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Economic history reveals several examples of changing economic paradigms. They occur when anomalies can no longer be explained by conventional economic theories and insights. Often this unstoppable process coincides with radically new technologies. NetWork Capitalism simply is the subsequent economic paradigm that is now starting to unfold itself.
The emergence of a new economic paradigm can be described by two interrelated phenomena. First, the existing paradigm displays structurally declining results, long term multiple crises occur and overall levels of support for its institutional continuity are shrinking fast. Second, game-changing innovations call for a new economic paradigm, because the old one doesn't fit the requirements needed to make the new innovations flourish and have them gain further momentum.
To cultivate the digital transformation from the perspective of Industrial Capitalism is senseless. It simply doesn't add-up. New times call for new leading principles.
As it appears today's broad range of failing renowned business models, fragmenting global markets, the disappearance of iconic brands, stagnating levels of productivity and a growing number of crises are no coincidence. They merely illustrate that the old paradigm (contemporary Industrial Capitalism) is on its way out. See the 'In Memoriam' section for more details.
At the same time the introduction of unlimited digital information and communication technologies during the last 25 years perfectly illustrates the need for a new economic paradigm. Today's digital transformation shows great resemblance with Columbus' discovery of the West and the invention of the book press at the end of the Middle Ages. And off course also with James Watt's introduction of the steam engine in 1769. They all triggered the rise of a new economic paradigm.
Beyond the digital transformation
To capture the true meaning of a new economic paradigm requires to look beyond the technological breakthroughs. What is the new paradigm really about? Although it's tempting to explain the call for a new economic paradigm from a technological perspective it makes no sense. It's much better to understand why and how the implications of new technologies are part of the bigger picture.
The NetWork Capitalism paradigm is really about three things: connectivity, inclusiveness and democratized information.
In other words, understanding the digital transformation means to learn about the social, economic, psychological and political developments that take place in coherence with the introduction of new technologies instead of knowing how the Internet works. As the 'Pioneers' chapter shows, several leading best practices in NetWork Capitalism are non-digital. And that's exactly the point to be made.
Going beyond the tech perspective also minimizes 'tech dream-world' hallucinations. Think about it, the industrial revolution wasn't about building a world full of steam engines. What really impacted society were its economic strongholds: scalability, standardization and mass production. Therefore, present day projections that the digital transformation is about robotization and App's that make the world a better place are nothing but ridiculous.
To quote Robbert Dijkgraaf, director of Princeton's Institute for advanced study (September 2014):
The seven billion cell phones were not on the front page, but the realization of universal mobile connectivity just might be the great and good news of our times.
Business as unusual
Given what the NetWork Capitalism paradigm is really about it's no wonder that today's leading innovations don't match with the leading economic principles (standardization, scalability and mass production) of first generation Capitalism. That's why the last 25 years have already revealed some fundamentally different economic principles that outline the NetWork Capitalism style of doing business.
Riding the early waves of NetWork Capitalism companies are quickly becoming far more outward oriented. As a result they start to identify themselves via the relations they have with their stakeholders instead of via their production capabilities. By (re)discovering their social value companies embrace the idea of working in collaborative open networks instead of closed hierarchical structures.
Pioneering companies regard trust to be the new main currency for enabling transactions. They believe profit is merely an outcome, not the overall purpose of doing business.
Leading entrepreneurs prove that personalization and customization oriented business models replace those which still rely on mass production and standardisation. They know circular production facilities within high value networks are the new standard compared to the old take-make-waste production model.
Front running companies have also learned how to anticipate on today's hyper fragmented levels of specialization. One way of doing so is to redefine the characteristics of 'markets'. They create high value networks in which using and sharing replace traditional believes that are built upon buying and having full ownership.
Product life cycles, production processes and even markets never end, they merely transform into something new.
During the last 25 years companies are discovering that doing business in the 21st century means to unlearn 'linear and serial' thinking, feeling and doing. For instance they start to acknowledge that total cost of ownership is a much more relevant standard for defining costs compared to production costs. And that revenues should belong to the network that created them instead of to who produced them. Can you imagine what this means for those poor MBA grads?
All these pioneering ways of doing business have emerged in organic processes by passionate and purpose driven entrepreneurs. They were not designed at drawing tables or in university laboratories, nor by government officials. But most of all, they all underline NetWork Capitalism's two core principles for driving progress and prosperity; the capacity to create high value networks and the ability to engage in mutually beneficial and meaningful partnerships with stakeholders.
The following quote by Jan Zijderveld, president of Unilever Europe, summarizes it quite well (December 2014):
It's time for business as unusual. None of our goals at Unilever is achievable without long lasting partnerships.