book.chapter Why businesses need strategic planning

The integration of disposable computers into manufacturing processes heralds the advent of a parallel information supply chain, poised to become a significant source of added value in the future. This development necessitates businesses to adopt a "strategy machine" aimed at enhancing current operations while simultaneously exploring ideas that could potentially disrupt or even obliterate the company in the future. This strategy machine is crucial for analyzing how new information products will revolutionize business models moving forward. The disposable computer revolution is propelled by Moore's Law and Metcalfe's Law, which, in essence, suggest that computing power is on an exponential increase while the reach and utility of the Internet are expanding at a rapid pace. A notable milestone in this revolution was the production of a 49-cent computer in 1999, which, despite being smaller than a match head, could connect to the Internet. It is projected that within five years, these minuscule computers will cost merely a fraction of a cent, come equipped with built-in transmitters for sending data to the nearest Internet network, and be small enough to be embedded in product labels and other items. This technological advancement will enable the precise tracking of small consumer goods, such as tubes of toothpaste, for the first time, thereby allowing entire supply chains to optimize in real-time using live data whenever an item is sold. Moreover, this revolution opens up new medical applications, such as embedding mini-computers to aid individuals with hearing or vision impairments, as well as new entertainment possibilities. However, the most profound impact of this revolution lies in the availability of accurate commercial data. Improved information quality and volume will enable supply chains to be configured and managed more efficiently, eliminating inefficiencies, reducing the need for inventory, and minimizing waste. As these efficiencies spread throughout the system, a virtuous cycle is initiated, where lower costs lead to better prices, which in turn drive higher demand, enabling greater economies of scale and even lower costs. The ultimate outcome of this cycle is the availability of consumer goods at incredibly low yet sustainable prices. The evolution of disposable computers mirrors the trajectory of previous information revolution innovations, which typically begin with an efficiency stage focused on adding value for customers by reducing transaction costs and waste. Technology plays a pivotal role in lowering the costs for buyers and sellers to find each other, learn about products, compare options, enforce deals, and more. It is estimated that transaction costs currently account for 45% of all economic activity. This is followed by an exchange stage, where structural industry inefficiencies are eradicated by creating online marketplaces for trading. The increased availability of information also facilitates the emergence of specialized financial products and services, such as variable demand-based pricing and the elimination of middlemen who add no value, as buyers and sellers connect directly. The final stage is the emergence stage, where supply chain participants standardize operations and share data seamlessly and instantly, leading to new industry structures where those adding the most value capture a larger portion of the profits. Interestingly, unlike past industrial revolutions, all three stages now occur simultaneously rather than sequentially, allowing new ideas to spread globally in seconds and making sudden industry transformations more likely. This is akin to fighting a war on three fronts at once, which explains why many industries face traditional supply chain breakdowns and radical restructuring into new combinations and configurations. Moreover, the three stages progress at different speeds, with some even being skipped entirely in certain sectors. The pace of change is influenced by three key accelerating factors: deregulation enabling free market forces, the shift from physical products to digitized information goods, and the presence of many buyers but few dominant sellers. As information supply chains emerge, data assets, including customer lists, product inventory and demand data, copyrights, trademarks, and application expertise, become valuable. Key points to consider include the cost-effectiveness of information supply chains compared to vertical integration, the notion that first movers won't necessarily win in the long term, the importance of willingness to share data internally and externally for supply chain participation, and the potential for success to come from startups or existing players with specialized know-how. The simultaneous progress across efficiency, exchange, and emergence stages is essential. Ultimately, the information supply chain moves businesses from vertical integration to virtual integration via shared data, making information potentially more valuable than the physical goods flowing through supply chains. For instance, TV Guide magazine has consistently generated more profit than the combined television networks by selling programming information, and when it was sold to Gemstar in 2000, it was valued at $10 billion. Accurate information supply chains enable customization to precise customer requirements, efficient targeted advertising, fine-tuned production planning, streamlined logistics and inventory, complex product commoditization, and more. New information products, such as financial instruments, marketing databases, and data services, will emerge as well. The key to capitalizing on these opportunities lies in strengthening internal information flows first before connecting to external partners. Companies must continue implementing core procurement, ERP, and customer relationship management systems built on data exchange-friendly infrastructure. With the Internet already enabling nearly $1 trillion in annual B2B orders and over $2 billion spent on just procurement software installation in 2001, the revolution is well underway. Those who move rapidly will lead, while others face potential extinction.