Part 11 – Cloud, data and platforms
When digitalization went from websites to infrastructure
The first parts of the digital evolution were very visible to the user. The web browser, the website, the search engine, the online store, social media and the smartphone could be seen and used directly. But behind these services, a less visible transformation was also taking place that would become at least as important.
The digital infrastructure changed.
Businesses had long purchased, installed and operated their own servers, databases and software. Capacity had to be planned, hardware had to be acquired and systems had to be installed and maintained. New digital services could therefore require significant investment before the business knew how many people would actually use them.
Cloud services changed this logic. Computing power, storage, software and, increasingly, more technological functions could be delivered as services over the internet. Capacity could be scaled up and down, new solutions could be established more quickly, and businesses could buy access to technology rather than necessarily owning the entire infrastructure themselves.
Cloud computing was therefore far more than a new way of placing servers. It changed the economics, pace and organization of digital development.
From software as a product to software as a service
A key part of this development was Software as a Service, usually abbreviated as SaaS. Traditionally, businesses had often purchased software that was installed locally on their own machines or servers. New versions had to be installed, upgrades had to be carried out and systems had to be maintained.
SaaS changed this by making the software available as an ongoing service over the internet. The customer could log in through a browser or an app, while the provider took responsibility for much of the technical infrastructure, updates and operations.
Salesforce was a key example of this development. The company was founded in 1999 with a model where CRM software could be delivered over the Internet rather than installed and operated in the same way as traditional enterprise systems. It helped demonstrate that core business systems could also be offered as web-based services.
Later, the SaaS model became common in more and more areas. Accounting, HR, marketing, analysis, customer service, project management, design, communication and online shopping could be delivered through services that were continuously further developed by the supplier. For the customer, the threshold for adopting advanced technology could thus be lower, while at the same time dependence on the suppliers could increase.
Amazon turned spare capacity into a new industry
One of the most important shifts came from a business we have already encountered in the history of e-commerce. Amazon, through its enormous trading business, developed significant technological expertise and infrastructure. Out of this grew Amazon Web Services , AWS, which from 2006 began offering, among other things, storage and computing power as services.
The significance was fundamental. A new digital business didn't necessarily need to buy a large server farm before launching its service. It could rent capacity and increase it as demand grew.
This made it possible to make a previously large capital cost variable to a greater extent.
This was particularly important for start-ups and fast-growing digital services. Infrastructure that previously required large investments and extensive planning could increasingly be ordered through software and paid for as needed. At the same time, large established businesses could use cloud services to modernize parts of their own technology.
Amazon had thus done something interesting: Competence and infrastructure developed to solve its own problems became the basis for a new global business.
Microsoft and Google made the cloud a fundamental infrastructure
Amazon wasn't alone. Microsoft developed Azure, while Google Cloud built on Google's extensive experience with global digital infrastructure.
The cloud thus evolved into a separate technological layer beneath much of the digital economy. Businesses could purchase computing power, databases, storage, analytics, security, machine learning, and an ever-growing list of other services.
This also changed the pace of innovation. When basic technological components already existed as services, developers didn't have to build everything from scratch. They could combine existing components and focus more of their efforts on the actual product or service they wanted to create.
The cloud thus became a form of digital infrastructure that others could build on.
The APIs made digital services connectable
Cloud services were just one part of the development. Another crucial component was APIs, Application Programming Interfaces.
An API allows different digital systems to communicate in defined ways. Instead of one system having to contain all the functionality itself, it can ask another system to perform a task or deliver information.
This may sound technical, but the consequences are very concrete. An online store can retrieve payment functionality from a payment provider, address information from another service, maps from a mapping platform, and shipping information from a logistics system.
The customer experiences one service, while behind the screen there may be a number of different systems working together.
The API therefore became an important building block in the modern digital economy. Businesses could develop new services by combining their own systems with functions and data from others.
Digital innovation increasingly became a matter of connecting components.
From website statistics to analytics
At the same time, another resource was rapidly growing in importance: data on how the digital services were actually used.
