Sunday, May 9, 2010

Stick to your line 2 - Or how do you determine Comparative Advantage?

Peter Drucker adapted Ricardo's theory of Comparative Advantage to the enterprise world.  He argued that organizations should sort out what they considered "Core" - in other words, what activities and capabilities constituted the basis for their differentiation, their competitive advantage.  Everything else or the 'periphery' in his parlance, Drucker said should be outsourced to organizations that in turn made that function their core.  That way peripheral or support services could continually be marked to market in quality, cost and delivery terms, unsheltered by the enterprises' indifference or ignorance.

This insight has been the foundation of the movement towards outsourcing.  Leveraging ubiquitous networks and technology tools, whole business functions have been shifted and entire new industries have arisen to exploit Ricardo’s insight.  But with the transformation has come a question:  is 'core' always core and 'peripheral' always peripheral?  How do changing market conditions and technologies change this assessment?

A pertinent example of this dilemma is storytelling, particularly video.  In the past video messaging was something done at great cost by focused experts who raised the concept of the 30 second advertising spot to a state of high 'art' with its own 'academy awards' and artistic nomenclature.  But with the rise of high speed networks and ubiquitous PDAs video storytelling (messaging, advertising, training) is becoming a much larger and more diverse part of the organization’s communications strategy.  In particular, enterprises selling ideas or knowledge are increasingly dependent on being able to share 'gifts' of stories, ideas, concepts or constructs with their target customers as a precondition for engaging in relationships with them.

This shift in the 'coreness' (forgive me Mr. Webster) of storytelling has led to two seemingly contradictory trends:  On the one hand some enterprises have begun to ‘insource’ parts of their messaging functions - the ability to tailor messages and deliver them inside their competitor's message cycle has become 'core'.  On the other hand, certain groups have begun organizing the tools and infrastructure so that the delivery of video and related content can be 'industrialized' and mass customized by industry vertical.  The key to both of these trends is the core content:  ideas and the ability to communicate them in a compelling manner are rare and valuable commodities and increasingly critical to success.  Big enterprises have the scale to buy or rent top talent, smaller players don't so they are looking for the leveraged solution.

By coincidence, Openwater Advisors just happens to have one: "Comunicato:  Relationship Leverage for a Visual Age" is our answer to the industrialization of the video world.  Working in partnership with Activated Marketing and The Knowledge Transfer Company, we are currently deploying the capability to create and mass customize compelling content by industry vertical - enabling individual knowledge providers to derive personal branding, personal leverage, viral referral and speed to message at a cost far below the existing 'cottage' industry's economics.  We don’t really expect to take business away from the thousands of ‘mom ‘n pop’ video shops out there, rather we plan to generate our own, new demand.  How?  by making it far cheaper and easier for knowledge providers like investment advisers, accountants and lawyers to deliver high quality video storytelling.

The incipient industrialization of a cottage industry:  a storm cloud on the horizon, out on the Openwater.

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