Saturday, June 15, 2013

Democratic network

Recent research from the City University of Hong Kong and the School of Management, at Beijing Normal University, shows that the click stream is not dominated by a few hubs – but rather smaller and relatively unknown websites could have significant influence on network traffic. The basic notion of scale – still a dominant theme of strategy for consulting firms and business schools alike - has been irrelevant for over two decades. Somehow, the PowerPoint gurus of corporate board rooms, have been a bit slow in recognizing it. And, they have been successfully draining shareholder value in fees and escaping before the owners are able to recognize the scheme.

Two basic ideas – content is important and people are not stupid – have escaped many. The “hubs” - some perfecting algorithms through neural nets trained to seek cat videos and others spawning cloud capacity like escaping water from the Amazon, may have missed the mark. Scale does help you but it is not a life saver. Content is more important and increasingly content is inversely correlated with scale. As the knowledge content of society increases, business models based on legacy ideas and those frozen in time – either mesmerized by monopoly profits or just sheer ignorance, are bound to fail. Such enterprises, akin to autocratic regimes with little understanding of optimal polices, are now run by people who have lost touch with reality. As they yahoo themselves to mediocrity, some demanding physical presence at the workplace and others counting earnings per share – apparently believing it is the most important metric, there is life beneath.

Democracy – a concept that never fails to bring the best possible outcomes – will continue to dominate networks, societies and the universe.