Early websites could measure relatively simple metrics like page views and visits. Over time, analytics tools became far more sophisticated. Businesses could examine where users came from, what pages they visited, where they left the service, what products they viewed, and what activities led to a transaction.
Google Analytics made web analytics available to a huge number of websites. At the same time, an entire field grew around digital analytics, experimentation, conversion optimization, and customer journey measurement.
This changed how digital services could be developed. Previously, a business could launch a product and then try to understand the results through sales figures, surveys and other forms of market analysis. Digital services could be observed to a much greater extent while they were being used.
But the data didn’t automatically tell us why people did what they did. A high bounce rate might show that many people were leaving a page, but not necessarily why. Analytics was therefore no substitute for user research, qualitative insights, or human judgment.
The data provided a new perspective that needed to be interpreted.
As the customer became increasingly measurable
As the customer journey became digital, more and more data points emerged. Search terms, clicks, product views, shopping carts, purchases, email responses, app usage, location, and customer service contact could be recorded and analyzed in various contexts.
This created new opportunities for businesses. They could examine which products were often paired together, which customer journeys led to purchases, and where in the process people encountered problems. Data could be used to improve services, plan inventory, develop products, and understand demand.
At the same time, there was a danger of confusing what could be measured with what was important.
People are more than the data points they leave behind. A digital service may register that a customer pressed a button, but it doesn't necessarily know what the customer was thinking, why the customer hesitated, or what expectations the customer had before the visit.
The data-driven business therefore had to learn something that remains crucial: Data can provide significant knowledge about human behavior, but the data must be understood in a context.
Personalization – when the service began to adapt to the person
More data and better analytics also made personalization increasingly important. Digital services no longer needed to show exactly the same content to everyone.
The online store could recommend products based on past behavior. The streaming service could suggest movies or music. The news service could prioritize content. Marketing could be tailored to different target groups, and digital interfaces could change based on what the system knew or assumed about the user.
Netflix became a famous example of how recommendation systems could become an integral part of the service itself. The key was not just to have a large catalog of content, but to help each person find something relevant in this catalog.
Here we encounter The Long Tail again . As the digital catalog becomes enormous, the need for mechanisms to help the user navigate it increases. Search, recommendations, personalization and algorithms thus become part of the value creation.
From digital service to platform
One of the biggest changes during this period was the development of digital platforms.
A traditional business often produces a product or service that is sold to the customer. A platform can instead create an infrastructure where different groups can meet, trade, communicate or develop services for each other.
Amazon evolved from an online store to a marketplace where external sellers could meet customers. Apple built the App Store as a platform between developers and users. Google connected searchers, websites, and advertisers. Airbnb connected people who had accommodation capacity with people who wanted a place to stay. Uber connected drivers and passengers through a digital infrastructure.
Value creation therefore does not only occur within the company. The platform facilitates the creation of parts of the value by other actors.
That is a fundamental difference from many traditional business models.
Network effects could make platforms very powerful
The platform economy also made network effects particularly important. A service can become more valuable when more people use it.
A marketplace with many sellers can attract more customers because the selection is wider. More customers can in turn make the platform more attractive to new sellers. An app platform with many users can attract developers, and a large selection of apps can make the platform more attractive to even more users.
This can create self-reinforcing growth.
But it can also contribute to significant market power. Once a platform has achieved large scale, an extensive ecosystem and strong network effects, it can become difficult for competitors to establish an alternative.
Digitalization could thus both reduce entry barriers and create new ones.
The ecosystem became more important than the individual product
APIs, cloud services, and platforms together led to a major change in how digital businesses could be understood.
It was no longer always sufficient to analyze one product or business in isolation. A digital product could depend on a cloud provider, payment platform, mapping service, identity solution, app store, logistics partner, and a variety of APIs.
Value creation took place in an ecosystem.
This gave businesses access to capabilities they previously had to build themselves, but at the same time created new forms of dependency. When a critical service changed price, technical conditions, or access, the consequences could spread throughout the entire ecosystem.
Digital infrastructure thus made it easier to build new services, but also made businesses more interdependent.
Data became a strategic resource
In this development, data took on an increasingly central role. Data could be used to understand demand, improve products, automate processes, personalize services, and develop new business models.
