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Strategies for a discontinuous future.












Wednesday, November 10, 2004
 


Limits of Hyperefficiency

Reaching them forces Best Buy to alter revenue maximization decisions - by selecting more profitable customers, and excluding less profitable ones. This is a new kind of price discrimination that's gaining traction across various industries with hyperefficient supply chains (another recent example was clothing retailers).

What I find more interesting than the econ in this case is that, in the limit, this form of organization looks more like a co-op/club than anything else - where strong customer relationships are the key resource of the business, even to the extent of membership criteria. And it's not a big step from there to a guild. Very interesting stuff.

And of course, begs the seminal question: where will the innovation come from? Assuming you don't count this as innovation, is Best Buy eating itself (in terms of future growth rate) by doing this? Is it an admission of declining future growth to the market? Probably a little bit.

-- umair // 4:56 PM //


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