Thanks for your comment. I can assure you that if you’re innovating on the web and you’re not confused, you don’t really know what’s going on:-))

Best of luck in the New Year!

- Greg

I found your article very comforting in that it was the process we recently followed without realizing we were following it – according to your outline we are at the end of Step 7 just getting ready for Stage 8.

Along with your other article on Pay Pal starting it’s nice to know that our general development cycle was in fact the norm, that confusion is actually part of the process and that being able to quickly change direction is a very important part of the process as well.

Thanks for saying so.

- Greg

It seems to me that there are actually three separate issues here.

1. Global vs. Local: Global companies must set some sort of global strategy, core principles, etc. The tone must be set for resources, company values and general direction. Finding the right balance between having a cohesive global strategy without stifling both local initiatives and adaptation to local markets is something all global companies struggle with. Some industries, for instance the auto industry, require a great deal of standardization. Others, such as food businesses, must be intensely localized.

Some global companies find that they can turn a local initiative into an itnernational success. Proctor & Gamble and McDonald’s are both extremely good at pulling products and practices from the local level and sharing them throughout the world.

Infrastructure vs. product strategy: Diversified Global companies have a distinct advantage in that they can spread infrastucture and R&D costs over not only a global market, but also over several product categories. Basic research, procurement and distribution all benefit from economies of scale and scope. However, significant innovation can still be done at the product level and it’s somewhat of a judgement call. Some companies are very good at innovating at the product level while profiting from the benefits of centralization. Others become over-centralized and suffer strategic rigidity while still other don’t centralize enough and suffer unnecessary costs as well as a loss of continuity.

3. Atoms vs. Bits: Another distinction that is important to make is between atoms and bits. Companies that make things with atoms have large changeover costs. For every new product expensive testing needs to be done, factories need to be re-tooled and, in some cases, regulatory agencies need to be dealt with. One of the advantages internet companies have is that product mistakes can be corrected rather cheaply.

That’s why strategic principles vary drastically in conventional and web product strategy and why so many big companies have trouble adapting to the digital world. The controls inherent in conventional strategy results in too much strategic rigidity for web businesses. In effect, it is often the cases that a company’s best practices in a conventional business can become the worst practices for a web business.

Centralization vs. Decentralization is a very basic issue for all major enterprises. The best ones are able to effectively communicate a set of core principles and push decisionmaking as close to the front lines as possible.

I hope I answered you queston helpfully:-)

- Greg