But the phrase “data is the new oil,” which has often been used in this period, is problematic if taken literally. Data is not a natural resource that automatically has value because it exists.
Data must be collected in a legitimate way, structured, quality assured, analyzed and put into context. Bad data can lead to bad decisions. Large amounts of data are not necessarily better than smaller amounts of relevant data.
The value therefore does not only lie in the data.
It lies in the people, systems and organizations that manage to turn data into knowledge, decisions and action.
Privacy and power became part of the infrastructure
The same development also created some of the most difficult questions of digitalization.
As businesses were able to collect, combine and analyse ever-increasing amounts of information about people, the need for rules, security and control increased. Privacy was no longer just a legal issue alongside the digital service. It had to become part of how the service and infrastructure were developed.
Platforms also created new power relations. A company that controls the infrastructure that other companies depend on can gain significant influence over the market. App stores can determine distribution rules. Marketplaces can influence which products are visible. Search engines can influence what information people find. Cloud providers can become critical infrastructure for thousands of other companies.
Thus, issues of competition, transparency, interoperability, security and regulation became increasingly important parts of the digital economy.
Cloud made innovation faster – but not automatically better
Cloud services, SaaS, and APIs reduced the time and cost of experimenting with new digital services. A small business could access technological capabilities that were previously largely reserved for large organizations.
It democratized parts of the digital infrastructure.
But easier access to technology does not automatically mean better innovation. Businesses still need to understand what problem they are trying to solve, who they are creating value for, and how the technology will fit into the organization.
This is a common point throughout the digitalization series. Technology is a tool. Value creation only occurs when technology is used to solve real needs or improve existing activities.
The infrastructure that made AI possible
Cloud, data and platforms simultaneously lead directly towards the development we are in the midst of today.
Modern AI requires massive amounts of computing power, extensive data infrastructure, and the ability to deploy advanced models to millions of users. Cloud services have made such capacity available on a scale that would have been previously unimaginable.
The API economy also made it possible to build AI capabilities into other products and services. A business doesn't necessarily need to develop its own underlying model to use AI. It can connect its own services to models and other AI capabilities through the same basic logic that previously made payments, maps, communications, and other digital features available through APIs.
The AI revolution therefore did not come out of nowhere. It was built on decades of developing digital infrastructure.
From the website to the digital ecosystem
Looking back on the development, the perspective has shifted dramatically. In the early web, digitalization could be about getting your business online. Later, it was about being found, establishing e-commerce, developing better user experiences, meeting the customer through mobile, and creating continuous customer journeys.
With cloud, data and platforms, the very infrastructure underlying these services changed.
Software could become a continuous service. Computing power could be rented. Systems could communicate through APIs. Customer behavior could be analyzed. Services could be personalized. Businesses could become platforms where other actors created parts of the value.
Digitalization was no longer just about what the business showed the customer on a screen. It was about how an entire network of technology, data, people, and businesses could be connected.
It was the foundation of the digital platform economy. And it would also become the infrastructure for the next great technological shift: a world where more and more of this infrastructure could be used to learn, predict, recommend, generate and automate using artificial intelligence. ➜ When customer focus became a strategic imperative
Academic background and further reading
This series also builds on my own professional journey through the Web Design study , the eMarketing study , Innovation and Commercialization and professional seminars in San Francisco and Oxford . Here you will find the background, professional environments and experiences that have followed the development from the early years of the web to today's digitalization.
Recommended literature
The literature presented here spans several disciplines and periods. The books provide perspectives on digitalization, innovation and strategy , and show how technology, markets, organizations and people have been understood and developed over time. Some of the works are classics, others represent newer academic perspectives, but together they provide a useful basis for further in-depth study of the topics we work with at The Invisible Capital .
The Long Tail: Why the Future of Business Is Selling Less of More
Author(s): Chris Anderson
Short review
The Long Tail is one of the most influential books on how the internet has transformed commerce, marketing, and consumer behavior. Chris Anderson introduces the theory of the “Long Tail,” which explains how digital markets enable significant value creation through a large number of niche products, rather than relying on a few bestsellers.
