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Traditionally, a company’s links to its customers, suppliers and other external parties have been based upon either arm’s-length transactions or socially embedded ties. Electronic technologies have enabled a third and more flexible option, dubbed “virtually embedded ties.”
The information revolution is making consumer disaggregation vastly more efficient and profitable than aggregation, the traditional source of brand power. This raises a fundamental question:
Companies should focus less on marketplace premiums for their innovations and more on opportunistically exploiting subsidies for innovations. Thus Microsoft‘s Windows 95 development effectively garnered a $900 million subsidy by drawing upon a valuable technical population to test and help improve the system. An innovation subsidy, says the author, is individuals‘ and institutions‘ cost-effective bartering of resources to reduce risk.
Companies with the best connections to their customers unwaveringly focus their orientation, configuration and use of information on the people and businesses that buy from them.
Sometimes large-scale operational efficiencies can mask opportunities. In their research, the authors found that small-scale operations provide significant advantages in four areas. Using case studies, the authors illustrate how companies in a wide variety of industries have found the hidden benefits of small-scale approaches, concluding that executives who learn when it is better to think small can have a potentially huge impact on their companies‘ long-term success.
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It's a marketing truism: Higher buying rates and lower service costs make long-term customers more valuable. That, of course, influences what companies spend on customer acquisition and retention. But according to an August 2001 working paper titled “Customers as Assets,” by Sunil Gupta and Donald R.
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