The Opportunity Economy: Enduring Lessons from the Rise and Fall of the New Economy

In this paper we argue that the business model underlying the new economy is based on thefollowing interrelated and self-reinforcing forces:1. The development of a new strategy of opportunity, which focuses on the use of creative innovationto open up new market spaces, rather than using exploitive innovation to prolong the life ofexisting products.2. The democratization of competition thanks to the Internet and to process outsourcing.3. Taken together, these forces result in a profound shift in the source of value creation in firmsfrom processes and physical assets to people.With the drivers of business success so fundamentally transformed, almost all aspects of thefirm and its management also need to change, from valuation, resource allocation and workercompensation, to what it takes to retain workers and promote innovation. But while the rules ofbusiness have changed, there has not been a corresponding shift in awareness among most managers.Assuming that there is nothing new in the New Economy is a profound and dangerous mistake.Managers that are so short sighted will find that they have not only lost out on the opportunities thatthe new economy continues to provide, but that the market downturn has only deferred, rather thaneliminated, the threats that change poses to their firms.