We are slowly beginning to understand the consequences of the digital world that is enveloping us. Our current level of understanding is at best rudimentary, but at least we’re making progress.
We’re learning by error of course. Was there ever another way of acquiring knowledge? The music industry was blind-sided by Napster, even though their product had become totally digital and the Internet had the ability to transmit large amounts of digital data anywhere at no cost. One could almost make the judgment that they deserved to be blind-sided for ignoring the blatantly obvious, but that would be ungracious, as we all suffer from short-sightedness from time to time.
What should we learn from Napster? For starters, if your business is based primarily on the manipulation of something that can be digitized, then it is at serious risk. With this simplistic observation, the following industries/services are put on notice: the entertainment industry, including music, films, books and games; all media channels; the paper industry; the photography industry; any information service industry such as travel, brokerage, insurance, etc.
At this point, you’ll have placed yourself in one of two categories. Either you consider yourself vulnerable to this digital threat, or you consider yourself more involved with physical products and therefore invulnerable to it. Careful. The future is filled with surprises, sure to trip us up if we’re not careful.
The concept of ‘Economy’ rests upon a simple relationship between the consumer, the product and cost of purchase. I will purchase something from you if and only if it costs me less to buy it than to make it myself. My cost includes the time, physical resources, and abilities necessary to make the product.
What happens when it costs consumers less to produce the product themselves than it does to buy it from a store? I’ve named this the ‘Vapour Point’ of the product.
Admittedly, this hasn’t happen too often, until recently that is. A long-distance ‘phone call’ on the Internet costs nothing – so much for the future of long-distance billing. Stores like HMV, Virgin and Tower Records are learning to live with ‘Turn and Burn’ – buy a $20.00 CD, burn it to a blank CD for less than $2.00, and then return it to the store for your refund. Quick, easy and potentially the death knell of the music distribution business as we know it. An enterprising kid at my son’s school will get you a copy of any CD for $5.00. He lives next to a music store.
With head planted firmly in the sand, there are those that will say “But that’s all digital; it doesn’t affect me. I manufacture things like cups and saucers.”
What if the consumer – any consumer – could manufacture a cup? Or copy any simple object as easily as using a photocopy machine? What if the cost of doing so were the same as the purchase cost? In other words, what if the Vapour Point has been reached? At first glance this reads like Science Fiction, but maybe it’s not as futuristic as we think.
Andrew Layton is a Program Manager at the Rapid Prototyping and Manufacturing Institute (rpmi.marc.gatech.edu). He believes that “Within a generation we’ll introduce a simple, relatively inexpensive, at-home device of limited use (the Rapid Manufacturing equivalent of an Apple II computer). Just like the Apple II, we will ask ‘What’s it good for?’ And just like the Apple II, our kids will find uses that adults cannot imagine.”
The first obstacle is obviously price. Five years ago these devices cost approximately US$250,000, Today, desktop devices are available in the US$10,000 to $20,000 range. Not quite cheap enough for that kid at my son’s school to start playing with, but cheap enough for a business to deploy as a local parts manufacturer.
What are the pending implications to your business? The economy? Patents? There are no answers yet, just looming questions.
Peter de Jager is a speaker and consultant on management issues relating to Managing the Future. Contact him at email@example.com.