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Digital Strategies for Market Dominance
By Larry Downes and Chunka Mui
Harvard Business School 241pp $24.95

The cotton gin set off the Industrial Revolution and shook the foundations of rural life. The steam-engine railroad opened the American West. Today, the World Wide Web, personal computer, and palm-size Net device are transforming commerce. All of these innovations, according to tech consultants Larry Downes and Chunka Mui, are examples of killer apps--new goods or services that destroy and re-create industries and bring disarray to the complex relations between business partners, competitors, and customers. And, they say, given the ''velocity and trajectory'' of change in the Digital Age, companies have got to learn to develop or defend against killer apps--or they'll be doomed.

In Unleashing the Killer App: Digital Strategies for Market Dominance, the authors rise above all the chatter about increased productivity and sound a warning cry: Change your strategy now. With many businesses still lumbering along in the Industrial Age, it's a message well worth hearing.

The first third of the book is a useful, if sometimes dull, rehash of cybertheory. First, we're introduced to Moore's Law, a prediction by Intel Corp. founder Gordon Moore that computing power would double every 18 months while cost remained constant. Next comes Metcalfe's Law, the observation by 3Com Corp. founder Robert Metcalfe that technology becomes more valuable as the number of users grows. These are the principles driving the digital economy, as exemplified by Intel's ever-faster chips and Netscape Communications Corp.'s browser giveaways.

Working together, the authors say, these two laws are blowing the economic status quo into smithereens. They are dramatically cutting into what Nobel laureate Ronald H. Coase dubbed ''transaction costs''--intangibles such as the time people must spend on finding, negotiating for, and deciding on a product or service. On the Web, buyers can simply point and click their way to transactions from the comfort of their homes or offices. And because ''firms exist only to the extent that they reduce transaction costs more effectively,'' this development is making corporate organization itself obsolete.

Downes and Mui lay out several principles for coping in such an environment. For example, companies must not be afraid to cannibalize their own markets, as the print media have done by duplicating editorial content online at little or no cost. Success also means hiring and empowering youth, a la Silicon Valley, since the best digital strategy comes from the kids who know it intuitively, rather than the adults who have learned it.

But the lessons on how to thrive in this new environment don't appear until page 163. That's where, in the book's third and final section, real-world anecdotes relate the successes and failures of companies turning the digital corner. For the tech-savvy, many of these allusions will be familiar, making Killer App a sure snoozer. But the corporate Everyman should make room on his shelf.



PHOTO: Cover, ``Unleashing the Killer App''

BOOK EXCERPT: Chapter One of ``Unleashing the Killer App''


Updated May 14, 1998 by bwwebmaster
Copyright 1998, Bloomberg L.P.
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