Economic Perspectives with Hopeton Hay on KAZI 88.7 FM in Austin, TX

Strategies for Competing in Today’s “Transparent Economy” Focus of January 24 KAZI Book Review

Posted by Hopeton on January 23, 2010

Mia de Kuijper, author of Profit Power Economics: A New Competitive Strategy for Creating Sustainable Wealth, will be the guest on the January 24 edition of KAZI Book Review on KAZI 88.7 FM, 12:30 p.m. – 1 p.m. central standard time.  Listen to the interview live online at http://www.live365.com/stations/kazifm?site=pro&play.

In her book de Kuijker writes that one of the bedrocks of economics is the “efficient market theory” that posits  that abundant information should help markets become more efficient so that supply and demand will be in perfect balance, prices will be set at the right levels, and extraordinary profit will no longer be possible. That day of perfect information has come thanks to the Internet and all other contemporary advances in connectivity, but she argues that transparency is reshaping patterns of market behavior that will not lead to efficiency, but will enable extraordinary profit and predictability.

A new “transparent economy” has begun with a new set of rules and vast implications for business argues de Kuijper,  a Harvard trained economist, strategist and seasoned executive, in Profit Power Economics.

Why? Because transparency dramatically accelerates the human instinct to consume and invest in herds, and herd mentality does not operate by efficiency, “the wisdom of crowds” or “tipping points” but instead attracts active, interdependent consumers to hubs that operate under different predictable “powerlaws.” It’s imperative that businesses, analysts, and investors  understand these new market dynamics to identify tomorrow’s “profit power” pattern and reshape their competitive strategy and business model in response.

To succeed in the “transparent” economy ushered in by the Internet, businesses  will need to:

•   Establish dominance over business partners who are at once allies and competitors. For example, Estee Lauder’s profit margins are being squeezed not from other cosmetics competitors, but due to price pressure from large chains like Macy’s, their leading distributor. Being best is not enough.

•    Prepare for competition  from new unlikely sources outside their industry.  For example, Google is now faced with competition from Microsoft with its Bing search engine.

•   Redesign their business models. Owning and producing almost everything that goes into your product worked for companies like General Motors in yesterday’s economy. Instead, the business model for the 21st century will be focused companies that work with others to maximize profit for all participants. They won’t be cooperatives but fierce competitors held together by power (Pepsi and bottlers). These relationships will replace what we think of as industries or companies today.

•   Navigate inefficient markets and novel dynamics to attract demand and manage risk.

Economist Mia de Kuijper is CEO of strategy advisory firm de Kuijper Global Partners, and a Dean of the Duisenberg School of Finance, Amsterdam. She has held senior positions on Wall Street as well as at Royal Dutch/Shell, AT&T, and PepsiCo.

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