Why digital technologies are transformational

An article about
http://sethgodin.typepad.com/seths_blog/2011/10/form-and-function.html

Form and function

When the form changes, so does the underlying business model, which of course changes the function as well.

Mail —> email

Books —> ebooks

DVD —> YouTube/Netflix

1040 —> Online taxes

Visa —> Paypal

Open outcry —> Electronic trading

Voice call centers —> forums and online chat

Direct mail —> permission marketing

In each case, the original players in the legacy industry decided that the new form could be bolted onto their existing business model. And in each case they were wrong. Speed and marginal cost and ubiquity and a dozen other elements of digitalness changed the interaction itself, and so the function changes too.

The question that gets asked about technology, the one that is almost always precisely the wrong question is, “How does this advance help our business?”

The correct question is, “how does this advance undermine our business model and require us/enable us to build a new one?”

There are projects that are possible with ebooks or Kickstarter or email that could never have worked in an analog universe. Most of the money made in the stock market today is via trading approaches that didn’t even exist thirty years ago.

When a change in form comes to your industry, the first thing to discover is how it will change the function.

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