Direct Economy

Concept by Xavier Comtesse, to describe a consumer-know-how led economy, in analogy with the direct democracy model.

Description

Summary from Bruno Giussani at http://giussani.typepad.com/loip/2006/08/direct_economy.html

"Could "direct democracy" provide a proper metaphor to describe the current economic transformation?

Are we heading towards a "direct economy"?

In a system of direct democracy, sovereignty is lodged with the citizens - or at least, with those among them that choose to actively participate in the system. They can not only pick among prepackaged options (vote) or candidates (election) but they also can deeply co-shape the policy process. Switzerland is probably the strongest case: here new laws can be put forth, and even the Constitution modified, by citizens' initiative.

Translate that into business terms and we have a description of a system where consumers have a direct influence on what companies develop and produce for them. The more informed, opinionated and wired (socially connected) they are, the more they are likely to make use of this influence and to try to organize it - exactly as in a direct democracy system.

On this premise Xavier Comtesse, who heads the Geneva branch of think-tank Avenir Suisse, is writing a book on the idea of "direct economy". "We're exiting an economic system based on the producer's know-how and heading towards one centered on the customer's know-how" (http://giussani.typepad.com/loip/2006/08/direct_economy.html)

Knowledge transfer from firms to customers

Additional commentary from Bruno Giussani at http://giussani.typepad.com/loip/2006/08/direct_economy.html

"in order to interact and participate and co-create, people need to develop or acquire specific know-how.

Assembling a bookshelf may require a relatively limited know-how (although for some people it may be overwhelming), but booking a flight ticket online or creating a blog are tasks of a higher complexity, and customizing a laptop is more complex still. Some of this knowledge is purely practical, other is highly conceptual, but in order to benefit from these products or services the customers have to acquire it.

How do people acquire this know-how? Mostly by what Xavier calls "transfer", which can be implicit or explicit. Implicit: "When Dell offers me a way to customize a laptop, they also encourage - or force - me to acquire new knowledge: in a way they operate a transfer of know-how to me", he writes in the draft of his book. Explicit: online forums and websites, eBay's University, Swissquote's 'trading seminars', communities or practice, etc.

Secondly, Xavier points out that often many of these developments (most notably in the airline business, but also elsewhere) are labeled as "low cost", but that's the wrong label, he contends, and the wrong way to look at it: they should be called "high productivity" - because that's the impact of the active role of the customers: productivity gains. Lower prices in the production process are the result, but the systemic change, he says, is mostly about raising productivity by involving the customers." (http://giussani.typepad.com/loip/2006/08/direct_economy.html)

Level of Interactivity Typology

4.1 Passive consumption:

The consumer is getting products or services with no real interaction and no real choice. He has to take whatever is available.

4.2 Self Service

The consumer is now given the ability to choose between various products or services. This first step is already a huge step forward, as the consumer can go around the vendor to pick and choose what he wants.

4.3 DIY: Do It Yourself

At this level, the consumer starts getting involved in the value chain. This is what IKEA offers, where you are not just buying a product, you are actually also delivering it to your home and building it yourself. This case is an example of the first disruption from the standard retail value chain.

4.4 Co-design

At this level, the consumer starts adding value by customizing the product and therefore defining his needs himself (as opposed to buying a product defined by the product management team). This is what Dell is asking from customers when they have to pick and choose options to build a computer.

4.5 Co-creation

This is the ultimate level of involvement, where the consumer is actually involved in the design of the product or service itself. This is what Open Source does for developers, and what Wikipedia does for knowledge consumers. Similarly Procter and Gamble has a “Connect and Develop” program that lets innovators define products.

Discussion

Limitations of the Model

Michel Bauwens:

In my own understanding, we have to clearly distinguish two participative models, depending on the level of engagement. When consumers engage on individual expressive endeavour on participatory platforms, we have weak links amongst consumers, and platform-dependent strategies. When consumers/producers actively build a common project (such as Linux and Wikipedia), using strong Commons-oriented licenses, we have strong links amongst participants, who usually have their own platforms. Here we have commons-oriented strategies.

But the model from Xavier Comtesee does not focus on either one of this possibilities, but rather on the consumer that is still secondary to the corporation. Hence it is a corporate-centric model, and does not apply to the more bottom-up peer to peer oriented alternatives. It's really a model of extended externalization that does not quite fully embrace the reality of autonomous particpation. But within these limits it is very valuable for understanding corporate strategies.

More Information

See the French-language entry on the Economie Directe; further commentary at http://www.viadigitalis.org/index.php/?p=65