Internet increases complexity for the supply chain

The Internet is great as it  allows search engines (Google,Yahoo,MSN etc.) and social media (Facebook,Twitter) to create algorithms that deliver personalised content to the Internet user. Based on this highly segmented audience  search engines and social media can now provide highly segmented and "customized" advertising targets. Advertising is cost efficient and highly effective because now you have an audience that cares for your product or service. But that can mean huge complexity for the supply chain.

This huge supply chain complexity problem pervades  every category from engineering to food,medicine and music. If there are 36 varieties of spaghetti sauce, you have to have 36 different types of labels, raw material and finished goods inventory and a huge deal of distribution logistics to keep track of each of the 36 varieties of spaghetti sauce. What happens if you can define and reach 36,000 or 36 million spaghetti users through the communication piece via Internet search or Social Media or paid advertising?  Well you need 36 million can labels for starters …… get the picture.

The basis of business thinking is "scalability."  You start with the farm production of tomatoes and then add 36 different options based on segmentation studies. Check out the TED talk by Malcolm Gladwell on spaghetti sauce.Things get real complicated if you can economically communicate with 36 million different consumers via the Internet and they have different preferences. The upstream complexity of delivering the sauce to delight the individual consumer is unimaginable.

The point is that the Internet is the disruptive innovation that can individually reach consumers at very low cost. All innovations of the past involved  the product first. The light bulb, the motor car came before the communication piece for the consumer via newspaper,TV. You first had the product or a set of competencies to produce something and then thought of reaching the market effectively.

Now you can communicate  with  the individual consumer easily and cheaply. If you have a digital product  (eBooks, Music) you can also distribute  via the Internet.  The problem is how do you deal with the complexity in this micro-segmented market when it comes to delivering.

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