When it comes to profits, smart guys node a lot !

Takeaway: Companies that invest in power nodes, or sources of strength and leverage, have an increased likelihood of earning extraordinary profits.

Accordingly, classically trained strategists understand the potency of a brand, the power of relationships, and the advantage of captive markets. However, two new power nodes have quietly emerged.

Those who understand them well will likely rise to a level of strategic importance in their firms and thereby establish a power node of their own.

What can aikido and hubs do for you?

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Excerpt from Strategy+Business, “The Most Powerful Paths to Profits,” by Mia de Kuijper, November 16, 2009.

In the 1990s, AT&T still controlled a huge share of the lines, hardware, and software required to deliver long-distance networking and telephone services to businesses and consumers. With minimal competition, the telecom giant could charge deliciously high rates for its services. The company’s vast network infrastructure amounted to what is called a power node: a source of strength or leverage that the company could reliably use to effortlessly dominate its market and fend off rivals.

In AT&T’s case, the power node was its preeminent stake in a network. But a power node can also be a coveted brand, a skill, a set of industry relationships, a process, a customer base with switching costs, regulatory protection, or access to resources. In short, it can be anything that a company depends on to influence financial outcomes.

The power nodes listed above have been around for a while, however two power nodes are strikingly novel.

The aikido asset power node is named after the Japanese martial art that exploits the energy of an opposing force. The key to aikido assets is being able to perceive and move with the momentum of the network. In the current information environment, it is no longer useful to “push” advertising and marketing messages to consumers. Most customers reach out for information they need on their own. If they find a source that they like, they tell other customers. They use search engines, which tend to drive large numbers of people to the most popular sources. 

Companies whose power node is based on the aikido approach are skilled in new forms of marketing. They “sow seeds,” tossing out many messages at minimal cost; Frito-Lay, for example, continually puts new flavors and packaging in the marketplace. These companies conduct surveillance, continually analyzing their digital media to see which messages are catching on.  And they react very quickly to what they learn from the networks, introducing or discontinuing products almost instantaneously. This may require the rapid retooling of sourcing, manufacturing, and distribution functions as they shift from one product to another.

Hubs are people or products that attract viewers, clients, buyers, or users in part because others are drawn to them as well; hubs are among the most effective power nodes imaginable in a transparent economy. Hubs represent the ability to become the beneficiary of self-reinforcing popularity.

The first Harry Potter book took off rapidly because friends recommended it to friends. It became a hub as others wanted to know what was driving people to read it. The existence of this hub ensured the popularity of the rest of the series. The transparency and immediacy of communications added momentum. Companies that can heighten the allure of their products this way, triggering attachment and emerging as hubs, will have a tremendously valuable power node.

When hub dynamics are at work, products or ideas that are ahead stay ahead for a long time.

That explains why Microsoft and Yahoo have not been able to catch up with Google in search volume. But because hubs are not a winner-take-all phenomenon, Google’s rivals have sizable numbers of users, leaving some room for market share to eventually turn against Google if a competitor comes up with a product that itself becomes a preferred hub. Microsoft hopes to exploit this opening with Bing, its new search engine.

Edit by BHC

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Full Article
http://www.strategy-business.com/article/09412?pg=all

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