The book shows how digital distribution, low inventory costs, search engines, and intelligent recommendation systems have made it profitable to offer an almost unlimited product range. Where traditional stores were limited by physical shelf space, online stores can offer millions of products and let customers find exactly what they are looking for.
Chris Anderson illustrates the theory with examples from Amazon, Netflix, Google, and the digital music industry, showing how the internet has changed the rules of competition for businesses around the world. Many of the insights have since become even more relevant through artificial intelligence, personalization, and modern search technology.
The authors take the reader through the entire process – from planning and organizing to publishing, managing and continuously improving content on websites and digital services. Although technology has evolved since the book was published, the principles of quality, relevance, management and long-term content work are at least as relevant in an era where search engines and artificial intelligence assess the credibility and usefulness of content.
Why we recommend the book
At The Invisible Capital, we consider The Long Tail to be one of the most important books in e-commerce, digitalization, and modern value creation.
The book explains why customers no longer just buy the most popular products, but increasingly find value in specialized products and services that meet individual needs. This insight has had enormous impact on the development of online stores, digital marketplaces, search engine optimization (SEO), information architecture, and content strategy.
Today we see that the theory also fits very well into the development of artificial intelligence. AI helps people discover relevant content, products and knowledge that were previously difficult to find. This has given the Long Tail principle a new dimension, where well-structured content and high professional quality are increasingly important for visibility, trust and value creation.
This is a book we believe everyone who works with e-commerce, digital marketing, customer experience, innovation, digital strategy or artificial intelligence should read.
Content Strategy for the Web (2nd Edition)
Author/authors: Kristina Halvorson and Melissa Rach
Short review
How do you create content that actually helps people – and at the same time supports your business goals? Content Strategy for the Web is considered one of the most influential books in the field of content strategy and digital communications. The book shows how good content does not arise by chance, but through a deliberate strategy where user needs, the organization's goals, structure, work processes and management are closely linked.
The authors take the reader through the entire process – from planning and organizing to publishing, managing and continuously improving content on websites and digital services. Although technology has evolved since the book was published, the principles of quality, relevance, management and long-term content work are at least as relevant in an era where search engines and artificial intelligence assess the credibility and usefulness of content.
Why we recommend the book
At The Invisible Capital, we believe that good content is one of the most important forms of invisible value creation. A website is far more than design and technology – it is the content that builds trust, creates great customer experiences and helps people find the answers they are looking for.
This book is perfect for leaders, communications consultants, content producers, web editors, UX designers, and anyone working with digital services. It shows why a clear content strategy leads to better user experiences, more effective interactions, and stronger digital results over time.
In an era where artificial intelligence is increasingly important in how information is discovered, understood, and communicated, this book is more relevant than ever. It reminds us that technology alone never creates value – it is good, structured, and relevant content that makes the difference.
Don't Make Me Think
Author: Steve Krug
Short review
Don't Make Me Think is one of the world's most influential books on usability and web design. Since its first edition in 2000, the book has helped designers, developers, content producers, and managers understand a simple but powerful principle: Good digital services should be intuitive. The user should be able to complete their task without having to stop and think about how the website works.
Why we recommend the book
This is one of the books that has had the greatest impact on my own work with digital services. Over the years – from SAS and the Norwegian Opera & Ballet to working on Bærum Municipality’s website – the principles in this book have been an important reminder that technology is never an end in itself. The goal is to make everyday life easier for the people who use the services. Despite the fact that the book was published many years ago, the message is just as relevant today.
Internet Marketing & eCommerce
Authors: Ward Hanson and Kirthi Kalyanam
Short review
Internet Marketing & eCommerce provides a thorough introduction to how the internet has changed marketing, commerce, and business development. The book combines theory and practical examples in digital marketing, e-commerce, customer behavior, value creation, and digital business models. Although written at a time when the internet was still in its infancy, many of the fundamental principles are still highly relevant.
Why we recommend the book
This book was an important part of my own learning journey in digital marketing and e-commerce. It helped build my understanding of how technology, customer experience and business strategy are interconnected – an insight that later became very important in my work with SAS, the Norwegian Opera & Ballet, Bærum Municipality and eventually the project The Invisible Capital. Many of the ideas about customer value, digitalisation and innovation presented on the website have their roots in the knowledge this book conveys.
