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Intangible Economics

Competitive advantages used to be the hallmarks of successful businesses. They were tangible, predictable and measurable. In other words, they could be clearly identified, there was no secret sauce to them. But not everyone had the resources to build them. It was mostly the big guys who were able to do this. Often years, if not decades, were required to build them. And once they had been built, they would last for many more decades. That's why people talked about sustainable competitive advantages.

Today, businesses operate in a different environment. Any advantage can quickly turn out to be short lived. In some markets, competing businesses switch the lead like the athletes of the Tour de France. What’s more, current sources of an advantage are not always that easy to spot. They are less visible, more diverse, and sometimes they can be built quickly, before competitors notice.

But here is the one thing that unites many of today's sources of advantage:

THE MAJORITY OF THEM ARE   I N T A N G I B L E

Only few of them are based on physical assets.

Only few are built solely on processes or technologies.

But most of them cannot easily be measured. They are rarely to be found on a balance sheet or P&L. We have to dig a little deeper to see them.

Welcome to the world of Intangible Economics.

Intangible Economics are about the elements that form value and that drive the success of businesses in today’s day and age.

In the world of Intangible Economics the factors that determine success are intangible. And often also the value that is being created - or what customers are willing pay for - and sold has become increasingly intangible.

New Types of Assets

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In the past, assets like access to hi-tech laboratories, manufacturing capabilities, equipment and R&D teams used to provide competitive advantages. Today these factors are still important. But they have become an enabler rather than a differentiator. Instead, intangible elements like customer relationships, audience reach and social media impact, brand positioning, innovation capabilities, design and network effects have taken the lead.

New Value Chain Structures

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The structure of the value chain has evolved. Here we also can see intangibility all over the place.
Neither AirBnB, Uber, Instagram or TikTok are in the traditional businesses of taking a resource and moving it along a value chain to turn out a product or service. Here is what unites their business models: it’s third parties who provide the resource that the business offers to customers. These third parties either provide critical assets and services - as in the case of Uber and AirBnB - or they provide content - as in the case of TikTok and Instagram.
Also the products that are being offered have become increasingly intangible. Amazon’s product portfolio less and less consists of shipped products. Car companies not only offer cars, but mobility services and access to different modes of mobility.

New Forms of Value

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Finally, what makes up the value that that customers pay for has become increasingly intangible. You don’t only pay for metal and glass when you purchase your new Paul Smith glasses. In the past, customers paid for the functioning of a product. Just think about today's advertising, and you will come to notice that we pay for meaning, for inspiration, motivation, signification, for a story that is being told, or just for peace of mind.

And the currency we pay with is not only money anymore. Today we also pay with the data that we provide, or the content we provide. “Give me your email address, and I give you a free pdf with three simple steps to solve all your problems.” Tech companies have launched free education offerings to get early access to the data of future customers. And of course, as we have realised, neither Facebook nor Twitter are really free. We pay with our attention, manifested in our eyeballs and clicks on ads and we pay with our content and engagement, manifested in likes, shares, that all-together fill the empty halls of social media platforms.

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How did we arrive at Intangible Economics?

How did we get from the Industrial Age to the Age of Intangible Economics? There’s a lot of change that lead to Intangible Economics. Many simply talk about ‘digital transformation’ or ‘disruption’. Yet both terms fail to grasp the scope of the shifts that have been happening. The impact of the reshuffling begins with the way that products and services are being built and distributed and it extends to how consumers interact, communicate and select those products. You could simply say that the whole business space has been reshuffled.

Consumer Habits are taking a Journey

Business Activities Shift Gears

Product Differentiation has been diluted

Consumer Habits are taking a Journey

Take for example consumer habits. There are plenty of layers to the transformation of consumer habits.
We as consumers not only went from shopping in a retail store to ordering online and mobile.
We also have moved from buying products to obtaining the same offering as services.
We became used to communicating not only with websites, but also with apps and increasingly with bots. And with each new social media platform, marketers even have to relearn new ways to communicate with humans.
Along the way we also have switched sides of the transaction. We have become hotel operators, full-time content producers, curators, thanks to AirBnB and the ‘like’, ‘share’ and ‘comment’ buttons of social media platforms.

