US investors can be forgiven if, confronted with a recent market rotation, increased interest rates,...
US investors can be forgiven if, confronted with a recent market rotation, increased interest rates, and the Supreme Court's decision on Microsoft, they might have missed a small but telling event.
Harvard University, which has long been the top business school in the US, is changing the curriculum of its MBA programme in order to address the novel challenges presented by Silicon Valley.
On a larger scale, this almost Copernican rotation for the tradition-bound institution makes clear that technology's influence on business is here to stay.
We share Harvard's view that a focus on technology's influence within the market will continue to be extremely relevant. Although the effects are most noticeable in the US, Silicon Valley's development of the internet and related industries has radically reshaped business on a global basis.
Now that information is the key determinant of competitive advantage in all industries, traditional business operations have begun to deconstruct, as new access to information and information capabilities alters existing relationships.
Amid deconstruction, the recent market shake-out provides the opportunity to preview potential winners and losers in the transition to the information economy.
The retail industry provides many examples of winners being determined by the company's ability to adapt their business models to internet-integrated solutions.
But future paths may not be entirely predictable. Many would have assumed that the creation of the business to business internet exchange site in the auto industry would hurt auto parts suppliers such as tyre manufacturers, who would be forced to supply their products at a lower price if they wanted to do business at all.
But some tyre manufacturers are defending themselves in a very interesting way, by creating a much more competitive, integrated,value-added product.
It is hardly surprising that, in this age of deconstruction, investors are returning their focus to more fundamental issues within companies, seeking those qualities that will best help a company succeed in the evolving environment.
Investors seem to recognise that, over the long term, technology's ability both to improve productivity and reshape operations throughout a range of industries remains valid.
Traditional companies, based on their superior fundamental values, should continue to benefit from the recent shift, just as they have for the past two quarters. At the same time, traditional companies will need to look harder than ever into their operations, to see how they can "deconstruct" themselves.
Michael Rome is the managing director at Lazard Asset Management
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