January 29, 2014

The Connection Economy

In the Connection Economy, he who leads the tribe wins

The Industrial Revolution

In the Industrial Revolution, value creation (the asset) came from creating a system to maximise economies of scale:

  • Maximise broadcast (1 way), ‘interruption’ advertising
  • So we can sell more widgets for a higher price
  • The more we sell, the cheaper the cost becomes of each widget
  • Net result: we make more margin the more widgets we sell

Creating the system was hard.

That’s why whoever could do it got the spoils.

In the Industrial Revolution, he who maximised the system wins.

The Connection Economy

In the Connection Economy, the system is no longer a competitive advantage.

Not only is the system no longer unique – it’s now default.

Every facebooker, tweeter, instagrammer, blogger, etc has been handed a global content creation and distribution system – for free.

A system that’s designed to allow infinite scale.

Last year, iUsers paid over $15 billion for product using such a system. However, app developers received the same amount per widget, regardless if they sold 1 or 1 million units.

So if value creation now no longer comes from creating and maximising the system, where is the real money being made?

The Connection Economy has shifted value creation away from the system and towards relationship.

It rewards Creators who harness the Network Effect where every new connection (ie. fan) makes your network, your tribe, exponentially more valuable (think of facebook – useless if you’re the only one on it, unavoidable if everyone you know is).

In the Connection Economy, the role of the Creator is twofold:

Conclusion

In the Industrial Revolution, he who maximised the system wins.

In the Connection Economy, he who leads the tribe wins.

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About Adam Sugihto

Founder of Intentional - a specialist Pay Per Click Advertising Agency based in Melbourne, Australia. Member of Perry Marshall's Marketing Mastermind since 2011. Google Adwords Qualified Individual since 2010.

Category

Connection Economics