Edgeconomy – shifting sources of advantage from the core to the edge

Umair Haque, who also has a new blog as part of Harvard’s Business Online, offers another example of how value creation is shifting from the "core" to the "edge" as the edgeconomy emerges. 

Sparked by a recent report citing that Google, not Coke, not P&G, not IBM is the world’s most powerful brand, Umair outlines how cheap and abundant interaction changes the sources of advantage as we move from an industrial information economy to a networked information economy:

"in the edgeconomy — an economy characterized by cheap, ubiquitous interaction — the nature of advantage is shifting.

Brands are perhaps the most intuitive example of cheap interaction’s atomizing hand. Yesterday, they were a potent source of advantage. Today, the game has changed: investing in traditional brands is yielding fast diminishing returns, and leading more and more players directly into value destruction. That’s why it’s not just revolutionaries like Google, but also mass-market giants like Nike and P&G, who are rethinking orthodox branding.

How is cheap interaction driving the strategy of branding into decay?

Let’s rewind. What is a brand? It’s a promise: information from a firm promising you a set of costs and benefits from the consumption of a good or service. Brands shape your expected value.

Now, for the economics of an industrial era, branding made sense. Interaction was expensive – so information about the expected benefits of consumption had to be squeezed into slogans, characters, and logos, which were then compressed into thirty-second TV ads and radio spots. The complex promise of a Corvette, for example, was compressed into shots of cute girls, open roads, and lots of sunshine.

But cheap interaction turns the tables. The cheaper interaction gets, the more connected consumers can talk to each other – and the less time they have to spend listening to the often empty promises of firms.

In fact, when interaction is cheap, the very economic rationale for orthodox brands actually begins to implode: information about expected costs and benefits doesn’t have to be compressed into logos, slogans, ad-spots or column-inches – instead, consumers can debate and discuss expected costs and benefits in incredibly rich detail.

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