Why There Are Heirarchies
in Business
(and why they dissolve)
-1-
Geodesic Networks
 Network of participants
 Community of interest
 Often global
 Non-hierarchical, web-like
structure
 No central node
 Long history
-2-
Historical Examples
 Construction contractors in ancient Rome
 11th Century English mine
 Medieval trading networks
 John Jacob Astor
-3-
Emergence of Managerial
Capitalism
 Mass Production
(scale economies)
Textiles
 Mining
 Primary Metals
 Flour & cereal
 Tobacco
 Business & agricultural
machines
 Household appliances
 Automobiles
  Mass Distribution
(scope economies)
 Railroads
— Compared with wagon
trails
— Compared with river
transport
— Compared with canals
Refrigerated storage &
transport
 Telegraph & telephone
 Mass Media
 High Volume Throughput
-4-
The generic value
chain for a firm:
-5-
Geo-Social Differences
 United States
 World’s fastest-growing mass market
 Great Britain
 Slower growth
 smaller space
 more disruption by world wars
 Germany
 Interessengemeinschaft
 Japan
 Late to industrialize
 Feudal social base
-6-
Heirarchies Are Coming
Unglued
 Economies of Scale
are Eroding
Automated Production
 Seamless Coordination via
Internet
 Flexible Fabrication
Facilities as “Common
Carriers”
  Economies of Scope
are Eroding
Disintegration of Mass
Media
 Commoditization of
transportation for goods
 Easy travel for people
 Smooth flow of money
 Mass Customization
-7-
The Challenge Ahead
How will communities of interest take
action without heirarchies?
-8-
Challenge Ahead
 Loss of Growth Dynamism
 Exports
 Production
 Shift to service sector
-9-
- 10 -
Challenge Ahead
 Productivity Conundrums
 Excess capacity
 Capital formation & interest rates
 Innovation and diffusion of technology
 Management failure
 Comparative productivity measures
 Stagflation
- 11 -
Challenge Ahead
 Global Interdependence
 Political interdependence
 Financial interdependence
 Trade interdependence & domestic economy
— Import penetration
— Adjustment
 The New Competition
 Knowledge business
- 12 -
Geodesic Networks:
Future Possibilities
 Project financing involves
network of participants
 Community of interest
 Often global
 Non-hierarchical, web-like
structure
 No central node
- 13 -
Exhibits 1-15
- 14 -
- 15 -
- 16 -
- 17 -
Population Density
( People / km2 )
- 18 -
GDP (PPP) per capita 1975
- 19 -
GDP (PPP) per capita 1980
- 20 -
GDP (PPP) per capita 1990
- 21 -
GDP (PPP) per capita 2000
- 22 -
Economic Map
- 24 -
2006 GDP (by Purchasing Power Parity) as
a percentage of the top producer (U.S. = 100)
http://upload.wikimedia.org/wikipedia/en/2/28/2006gdp_ppp.PNG
- 25 -
Purchasing Power Parity of GDP per
capita 2003 (U.S. = 100)
PPP of GDP for the countries of the world (2003). The US is the base country, so it is 100. The highest index value, for
Bermuda, is 154, so the same goods are 54% more expensive in Bermuda than the United States.
- 26 -
- 27 -
Focus on Poland
- 28 -
The physical value chain from a
global perspective: What
opportunities?
Support Activities:
• Technology Development
• Human Resources
Development
Service
Distribution&
Marketing
Fabrication
Refining
Basic Extraction
- 29 -
Future Possibilities
Renewable Fuels Power
 Geothermal
 Ocean Thermal Layers
By-product is fresh water
 Tidal
 Hydrogen Conversion
- 30 -
Virtual Value Chain &
Information Operations
GATHER AND APPLY IN THE PHYSICAL REALM
STORE AND TRANSFORM IN THE INFORMATION REALM
APPLY
PRESENT
DISTRIBUTE
SYNTHESIZE
Infosphere
SELECT
ORGANIZE
GATHER
- 31 -