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Industrial era passe, network age is cool

If Ford Motor Company epitomized the 20th Century powerhouse, Google, with its customisable pages, and Apple, herald a new customer-centric culture, writes Narayanan Madhavan.

business Updated: Apr 18, 2008 00:08 IST
Narayanan Madhavan | Management morphs
Narayanan Madhavan | Management morphs
Hindustan Times

It is official. Industrial era manufacturing based on assembly lines, mass production and integrated companies has given way to a new age of the network economy.

The gear now shifts towards a global model in which customers will “co-create” products and services, while companies will switch to a flexible mix-and-match model to boost gains in both sourcing supplies and serving customers – or face the danger of demise.

If Ford Motor Company epitomized the 20th Century powerhouse, Internet giant Google, with its customisable pages, and Apple, with its plans that help digital player iPod’s customers juggle songlists to suit moods, herald a new customer-centric culture.

“The age of products and devices is not over. But the industrial system that was built where it was a firm-centric and product-centric view of value creation—that we believe is over,” CK Prahalad, arguably the world’s leading management guru, told Hindustan Times in an interview after the global launch of his latest book on Thursday.

Co-authored with fellow Michigan professor MS Krishnan, the book, “The New Age of Innovation: Driving Co-created Value Through Global Networks” published by Tata McGraw Hill chronicles the pioneers of the new age and derives lessons from them for others to emulate.

The event in New Delhi was symbolic in many ways. Not only was the launch a global one for the professor guru who advises Fortune 500 leaders, but the case studies lined up in the tome also put Indian companies in the forefront.

What’s more, information technology that aids the new culture is a definitively Indian flavour. “It is a 180-degree turn from where the Industrial Revolution started,” Prahalad said.

Ford’s Model T epitomized the 20th Century one-size-fits-all assembly line. In the new scheme of things, such vertically integrated companies owning or controlling as many assets as possible are replaced by nimble players that draw upon a diverse variety of resources that are global in an equation the authors describe as R=G. The focus shifts from managing supply chain of vendors to a supply web of many.

At the other end, every consumer is taken one at a time in an equation dubbed N=1.

Prahalad and Krishnan pit TutorVista, a startup founded by K Ganesh in Bangalore, as the counter-point to Ford. Using the Internet and software tools, TutorVista enables mathematics tuitions in a model under which students pick their own teachers, speed and style of learning—and the pricing is as flexible.

Similarly, ICICI Prudential is moving towards a flexible pricing of insurance premiums for diabetics by creating a lifestyle network where it can measure the risks associated with each patient.

Companies like Chennai-based Ramco help companies adapt to customer behaviour with intelligent software solutions.