The Open Magazine (a weekly e-zine for Linux and Open Source computing), recently ran an article entitled “The Connection Economy” by by Geoff Cohen, Senior Consultant, Cap Gemini Ernst & Young Center for Business Innovation
(read it here). It’s a nice simple, and short summary that prefers the title, the “adaptive economy” for the transition time we find ourselves in.
I have reproduced the entire piece below.

It’s been more than a year after the collapse of the Internet stock bubble, and there’s apparently little relief in sight. Well-established companies perceived as “Old Economy� bestride the world, while “New Economy� startups, having boasted about their impending takeover of all existing relationships with consumers or between businesses, are now scrambling to liquidate their office furniture. What actually happened to the New Economy? Was it ever real? Was it really new?
Well, the answer is yes and no. It’s easy to say they didn’t understand the folly in believing the economy was new. It turns out, however, that what the startups didn’t understand wasn’t the “new� part, it was the “economy.� Money still matters. Pesky things like revenue, expenses, and, yes, profits matter. But that doesn’t mean that there’s nothing new.
The most obvious and important new element of today’s economy is the degree of connectivity. Certainly this involves the rapidly increasing size, capacity, and accessibility of the Internet. More interestingly, it also encompasses the increased connectivity being embedded into products, into business and economic relationships between companies, and into the informal and social connections between people.
What this degree of connectivity means is that you are seeing a new economy creating novelty more easily as diverse ingredients are recombined into new entities. New ideas spread rapidly through the economic and social networks. Change is faster and it matters sooner. Perhaps the “new economy� is less a new kind of economy as it is an economy of newness. Change is the challenge. After all, companies that are still bound into centuries-old models of top-down hierarchies must develop a new set of tools that will allow them to not only keep up with this rate of change, but take advantage of it and thrive.
So just how do companies adapt to this new economy of change and innovation? At the Center for Business Innovation (CBI) , we have studied the Open Source movement to find hints on how to adapt to this new economy of change. What we discovered are three actions that companies can take: build feedback mechanisms, empower the edge of the network, and create communities.
Feedback mechanisms require the right input and the right response. All of the new connectivity means that there’s huge amounts of data available about your processes, your customers, and the world outside. Don’t be overwhelmed, but also don’t lose track of important intangible assets like brand, innovation, and loyalty.
Empowering the edge of the network means that your employees, customers, and partners must be able to make decisions and changes on their own. They’ll make better decisions in the field than isolated back-office decision makers are likely to, but that’s a side benefit. The reality is that letting them make decisions is the only way your organization can respond to opportunities quickly enough.
With so many independent actors, how can you coordinate action? Community, a strong sense of shared purpose and values, is the glue that holds together the organization in the new economy. Use community forces to mobilize action among your network. At the CBI, we’ve taken to calling the next economy – the one after the new economy – the “adaptive� economy. Companies must learn a different set of skills to constantly adapt to an ever-changing, ever-surprising, world.

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