Business Activities Shift Gears

Building cars has become a software task. The mechanical parts of electric cars are much simpler than those of combustion cars. At the same time autonomous driving, connectivity among others require software capabilities.

The biggest marketing agency of today started out as a social network. Its key asset is the data that it collects about our behaviour. We are talking about Facebook of course.

Similarly, the success of our movie and music stores is now driven by their data science capabilities. If in doubt, just have look at Netflix’ recruiting site. And of course, the ‘hotel’ business AirBnB, operates neither hotels nor appartments.

Product Differentiation has been diluted

The physical quality of many of our products today is at an equal level. How can you tell one Plasma Screen TV from another these days? Why is their quality on a similar level? That’s because many of the components that are needed to build and deliver these products have been commoditised. Hardware components not only have reached an advanced level, they also can be purchased by anyone who wants to set up shop.

But it’s not only about physical components. Also the software infrastructure that was required to run a business can now be sourced as a service. If standard solutions are not sufficient for our needs, well, then platforms provide us with outsourcing opportunities across the globe, whether we need a database entry person or a certified financial accountant.

What does it mean?

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NAVIGATING NEW RULES

Consider what would happen if the rules of a sport would change. Teams would have to relearn their skills, and the league tables would be reshuffled. While businesses talk about digital transformation, most of them still operate by rules which have been developed in the Industrial Age. Instead we should reconsider what value is based on today, and how companies need to operate today. We need to understand which types of value propositions, business models, unit economics and business structures enable success today. And we should figure out how we can best apply them to our businesses.

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NAVIGATING NEW BUSINESS STRUCTURES

But it’s not only the rules of the game that have changed. The make up of teams have changed as well. Business structures have started to adapt to this new environment. Along the whole value chain many activities are now available as a service. Teams can choose to work leaner if they want to. One of the key challenges for businesses is balancing the operation of scalable businesses, while allowing room for innovation.

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NAVIGATING WIDER FIELDS

Today’s world is much more connected than it used to be. With more connections we have more influences and interactions. This means we need to broaden our understanding of what the business entails and what business functions entail. We need to look out for connections between disciplines, open our eyes to what is happening outside of our core fields. We can turn curiosity into our core fuel for understanding.

So here is your guide to Intangible Economics. We are going to explore what makes businesses successful today and you are going to get to know different sources of value, or shall we say currencies.

You'll build a great understanding of how the business landscape is changing and you will more quickly see for yourself which elements have the biggest impact on a particular field of business. And isn’t that what it’s all about after all? If you train for a marathon, you won’t succeed by building your arm strength.

We will start by providing a bit of historical context, exploring how success factors of business have evolved since the Industrial Age. This context provides the foundation to see how success factors are changing over time. After all, who wants to work with an outdated equipment.

Then we’ll get to the point by providing a short overview of the major intangible success factors today.

The last three parts are case studies that go deeper into specific elements of intangible economics. We will look at some examples to increase your sensibility for what is being traded in today’s economy.

The third case study is an interactive case study to challenge your thinking a bit.

There is a logic to the order, but feel free to jump to whatever feels most relevant for you today.

Programme Content

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Requiem for the Economic Moat: The Former Strengths of Industrial Age Companies 3 Topics
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Part Content
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The One Thing: What did Classic Competitive Advantages have in common?
The Commoditization of Quality
Why Production has levelled the Playing Field
Intangible Success Factors of Today
Supreme Streetwear and the Business of Selling the Intangible. What Drives Value? 3 Topics
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Part Content
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The Intangible Value Proposition
Tools of the Trade: How to sell the intangible?
Lifecycle Adjustments: From Sustaining the Position to Remapping the Position.
Every Business is a Media Business: Lessons from the Success Story of GoPro 4 Topics | 1 Lab
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Part Content
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Foreseeing Change: from Polaroid to GoPro
Every Business is a Media Business. Analysing the Success Story of GoPro
Lessons learned: Success Factors of a business have changed
Implications: From Innovation Skills to Media Metrics
The New Differentiators

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