Monday, August 22, 2005
Telepocalypse says about Last.fm:
"...And remember: these folks give away the music, but charge for social contact. Exactly the oppostive of your IPTV triple-play push."
OK. Let's start with core competences. I'm sure you all know what those are; but briefly, they're specialization economies in value activities. (Full disclosure: I've done research with Gary Hamel, who's 1/2 of the team that came up with core competences)
My own work has made me think hard about what happens to competences in a networked, always on world. At recent engagements, I've been arguing for the notion of edge competences.
Rather than resort to jargon, or attempt a really deep explanation, let me use the quote above and simply illustrate. What's happening in this ecosystem (music) is that the core is atomizing: all the value's being sucked out, because of hypercommoditization (cheap technology, blah, blah). This is the fate of most totally networked value chains.
When this happens, smart players build new kinds of competences at the edges of the network. Last.fm is one of my absolute favorite examples: they've realized that music is getting hypercommoditized, so attention is what's become scarce. But we could also take Amazon (reviews/recs), eBay (PayPal), Google (AdSense). These are all edge competences that helped each player dominate it's market space.
We could also take the example of players who haven't developed edge competences, but who have stayed core - and it's cost them. The canonical example that I've discussed for the last year or so is Yahoo - who tried to develop a core competence as publisher/aggregator forever - and has only now shown signs of realizing that this is valueless without corresponding edge competences.
Here's a very interesting example of a developing edge competence, which helps us understand just how powerful they can be in entering new markets and leapfrogging competitors.