How technology is transforming the architectures of whole industries In the past decades, technology has driven waves of industrial transformation. The first decade of the commercial Internet was about distribution and the disintermediation of traditional businesses. The second was about user-generated content: transforming the Web from pages into conversations, from a noun into a verb. The third, just beginning, will be shaped by three large themes: Falling transaction costs, causing the “deconstruction” of traditional value chains Polarizing scale economics, in which economies of scale become either much more stronger or much weaker In response, the emergence of horizontal, layered, “stacked” industry architectures, challenging the vertically-integrated oligopolistic model characteristic of many industries today. Driven by these forces, new forms of economic coordination are emerging, requiring cooperation among competitors, and a different role for public policy. The concept of “business strategy” has to be rethought from first principles.

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