Blown to Bits: How the New Economics of Information Transforms Strategy [Unbound]

Blown to Bits is about the consequences of the Internet for businesses.

The most important conclusion in the book is that the combination of increased bandwidth, global interconnected electronic network, faster computers and open standards are abolishing the requirements up to now of balancing information reach with information richness.

One example is the alternative media that a company can select when potential customers are targeted. Newspaper ads can reach a broad audience with a limited and static message. At the other end of the scale, a personal meeting with the customer gives the opportunity for deep, detailed and interactive information.

Businesses' supply chains include the same balancing act. When firms do business, the number of partners is inversely correlated to the richness in the information of the interchange.

The Internet removes this balancing act because you suddenly can reach many partners without compromising on the level of detail and complexity of the information (vast reach AND vast richness).

According to the authors, the consequence is that the value chain is blown to bits. They call it deconstruction, which happens when the things economy increasingly is separated from the information economy. "Information is the kit that binds the value chains and supply chains". But the kit is eroding. Information is no longer embedded in the physical units. The economy for physical things and the economy for information are fundamentally different. Unlike physical assets, information (an idea, illustration, checklist, article, etc.) can be reproduced costless infinitely. And where things are worn out, information remains their original form.

Blown to bits contains a wealth of well-described cases like newspapers, banks, car dealers, stock brokers, computer hardware and last not least Encyclopaedia Britannica. In addition, the book includes many interesting text boxes with questions the reader can use for further consideration.

In the bright light of hindsight!
Blown to bits was published in the roaring heydays of the dot-com wave ... and it shows. In 2001, two years after Blown to bits was published, the authors admitted their mistakes in an article for their employer, Boston Consulting Group. They summarised the evolution:
1) It is increasingly clear that the new economy is not displacing the old one. Instead the old is in the process of transforming itself from within.
2) The Internet is NOT proving to be a disruptive technology (i.e. characterised by eliminating the advantages for existing market players). Instead, incumbents are using it to challenge their own business models.
3) Information does not, in general, "want to be free"; instead, intellectual property rights are being extended.

This does not imply that the Internet won't change a lot. Nor can we all can return safely to the good old ways of doing business. Rather, it means that all incumbents have got a second chance to get e-business right.

This conclusion concurs with the view of strategy professor Michael Porter (quoted August 2001 in Business Week)
"We need to see the Internet as complementary to other things the company does rather than contradictory or cannibalistic. That was a really fundamental mistake that many people made. They assumed that this was a disruptive technology that existing companies could not embrace as efficiently as a new company coming in with a clean sheet of paper.

And Porter concludes: "The Internet as a family of technologies will have a very powerful effect on operational effectiveness. We'll see deeper integration among service, sales, logistics, manufacturing, and suppliers."

Peter Leerskov,
MSc in International Business (Marketing & Management) and Graduate Diploma in E-business