The Innovator's Solution: Creating and Sustaining Successful Growth
Authors: Clayton M. Christensen and Michael E. Raynor
Short review
In this sequel to The Innovator's Dilemma, Clayton Christensen shows how businesses can translate innovation theory into practical strategy. The book explains how companies can identify new growth opportunities, develop disruptive innovations, and build organizations that thrive in rapidly changing markets.
Why we recommend the book
While The Innovator's Dilemma explains why established businesses are often challenged, The Innovator's Solution provides concrete advice on how to meet the challenges. The book is therefore a natural next step for anyone who wants to understand innovation, strategy and long-term value creation.
The Innovator's DNA: Mastering the Five Skills of Disruptive Innovators
Authors: Jeff Dyer, Hal Gregersen and Clayton M. Christensen
Short review
What characterizes people who create groundbreaking innovations? The authors identify five key skills – observation, questioning, experimentation, networking and association – that are common to the world's most innovative leaders and entrepreneurs.
Why we recommend the book
This book shifts the focus from organizations to the people behind innovation. It shows that creativity and innovation can be developed through deliberate training and experience. The perspectives align well with the philosophy behind Invisible Capital, where human competence and curiosity are the most important drivers of development.
Competing Against Luck: The Story of Innovation and Customer Choice
Authors: Clayton M. Christensen, Taddy Hall, Karen Dillon and David S. Duncan
Short review
In this book, Clayton Christensen further develops the theory of Jobs to Be Done – the idea that customers do not primarily buy products, but "hire" them to solve specific needs. Through practical examples, the authors show how businesses can develop products and services that address customers' real-world challenges.
Why we recommend the book
For anyone working in customer experience, service design, and innovation, this is one of the most insightful books ever written. It reminds us that value creation always starts with understanding the people we are developing solutions for – a fundamental principle of Invisible Capital.
The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail
Author: Clayton M. Christensen
Short review
The Innovator's Dilemma is considered one of the most influential books on innovation and technological change. Clayton M. Christensen introduces the theory of disruptive innovation and explains why even the most successful businesses can fail when new technologies and business models challenge established markets. Through a series of examples, he shows how companies often focus on today's customers and incremental improvements, while overlooking innovations that later change entire industries.
Why we recommend the book
This is one of the books that has had the greatest impact on modern innovation thinking. When I first read it, it gave me a whole new perspective on why some businesses succeed in transformation, while others lag behind – even when they are well led. The insight has been an important part of my own understanding of digitalization, innovation and change management, and many of the reflections in The Invisible Capital build on the ideas Clayton Christensen presents in this classic. The book is as relevant today, in the face of artificial intelligence and digital transformation, as it was when it was published.
Open Innovation: The New Imperative for Creating and Profiting from Technology
Author: Henry Chesbrough
Short review
Henry Chesbrough introduced the concept of Open Innovation and changed the way many businesses think about research and development. He shows how companies can create more innovation through collaboration with customers, universities, start-ups, suppliers and other external partners.
Why we recommend the book
Open Innovation has had a major influence on modern innovation thinking and was also an important topic during the seminars in Oxford and San Francisco. The book shows why future value creation occurs in the interaction between people, businesses and knowledge environments – not within closed organizations alone.
Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant
Authors: W. Chan Kim and Renée Mauborgne
Short review
Blue Ocean Strategy challenges businesses to shift their focus away from fierce competition and instead create new markets with little or no competition. The authors present strategies and models that help organizations develop innovative products, services, and business models.
Why we recommend the book
This book has inspired leaders around the world to rethink strategy and innovation. Instead of competing for the same customers, it shows how businesses can create new value through creativity and differentiation. The perspectives align very well with the themes of innovation, digitalization, and long-term value creation in Invisible Capital.
Outside Innovation: How Your Customers Will Co-Design Your Company's Future
Authors: Patricia B. Seybold
Short review
Patricia Seybold shows how businesses can create better products and services by actively involving customers in the innovation process. The book describes how dialogue, co-creation and close collaboration with users can provide better solutions and stronger competitiveness.
