The Possibility Frontiers of System Economics Systems can be optimized to realize economies of speed, scale, scope or span. Combinations of these economies can provide strategic differentiation from the technology asset base. The System Economics Radar provides a framework to explore how combinations of the four economies yield four production possibility frontiers:
The Productivity Frontier is defined by a system optimized to realize economies of speed and scale. That is, a system that achieves increasing marginal returns through reduced transaction costs in throughput and scale. Optimizing a system to extend this frontier yields the highest level of productivity for a given function over time. An example technology asset class optimized for the productivity frontier is manufacturing execution software.
The Innovation Frontier is defined by a system optimized to realize economies of span and speed. That is, a system that achieves increasing marginal returns through reduced transaction costs in sequence and throughput. Optimizing a system to extend this frontier yields greater network effects. An example technology asset class optimized for the innovation frontier is supply chain management software.
The Agility Frontier is defined by a system optimized to realize economies of scope and span. That is, a system that achieves increasing marginal returns through reduced transaction costs in repurposing and sequencing. Optimizing a system to extend this frontier yields greater options for asset configuration. An example technology asset class optimized for the Agility Frontier is Web Services architectures.
The Diversity Frontier is defined by a system optimized to realize economies of scale and scope. That is, a system that achieves increasing marginal returns through reduced transaction costs in scaling and repurposing. Optimizing a system to extend this frontier yields scaled productivity for a variety of functions. An example technology asset class optimized for the Diversity Froniter is customer relationship management software.
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