Destructive impact of network entrants

When networks come on the scene of triform, complicated-market order situations I explored in my last post, creative destruction abounds. The new kid on the block does not get welcomed by the established tribal, institutional and market providers. Each suffers setbacks as network functionality takes effect. Here's how some of our recently developed digital networks have produced those destructive impacts.

Tribal providers are naturally too numerous and scattered for effective regulatory oversight, surveillance, inspections and testing. The ability of broadcast and print journalism to fund investigative reporters is declining. Likewise, the budgetary restrictions on enforcement capabilities curtails an adequate coverage of needed apprehension, prosecution and punishment. This has created a ripe opportunity for exploitative and deceitful practices throughout domestic and global economies. There have been many ways to go undetected, appear reliable, cover-up scams and mislead the public. In recent months we've learned of Ponzi schemes, neglected food inspections, corrupt uses of governmental offices, cancellations of financially responsible credit card or health insurance accounts, and exploitative subprime mortgages, financial derivatives, credit swaps and securitized debt instruments. Prior to networks, concerned citizens would have trouble getting heard or causing much of stir. They were left with options like becoming disinterested, cynical and frustrated.

All that has changed. Victim stories go viral faster than anything. Persecuted underdogs get an inordinate amount of attention via blogs, tweets, text messages and emails. The workforce of voluntary inspectors and investigative reporters has grown exponentially. The "too numerous and too scattered" nature of tribal providers is no problem for the countless, ubiquitous citizen watchdogs with easy access to exposure, and emergent constituencies which provoke the needed responses from the appropriate authorities.

Institutional providers are closed systems protected by law to maintain proprietary inventions, creations and advances. They expect their authority to be respected, their rights to be protected and their systems to remain closed. They are designed to deliver what they produce to passive consumers who fall for the providers propaganda about the same value everyone get from what is being sold. Institutional providers can extract economies of scale from consolidating their industry into a few giants that buy out or bleed out the little guys. Creative customers could dabble in pirate radio, home movies, underground presses, swap meets, and many other low key ways to refuse the standard issue from the institutional providers.

All that has changed. Advertising gets contradicted or confirmed by word of mouth buzz. Broadcast media gets challenged by, compared to and deprived of audience share that has migrated to "user content generation". Protected artistic content is getting remixed, extended in fan fiction and mash-upped in music videos. Sacrosanct authorities in software development, journalistic news coverage, encyclopedia authorship and many other "restricted to expert" endeavors are facing new competition from all breeds of hackers. The effect is undermining the business models, forcing many out of business and questioning the sustainability of institutional providers.

Market providers have bent over backwards to provide an expanded inventory of options, selections, and customizing alternatives. They have realized the market is very diverse and appreciative of responsiveness, service and freedom to mess around with what is being sold. The cost of accommodating these complications has been staggering. It's seemed necessary to open more locations, add help desks, improve customer service training, carry larger inventories and generate a new look often enough to always appear fresh. The investment has paid off for some providers who found their niche, developed loyal customers, and became a trusted source for a wide selection of options. For many, it's felt like a losing game where the customers win at the expense of the enterprise. The margins don't support to range of offerings, level of available service and the follow through after the purchase.

All that has changed. The growing volume of e-commerce occurs without retail outlets. Online connections between inventories and suppliers makes reordering automatic and reduces required inventory levels. Many customers are getting better help from experienced users who are accessible via discussion lists, their own blogs or contact links on fan web sites. The reasons to frequently revisit the provider online gets supplied by the visitors who tag, rank, vote, comment, make suggestions, and upload content themselves. The provider sites are becoming platforms for emergent social networks around using what the provider sells.

Thus the introduction of networks is proving to be a real game changer for tribal, institutional and market providers. There's no looking back now. Some will realize how the times are changing and others will take the brunt of the creative destruction brought on by the network entrants.

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