Why we recommend the book
Customers often hold the most important insights into how products and services can be improved. This book emphasizes the importance of listening, involving, and learning from users – a perspective that is echoed in many of the articles on The Invisible Capital. Innovation rarely happens alone; it is created in the interaction between people.
Blown to Bits: How the New Economics of Information Transforms Strategy
Authors: Philip Evans and Thomas S. Wurster
Short review
This book analyzes how digital information is changing competitive conditions, markets, and business strategies. The authors explain how the internet is disrupting established structures and creating new opportunities for businesses that are able to think differently.
Why we recommend the book
Although written early in the internet revolution, the book describes many of the developments that still characterize business today. It provides valuable perspective on how digitalization affects value chains, competition, and innovation – themes that are central to Invisible Capital.
Wikinomics: How Mass Collaboration Changes Everything
Authors: Don Tapscott and Anthony D. Williams
Short review
Wikinomics shows how openness, sharing and collaboration across organizations create new forms of innovation and value creation. Through a number of international examples, the authors describe how digital networks make it possible to develop products, services and knowledge together.
Why we recommend the book
This book was groundbreaking when it was first published, and many of the ideas have since become a natural part of everyday digital life. The perspectives on collaboration, knowledge sharing, and open innovation processes align very well with the philosophy behind Invisible Capital, where people and networks are at the center of value creation.
The Competitive Strategy: Techniques for Analyzing Industries and Competitors
Author(s): Author: Michael E. Porter
Short review
Competitive Strategy is Michael E. Porter's classic work on how companies can understand the competition they find themselves in and develop a position that provides a basis for long-term profitability. Porter shifts the focus from the individual competitor to the structure of the entire industry and shows how competition is affected by customers, suppliers, new entrants, substitutes and the rivalry between existing companies. This forms the basis for what has later become known as Porter's Five Forces. The book is also about how companies can choose a competitive strategy on the basis of this analysis. It thus established an analytical language for strategy that has gained great importance in both research, teaching and practical strategy work.
Why we recommend the book
We recommend Competitive Strategy because it provides the analytical foundation for much of the thinking Porter later develops in What Is Strategy?. If a company is to choose a unique strategic position, it must also understand the competitive forces, the industry structure and the factors that affect the ability to create and retain value. The book is particularly useful because it reminds us that strategy is not just about internal goals, plans and ambitions. Strategy must be developed in the face of customers, competitors, suppliers, technology and structural changes in the market. Together with What Is Strategy?, the book therefore provides a much richer picture: First, the company must understand the competitive arena. Then, it must choose how to be different.
Competitive Advantage: Creating and Sustaining Superior Performance
Author(s): Author: Michael E. Porter
Short review
In Competitive Advantage, Porter moves the analysis from the industry to the business itself. The main question is how competitive advantage is actually created. One of the book's most important contributions is the value chain, where the business is understood as a system of activities that collectively develop, produce, market, deliver and support a product or service. Competitive advantage cannot therefore be understood only through products or overall strategies; one must examine the activities that create costs, differentiation and value. This understanding later becomes central to Porter's argument about strategic fit: the activities must not only be good in isolation, but also fit together and reinforce each other.
Why we recommend the book
We recommend Competitive Advantage because it brings strategy right down to where value is actually created: in the activities the business performs. This makes the book particularly relevant together with What Is Strategy?. When Porter argues in 1996 that strategy consists of performing different activities than competitors, or performing similar activities in other ways, this builds on the thinking he developed here. For our perspective on value creation, this is particularly interesting. Value does not arise because the business has formulated a strategy on a document, but through people, expertise, technology, processes, collaboration and activities that together enable the business to create something that customers value. The book therefore provides an important connection between strategy, competitive advantage and actual value creation.
