In the old days, companies that were bigger were also more powerful—and they often had a high market multiple as well. But now, just the opposite may be true. Think of Netscape, a company that barely existed prior to 1995. Is Netscape overvalued? Perhaps. But if you consider how quickly it has mobilized other companies to support and implement its technology, you begin to see why the excitement may be justified.

Netscape’s strategy exemplifies a new form of industrial structure: "webs," or clusters of companies that collaborate on a particular technology. Webs are a natural response to environments fraught with risk and uncertainty—which is why they are prevalent in high-technology arenas. They create powerful new ways to think about strategy, risk, technological uncertainty, and innovation. Webs help us see why the "virtual company" may be more than just an abstract concept. They influence management focus, organizational structure, performance measurement, and information systems. Webs may even represent the opening salvo in the transition from industrial-age to information-age strategies.

What are webs?

An economic web is a set of companies that use a common architecture to deliver independent elements of an overall value proposition that grows stronger as more companies join....