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jerryking : don_tapscott   6

Coase’s theories helped understanding of Internet’s impact on how business is done
Sep. 08 2013 |The Globe and Mail | DON TAPSCOTT.

Mr. Coase wondered why there was no market within the firm. Why is it unprofitable to have each worker, each step in the production process, become an independent buyer and seller? Why doesn’t the draftsperson auction their services to the engineer? Why is it that the engineer does not sell designs to the highest bidder? Mr. Coase argued that preventing this from happening created marketplace friction.

Mr. Coase argued that this friction gave rise to transaction costs – or to put it more broadly, collaboration or relationship costs. There are three types of these relationship costs. First are search costs, such as the hunt for appropriate suppliers. Second are contractual costs, including price and contract negotiations. Third are the co-ordination costs of meshing the different products and processes.

The upshot is that most vertically integrated corporations found it cheaper and simpler to perform most functions in-house, rather than incurring the cost, hassle and risk of constant transactions with outside partners.

It makes sense for a firm to expand until the cost of performing a transaction inside the firm exceeds the cost of performing the transaction outside the firm. This is why large, insular corporations prevailed in the industrial economy.
Don_Tapscott  Ronald_Coase  transaction_costs  frictions  economists  large_companies  Coase's_Law  industrial_economy 
september 2013 by jerryking
Business continuity: Making it through the storm
Nov 10th 2012 | The Economist |Anonymous.

Hurricane Sandy was another test of how well businesses can keep going when disaster strikes...GOLDMAN SACHS’S latest shrewd investment was in sandbags and back-up electricity generators. As Hurricane Sandy approached New York, the bags were stacked around its headquarters. It was one of the few offices in downtown Manhattan to remain dry and well-illuminated as “Frankenstorm” battered the city.

Meanwhile, a block farther down West Street, the headquarters of Verizon were awash with salty flood water, soaking cables delivering phone and internet services to millions of customers. The firm was able to reroute much of the traffic through other parts of its network, but local service was disrupted....Sandy is the latest catastrophic event to test the readiness of the world’s leading firms to cope with disaster. Most firms have improved “business continuity” preparations over the years. The Y2K scare at the turn of the century moved IT risk high up the list of worries. The attacks of September 11th 2001 warned firms of the danger of putting all their computers (and staff) in the same place (jk: concentration risk)....“Firms are increasingly reliant on networks, but often fail to understand the risks that networks bring,” says Don Tapscott, a management guru. Global supply chains, just-in-time and shifting to the “cloud” tend to bind once unrelated activities ever closer together, making them more prone to failing at the same time. The current fad for moving data to the “cloud” may appear to reduce risk because there is so much spare capacity in the web. Yet some firms offering cloud services have more concentrated operations than (jk: concentration risk).

Firms are starting to recognise their vulnerability to cyber-attack, but few have much idea what they would do if it happened. Mr Tapscott thinks boards should have a committee explicitly focused on understanding IT and network risks and ensuring they are properly managed....Dutch Leonard, a risk expert at Harvard Business School, says that the best-prepared firms use a combination of planning for specific events and planning to cope with specific consequences, such as a loss of a building or supplier, regardless of the cause. He also recommends copying an approach used by the armed forces: using a group of insiders to figure out how the firm could be brought down [ jk: white hats]....Firms should make lobbying government to invest heavily in upgrading that infrastructure a core part of their risk-management strategy, argues Irwin Redlener of the National Centre for Disaster Preparedness at Columbia University.

Goldman Sachs has long been a leader in disaster planning because it understands that the situations in which it might not be able to function are exactly the sort of events when very large changes in the value of its investments could occur, says Mr Leonard. Yet too many firms underinvest in planning for disaster because they don’t think it will pay, at least within the short-term timeline by which many now operate, reckons Yossi Sheffi of MIT.
Goldman_Sachs  Hurricane_Sandy  disasters  New_York_City  supply_chains  Don_Tapscott  business-continuity  boards_&_directors_&_governance  disaster_preparedness  vulnerabilities  resilience  red_teams  SPOF  cyber_security  surprises  valuations  step_change  networks  risks  natural_calamities  crisis  isolation  compounded  network_risk  underinvestments  catastrophes  risk-management  short-term  optimism_bias  beforemath  cyberattacks  preparation  readiness  concentration_risk  white_hats 
november 2012 by jerryking
China's motorbikes designed in tandem
Jan. 01 2007 | Globe and Mail | DON TAPSCOTT AND ANTHONY D. WILLIAMS

From Monday's

Published Monday,
motorcycles  China  collaboration  Don_Tapscott  business_models  subcontracting 
november 2012 by jerryking

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