The Competitive Advantage of Nations
Author(s): Author: Michael E. Porter
Short review
In The Competitive Advantage of Nations, Porter raises the perspective from business to countries, regions and business environments. The book is based on extensive studies of the competitiveness of ten leading trading nations and examines why certain countries and business clusters are particularly successful in certain industries. A central premise is that national prosperity is not simply something a country inherits through natural resources or other given conditions. It is created, and productivity, innovation, competence, competition and the quality of the environment in which businesses operate are crucial. Here, Porter also develops the well-known diamond model to explain how different national and regional conditions can interact and stimulate competitiveness.
Why we recommend the book
We recommend The Competitive Advantage of Nations because here Porter extends the strategy perspective to the ecosystem surrounding the business itself. Value creation does not occur in a vacuum. Businesses develop in societies with education, research, infrastructure, capital, suppliers, demanding customers, competing businesses and public institutions. This makes the book particularly interesting for understanding value creation as an interaction between people, businesses and society. It also provides an important corrective to the notion that a country's competitiveness can mainly be understood through low costs or access to natural resources. Innovation, productivity and the ability to continuously develop are far more central to Porter's explanation.
Understanding Michael Porter: The Essential Guide to Competition and Strategy
Author: Joan Magretta
Short review
Understanding Michael Porter brings together and explains the most important parts of Michael Porter's strategic thinking in one accessible whole. Joan Magretta herself worked on strategy at the Harvard Business Review and organizes Porter's ideas around two fundamental questions: What is competition, and what is strategy? She explains, among other things, the Five Forces, competitive advantage, the value chain, value creation, trade-offs, fit, and strategic continuity. This makes the connection between Porter's various works clearer than when the concepts are studied separately. The book also includes an interview with Porter.
Why we recommend the book
We recommend Understanding Michael Porter because it helps the reader see the whole picture of Porter's understanding of strategy. Porter is often reduced to the Five Forces or a few models used in isolation. Magretta shows why this is too simple. Competition, value creation, strategic positioning, trade-offs, activity systems, fit and continuity are interconnected. This makes the book a particularly good supplement after reading What Is Strategy?. It makes it easier to understand why Porter does not view strategy as a plan or a collection of goals, but as a coherent system of choices about how the business will create value and compete over time.
HBR's 10 Must Reads on Strategy
Authors: Harvard Business Review, Michael E. Porter, W. Chan Kim, Renée A. Mauborgne and more
Short review
HBR's 10 Must Reads on Strategy brings together some of Harvard Business Review's most influential writings on strategy. The original collection from 2011 features Michael E. Porter's What Is Strategy? as its main article and combines it with works on competitive forces, Blue Ocean Strategy, the organization's vision, business models, strategy execution, and the Balanced Scorecard, among others. The result is not one unified theory of strategy, but multiple perspectives on how organizations can develop, formulate, and execute strategy.
Why we recommend the book
We recommend HBR's 10 Must Reads on Strategy because it places Porter in a broader strategic context. After reading What Is Strategy?, it will be interesting to encounter other central perspectives and see how they complement, challenge, or extend Porter's understanding. The collection also shows why strategy cannot be reduced to a single model. Competitive position, choice, innovation, business model, execution, priorities, and measurement must be seen in context. For the reader who wants to move on from Porter and into the strategy discipline more generally, this is therefore a very good introduction.
Creating a Learning Society: A New Approach to Growth, Development, and Social Progress
Author: Joseph E. Stiglitz and Bruce C. Greenwald
Short review:
Creating a Learning Society examines how knowledge, learning, and technological development contribute to economic growth and long-term value creation. Joseph E. Stiglitz and Bruce C. Greenwald challenge the notion that economic development is primarily about accumulating more physical capital. They argue that society’s ability to create, disseminate, and apply knowledge is crucial to productivity growth and improved living standards. A key point is that learning does not only occur in schools and universities. It also occurs in businesses, through work, production, innovation, and interaction between people and organizations. Knowledge can also spread from one business and one part of the economy to others.
The book thus provides an important perspective on why human capital, competence, innovation and learning must be understood as central parts of a society's ability to create value over time.
Why we recommend the book
We recommend Creating a Learning Society because it expands the understanding of what lies behind economic value creation.
Machines, technology and financial capital are important, but they do not create productivity growth alone. Behind the development are people who learn, develop knowledge, improve work processes, share experiences and find new solutions.
