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Project Studies & Early Warnings


Information: Industry Structure and Competitive Strategy

The Jones Center's Project on Information, Strategy, & Economics has operated for two decades as an early warning system:

  • The Project’s newest initiative include (1) a study of cloud computing, standards, and the risks to clients that can be created by incomplete standards and incomplete contractual protections; (2) a study of the enormous power of dominant search engines and the limitations of current antitrust and other regulatory mechanisms to protect the competitive process, sellers, and ultimately consumers; (3) business models not based on advertising or on the control of search; and (4) the power of third party payer business models such as search. where party1 (a shopper or consumer) uses party2 (a search engine provider) to find party3 (an airline, hotel, seller, or service provider).  Since party3 needs party2 to allow party1 to find it, party3 pays party2 to “not be not found.”  Since this payment is not made by the user and is indeed not visible to the user, there are few constraints on party2’s ability to charge, essentially decoupling third party payer business models from the discipline of the competitive marketplace.
  • Resonance marketing is the emerging trend towards selling a wider ranger of products, each to fewer consumers, but each more perfectly designed to appeal to the consumers who actually buy it.  This trend exploits the net’s ability to truly inform, resulting in consumers who find and buy what they truly want.  This behavior is called trading out,not to luxury but to perfect fit, resulting in greater consumer delight and higher profits for companies that master finding niches and designing products for them.
  • The Project did its first study of Business Process Outsourcing in 1992. We were among the first groups to identify the role that improved telecommunications would have in increasing the ability to transfer work and to monitor work, and one of the first groups to predict a significant increase in the outsourcing of complex components and complex business operations. We were also among the first to highlight the various components of risk, to suggest steps to mitigate those risks, and to suggest mechanisms for determining which activities simply could not be outsourced. We continue to address the design of work flows and the division of work among firms to minimize risks, and to study contract design and incentives to maximize long term performance of outsourcing relationships.
  • The Project did its first study of online sales and distribution in 1996, long before the internet was a serious concern. Unlike later, wildly enthusiastic and largely inaccurate studies, this work suggested that there were entire industries in which manufacturers would be unable to attack the traditional distribution channel through any form of online sales. Our early predictions suggested that travel agents were at risk of becoming irrelevant, with commissions slashed or large-scale bypass the most likely outcomes. The same study cautioned consumer packaged goods manufacturers not to risk offending Wal*Mart and other essential powers in the distribution channel. The failure of online automobile dealerships and pet supply stores was a predictable outcome, and one that could have been of greater use to financial markets and strategic planners. The techniques used included theoretical analysis of channel power, computer simulation and sensitivity analysis, and the valuation of strategic options.
  • The Project did its first study of online securities trading and the threat to established firms and exchanges in the late 1980s, long before the internet or any widespread use of electronic access to alternative trading systems. The work was based upon theoretical analysis of the functioning of various market structures, field work to obtain detailed estimates of costs, profit margins, and the parameters that dictate trading strategies, and computer simulations. The work has remained surprisingly timely, both for understanding the strategies available in the industry and for addressing concerns of regulators and of investors.

 


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