The Wired article of Kevin Kelly
In a superb and revolutionary article in Wired (5th September, 1997) Kevin
Kelly described the Twelve Principles of the Network Economy. According to
Kelly, the emerging new economy represents a tectonic upheaval in our
commonwealth, a social shift that rearranges our lives. More than mere hardware
or software ever can. It has its own distinct opportunities and its own new
rules. People playing by the new rules will prosper; people ignoring them
Four Axes of the new rules
Kelly argues the new rules governing the global restructuring revolve around
- Wealth in this new regime flows directly from innovation,
not optimization; that is, wealth is not gained by perfecting what is known.
But by imperfectly seizing what is unknown.
- The ideal environment for cultivating the unknown is to nurture
the supreme agility and nimbleness of networks.
- The domestication of the unknown inevitably means abandoning
the highly successful known - undoing what was perfected.
- In the thickening web of the Network Economy, the cycle of "find,
nurture, destroy" happens faster and more intensely than ever before.
Twelve Principles of the Network Economy
The following 12 principles of the Network Economy were supposed to provide
new rules for the internet period:
- The Law of Connection. Embrace the dumb power: Of the collapsing
microcosm of chips and the exploding telecosm of connections.
- The Law of Plentitude. More gives more: Mathematicians have proven
that the sum of a network increases as the square of the number of members.
In other words, as the number of nodes in a network increases arithmetically,
the value of the network increases exponentially.
- The Law of Exponential Value. Success is nonlinear: During its
first 10 years, Microsoft's profits were negligible. Its profits rose above
the background noise only around 1985. But once they began to rise, they
- The Law of Tipping Points. Significance precedes momentum: In
epidemiology, the point at which a disease has infected enough hosts that
the infection moves from local illness to raging epidemic can be thought
of as the tipping point. The contagion's momentum has tipped from pushing
uphill against all odds to rolling downhill with all odds behind it. In
biology, the tipping points of fatal diseases are fairly high, but in technology,
they seem to trigger at much lower percentages of victims or members.
- The Law of Increasing Returns. Make virtuous circles: Value explodes
with membership, and the value explosion sucks in more members, compounding
the result. An old saying puts it more succinctly: Them that's got shall
- The Law of Inverse Pricing. Anticipate the cheap: Through most
of the industrial age, consumers experienced slight improvements in quality
for slight increases in price. But the arrival of the microprocessor flipped
the price equation. In the information age, consumers quickly came to count
on drastically superior quality for less price over time. The price and
quality curves diverge so dramatically that it sometimes seems as if the
better something is, the cheaper it will cost.
- The Law of Generosity. Follow the free: Now, giving away the
shop for free is an applauded, level-headed strategy that banks on the network's
new rules. Because compounding network knowledge inverts prices, the marginal
cost of an additional copy (intangible or tangible) is near zero. Because
value increases in proportion to abundance, a flood of copies increases
the value of all the copies. Because the more value the copies accrue, the
more desirable they become, the spread of the product becomes self-fulfilling.
Once the product's worth and indispensability is established, the company
sells auxiliary services or upgrades, enabling it to continue its generosity
and maintaining this marvelous circle.
- The Law of the Allegiance. Feed the web first: The distinguishing
characteristic of networks is that they have no clear center and no clear
outer boundaries. The vital distinction between the self (us) and the nonself
(them) - once exemplified by the allegiance of the industrial-era organization
man - becomes less meaningful in a Network Economy. The only "inside" now
is whether you are on the network or off. Compare:
- The Law of Devolution. Let go at the top: The biological nature
of this period means that the sudden disintegration of established domains
will be as certain as the sudden appearance of the new. In the Network Economy,
the ability to relinquish a product or occupation or industry at its peak
will be priceless.
- The Law of Displacement. The net wins: The question "How big
will online commerce be?" will have diminishing relevance, because all commerce
is jumping onto the Internet.
- The Law of "Churn". Seek sustainable disequilibrium: The Network
Economy moves from change to "Churn". Change, even in its toxic form, is
rapid difference. "Churn", on the other hand, is more like the Hindu god
Shiva, a creative force of destruction and genesis. "Churn" topples the
incumbent and creates a platform that is ideal for more innovation and birth.
It is "compounded rebirth." And this genesis hovers on the edge of chaos.
- The Law of Inefficiencies. Don't solve problems: In the Network
Economy, productivity is not our bottleneck. Our ability to solve our social
and economic problems will be limited primarily by our lack of imagination
in seizing opportunities, rather than trying to optimize solutions. In the
words of Peter Drucker, as echoed recently by George Gilder, "Don't solve
problems, seek opportunities."
Principles of the Network Economy Special Interest Group
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