This makes the book particularly relevant to Invisible Capital and our perspective on value creation: A significant part of society's value-creating capacity is found in the knowledge, competence, and learning ability of the people who participate in the economy.
Stiglitz and Greenwald thus provide an academic foundation for one of the most important relationships in modern value creation:
The Value of Everything: Making and Taking in the Global Economy
Author: Mariana Mazzucato
Short review
In The Value of Everything, Mariana Mazzucato asks a fundamental question: What exactly is value – and who creates it? Mazzucato returns to the historical discussions of value in economics and shows how the understanding of value creation has changed. She challenges the notion that high income, high prices or large profits necessarily mean that correspondingly large values have been created. One of the book's most important contributions is the distinction between value creation and value extraction . Mazzucato examines the financial sector, the pharmaceutical industry, innovation and the public sector, among others, and argues that we must become better at distinguishing between activities that actually create new values, and activities that primarily extract values that have already been created.
The book also challenges the traditional notion that the private sector creates value while the public sector mainly consumes or redistributes it. Innovation and economic development often arise through a complex interaction between public investment, research, businesses, capital and people.
The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations
Author: Philippe Aghion, Céline Antonin and Simon Bunel
Short review
The Power of Creative Destruction is about one of the most important drivers of long-term economic growth: innovation.
Philippe Aghion, Céline Antonin and Simon Bunel build on Joseph Schumpeter's classic idea of "creative destruction" – the process by which new technologies, businesses, products and ideas challenge and replace existing solutions.
But the book is not just about the disappearance of the old. The authors examine why some economies manage to create continuous innovation and productivity growth, while others stagnate. Competition, entrepreneurship, research, education, institutions and public policy thus become important parts of the explanation.
Creative destruction also comes at a cost. New technologies and businesses create opportunities and jobs, but can also make existing skills, tasks and business models less relevant. The challenge is therefore to create societies that both promote innovation and enable people to participate in the transition.
Why we recommend the book
We recommend The Power of Creative Destruction because it shows why innovation is a fundamental driver of value creation .
Value creation is not just about producing more of what we already produce. It also occurs when people develop new ideas, technology, and ways of working that enable us to solve tasks better than before.
This makes the book particularly relevant to The Invisible Capital. Behind innovation are people with knowledge, expertise, creativity and experience. But Aghion's perspective also shows that human capital must be part of a larger system where competition, institutions, research, investment and policy create the conditions for new ideas to actually turn into economic and social development.
The book thus provides an important context in our understanding of value creation:
Knowledge → new ideas → innovation → productivity growth → long-term value creation.
Institutions, Institutional Change and Economic Performance
Author: Philippe Aghion, Céline Antonin and Simon Bunel
Short review
Institutions, Institutional Change and Economic Performance is one of Douglass C. North's most important works on why some societies are more successful than others in creating economic development over time.
North shifts attention from traditional factors of production such as capital and labor to the institutions that shape how people, businesses, and governments act and cooperate. Institutions are society's formal and informal rules of the game – including laws, regulations, norms, traditions, and established ways of organizing interaction.
These rules of the game affect the incentives that people and organizations face. They also affect investments, knowledge development, cooperation, transaction costs, and which economic activities emerge.
North also shows that institutions develop over time. History therefore matters: Today's economic opportunities are influenced by institutional choices and development paths that can stretch far back in time.
Why we recommend the book
We recommend Institutions, Institutional Change and Economic Performance because it explains a crucial aspect of value creation that easily becomes invisible:
Value creation needs good rules of the game.
People may have knowledge. Businesses may have capital. Entrepreneurs may have great ideas. A society may have natural resources and advanced technology. But outcomes are also influenced by the institutions that determine how people can collaborate, invest, compete, make deals, and develop businesses.
This makes North particularly interesting for our understanding of trust as part of invisible capital. Trust is not the same as institutions, but stable rules of the game, credible agreements, and well-functioning institutions can reduce uncertainty and make economic interaction easier.
North thus gives us another important part of the value creation picture:
Institutions → predictability and incentives → cooperation and investment → productive activity → long-term value creation.
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