In the information age it's tougher to distinguish between product and service, buyer and seller

By THOMAS K. GROSE

avid Bowie's many transformations in three decades of performing qualify him as a singularly creative rock musician. Last year he proved to be an innovative businessman as well by floating a personal bond issue pegged to future concert receipts and royalties. Investors eagerly snatched up the $50 million issue. Other established rock acts are likely to follow Bowie's lead. Will investors one day be able to buy an interest in top business performers with huge earning potential?

Bet on it, say Stan Davis and Christopher Meyer. Their book, Blur: The Speed of Change in the Connected Economy (Capstone, 244 pages), argues that the old rules of economics and commerce are being blown apart by high-speed technological change. Meyer is director of the Boston-based Ernst & Young Center for Business Innovation and Davis is a research fellow there. As more real markets begin to mimic financial ones, they predict a brisk trade in new-fangled financial instruments like stocks and bonds linked to the future incomes of executives. Crave a cappuccino? The Starbucks of the future may feature a ticker that quotes hourly changes in the price of your coffee--just like the nonstop fluctuations in share prices. "How long before potato chips are marketed like blue chips?" the authors ask.

Several forces are working together to create pure market economies where they did not exist before, say Meyer and Davis. There is the sheer speed of commerce, exemplified by accelerated product life cycles and the availability of "real time" information. People, products and companies are becoming so electronically connected that such information can have broad and immediate consequences. The authors also argue that the commercial importance of intangibles like service, brand loyalty, prestige and celebrity is increasing. In a world where few durable goods are meant to last, physical and financial capital--the mainstays of the old economics--have dwindling worth.

The old paradigm of sellers bringing products or services to market and setting the price is passe, say the authors. For one thing, the distinction between products and services is becoming fuzzier. Producers now bring a blend of the two to market. For example, a Mercedes test model connects its onboard computer to a service center via the Internet. If something goes wrong, the software lets the service center diagnose the problem while the car remains on the road; technicians might even be able to download a repair.

The roles of buyers and sellers are likewise blurring, and information is frequently exchanged along with products and services. The Irish supermarket chain Superquinn pays customers who spot problems, like malfunctioning freezers or products past their sell-by dates. "The shopper is selling quality control services to the store," the book notes. Davis and Meyer say these changes will benefit consumers. They predict the power of the Fortune 500 corporations will eventually be surpassed by that of what they call the Value 500, made up of enormously powerful consumer organizations.

Blur is witty, and the authors marshal telling anecdotes to illustrate how rapid innovation is altering the economy, and how smart firms are adapting. In describing and advocating these changes, the book is on terra firma, but some forecasts, like continuously gyrating retail prices, seem far-fetched. Still, the benefits of technological breakthroughs are often oversold. Weren't more of us supposed to be telecommuting by now?