Deep into the new book Unleashing the Killer App: Digital Strategies for Market Dominance, Larry Downes and Chunka Mui make a strange but important admission. They refer to a Fortune magazine article by management guru Gary Hamel which talks of the ‘dirty little secret’ of the ‘strategy industry’ that not one of the great advisors or management gurus, even himself, has any theory of strategy creation. Truly innovative strategies are always, and I mean always, the result of lucky foresight. There have been too many books about the digital revolution and its impact on business, most of which recommend various killer approaches for troubled business strategists. Here is a book that seems to admit that, at best, there are no easy answers, and at worst, there are no answers at all. That lack of a solid theory means all the ideas, the laws, the key principles about how to win in modern digital business are unscientific. They will not produce repeatable results, nor are the theories provable or ‘falsifiable’. Nobody, not even a competent, experienced business person with capital, could take on the ideas in this or any other book and be more likely to succeed than anyone else. What does this leave us with? In most cases, without the so-called philosophy, the result is a hotch-potch. Most books on post- Internet business even from respected authors are little more than reams of examples of digital businesses, with no obvious insight into why some fail and others succeed. And the examples are growing rather familiar: Amazon.com, the digital book shop; Microsoft, because of the way it supposedly re-engineered itself; and Yahoo!, because its web indexing services are genuinely new. Downes and Mui claim to have a radical new approach to strategic planning, one that doesn’t pretend to create strategies so much as to create an environment where lucky foresight is more likely to make an appearance. This is admirably modest.
Soundbytes, maxims and laws
SKeptics might be wary. But this publication is coherent, thoughtful and thought provoking and, for the most part, it does not merely exhort people to change and digitize. Its main fault is that it tries to reduce its thinking to soundbites, maxims and laws. The theory draws on several ‘laws’ that are not laws at all, but rules of thumb. One is Moore’s Law, which states that technology will advance exponentially. Another is Metcalfe’s Law, which says the usefulness of a network equals the square of the number of users. Setting aside such pseudo-science, the point is a fair one: The revolution is continuing and is likely to speed up and spread more rapidly. Of more interest is the role of Robert Coase, an economist who in the 1930s sought to discover why companies take on non-core functions, such as catering or building components they could buy. He found it was due to transaction costs the harder and costlier it was to find and keep a reliable outside supplier, the more likely a company was to do it itself. Mui and Downes say the Internet makes it easy to buy external services, and that adapting to change is easier for companies with fewer assets and functions. They say change is creating uncertainty and making it harder to plan strategies. They create several laws of their own such as the law of diminishing firms and the law of disruption to explain this. Several principles will emerge to aid success, say the authors. Few will be new to followers of the technology business. They recommend that businesses outsource to the customer; treat customers as a market of one; cannibalize their markets; destroy their value chains; treat assets as liabilities; and manage innovation as a portfolio. The logic is persuasive. And the theories dovetail into many fashions of modern business from former Intel CEO Andy Grove’s Eat your children to Don Peppers’ ‘One to One Marketing’ and Tom Malone’s Virtual Corporation. But there is a problem, which might be expressed as the law of contradicting advice: For every principle, there is an equal and opposite principle. Many companie
s followed the practices in the book and did badly; many did the opposite and fared very well. That does not invalidate the theory or advice in this well argued, thought-provoking book. But, as the authors say, there are no easy answers, and no one should turn off their own brain when they plug into the gurus.
Unleashing the Killer App: Digital Strategies for Market Dominance is by Larry Downes and Chunka Mui, and published by Harvard Business School Press. Reviewed by Andy Lawrence, Computer Business Review.
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