon.com has turned its customers into salespeople E-Bay turns its customers into its suppliers Facilities exist for instant and short-term partnerships for cross-selling through linked websites. Google makes its money by basically selling relationships based on web search terms.

13. Transition Push-cart, market, main street have large fixed costs of weighty materials and relationships, hence emphasis is on long- term relationships, lasting products. E-Commerce also has fixed costs, but these are much less; emphasis is now on flexibility, adaptability, short-term relationships, etc.