Technology is now the central driver of the business economy. Cyberspace may already be the home office of every global enterprise. As we demonstrated in Part 1, the rapid appearance and strange economic behavior of the latest generation of digital technologies has created a new world in which many of the old rules don't apply. Today's tools for setting and executing strategy turn out to be artifacts of the industrial age that spawned them, and likewise don't work in the new climate.
This part of the book describes twelve new rules for designing killer apps of your own. We have organized these rules into three stages, analogous to the major tasks of any complex problem of design: reshaping the landscape, building new connections, and redefining the interior (see Figure 2.A).
The first stage of designing any structure is to identify and evaluate an appropriate site. At a minimum, this requires an understanding of the environment and its constraints, including natural limits like soil, weather, danger of earthquake and other disasters, and of manmade features such as traffic patterns, zoning, noise, and pollution. These determine the nature and scale of the structure you can build. You must also understand the buildings around your site, to fit in and at the same time to distinguish yourself.
In cyberspace, the new business environment is largely defined by the organizations and individuals with whom you interact, what we have earlier referred to as business partners. Most organizations are comfortable thinking about strategy in terms of interactions with customers, suppliers, and competitors, but in digital strategy the category is much broader. The range of relationships is also broad, going far beyond simple categories like buyer and seller, or supplier and producer. Chapter 4 presents new rules for dealing with the outside environment through interactions with customers and other business partners. These rules emphasize the liberating (and threatening) aspects of plummeting transaction costs. They also highlight the value of treating the new business environment as an evolving community, increasingly bound together by cheap digital technology, rather than as a discrete and largely static set of individual actors.
In architecture, the second major task is to design the structure, and in particular the face it presents to the outside world. A building is a set of systems, and the external design represents the interface not only to the occupants but to everyone who comes in contact with it. A good design meets all of the constraints of the site, while a superior design does so in a way that manages to express the character of its function in the architecture itself. Structures like the Eiffel Tower, the Brooklyn Bridge, Hoover Dam, and traditional Japanese homes bind the design to the physical structure so tightly that the two are largely indistinguishable.
Interfaces for killer apps are built in software, a material that is both cheap and highly flexible. In cyberspace, there is little additional cost, relatively speaking, for an interface that looks more like the Taj Mahal than a lean-to. Virtual interfaces can be taken down and redeveloped at will, without the need for scaffolding to cover the old design while the new one is being applied. Chapter 5 describes ways of building interfaces that not only generate dramatic new images for your organization but move much of the interaction between your organization and its business partners into the interface itself. There, everyone benefits from the superior economic behavior of the medium.
The third major task is to rehabilitate the interior of a structure, including preexisting portions, to a new set of uses. Rehabbing within the constraints of both the site and the design improves the performance of the structure and its systems, keeping the building "alive" through generations of environmental and design changes. In many urban centers in the United States, for example, train stations have been reconfigured as shopping malls, warehouses have become premium residences, and abandoned or ignored waterfronts have become parks and community gathering places.
Rehabbing your organization requires a similar degree of ingenuity. Old structures must be torn down and new ones constructed, but always within the organizational culture that serves as the foundation. Rules for managing this transformation are the subject of Chapter 6. As the Law of Diminishing Firms pushes organizations into more temporary and decentralized entities, we demonstrate how the very same technologies that are forcing these changes can be used to create businesses that are modular, always ready to adapt to new demands and new opportunities.
The twelve design principles are the beginning of a building code for commercial organizations in cyberspace (see Table 2.A). For each of the three phases outlined above, we present four such rules. Together, the principles can help you jump-start the development of your own digital strategy. Separately, they are the rules from which you develop your own killer apps.
We also show how the rules follow from the new competitive environment we described in Part 1, the logical result of Moore, Metcalfe, and Coasean economics, operating through the Law of Disruption and the new forces. Connecting the rules to the framework described in Part 1 should help diminish the anxiety you might feel at adopting so counterintuitive a notion as cannibalizing your own market, giving away your most valuable information, or destroying your own value chain. To help further, we provide numerous examples from a wide range of industries and organizations, many of industrial-age vintage, that have proven the rule through their own efforts to develop killer apps.