This is no longer true. With little fanfare, the 1990s witnessed a change to a world of excess supply on almost every front. Money is no longer scarce; it's now relatively easy for any business or businessperson to finance an enterprise built around a smart idea. Skilled labor is plentiful. Although there may be local labor shortages in particular skills, talent is abundant on a global level. (Computer programmers are found in Bombay, San Antonio, Malaysia and even Romania—all reachable via the Internet.) Distribution channels? Selling and shipping extend around the globe overnight now, thanks to the Internet. Few companies have major difficulties in bringing their products or services to the marketplace. Information and ideas travel freely. And innovation and invention rarely shield any company from competition for more than several months—or, in some cases, even a few days.

You might object that the supply of oil, say, or of Moet & Chandon champagne is limited and will always be, therefore, expensive. But the limitations on our supply of both are largely artificial. Those resources, if you consider wine a valuable natural resource—as I do—are actually quite plentiful. Those who control the supply of oil have limited the world's access to that supply to boost prices to artificially high levels. And Moet & Chandon has, in reality, millions of bottles of its elixir stored away. Copper, iron, magnesium, zinc: won't those resources run out? Possibly, down the road, but with most of them, science and technology will come up with ample supplies of artificial substitutes. PVC pipes are a perfectly suitable replacement for copper ones. And our technological ingenuity has already come up with a variety of alternative fuel technologies to eliminate our dependency on fossil fuel, if we chose to adapt our habits, and our industries, to take advantage of them.

As a result, throughout the developed world, there is—or will be—a significant oversupply of most goods and services. I'm not just referring to the dozen different labels of bottled water on grocery shelves, or the almost interchangeable brands of personal computers on sale as commodities at ever lower prices. The fact is that there is huge overcapacity in virtually every line of business. Auto factories already in operation can produce thirty percent more cars per year than people actually need. As a result, we have too many cars, computers, networks of dark fiber-optic cable already in the ground: all the outcome of overcapacity everywhere.

This paradigm shift is, in many ways, a wonderful event. It means that the struggle between consumers and providers—which extends back to before recorded history and the bazaars of Mesopotamia—has been decided. The consumers have won. In the world of excess supply, consumers are the real leaders of business now. They are in a position to call the shots based on what they want—not on what manufacturers, marketers, distributors, advertisers, or retailers are willing to make and sell.

This shift has disturbing implications for business. In the new world, what was once friendly competition for market share in a comfortable, clubby atmosphere where there were plenty of buyers to go around has become a battle where every company's survival is always at stake. And competition is likely to become even more intense in the years ahead.

At the same time, many competing products and services have become impossible to tell apart. Worthwhile innovations are rapidly imitated; today's unique benefit is tomorrow's standard feature. What would have ensured years of profit in the past is now a mere ticket into the competitive arena. Products that once stood alone now face dozens, sometimes hundreds of competitors. Once-powerful brands are converging into commodities differentiated—if at all—by price alone. Multiple brands are perceived to have equal value. And in this price-sensitive, hotly competitive world, profit margins are under constant downward pressure. Commoditization is the cancer of 21st century business.

It's a brutal business environment. Some of the old tactical responses to a downturn in demand will still work, up to a point. Companies continue to cut costs, but there's a limit to how much they can cut without impairing quality. Companies may increase productivity per worker, but productivity gains are up against the law of diminishing returns. Ironically, this environment is forcing us to reinvent the way we make and sell products and services in a way that, over the long run, will usher in a far more personal, humane way of doing business. Long-term success is requiring business leaders to compete according to a set of rules and values quite different from those that brought prosperity down through history.

The Internet is playing a key role in this shift. It's a truly revolutionary force, one with the manifest potential to obliterate borders and strengthen even further the consumer's control over business. It amplifies every individual's voice as a buyer and—at least as important—as a citizen. It's also global, the first and (so far) only truly worldwide communications medium in history. It's available to anyone with access to a computer at a fraction of the cost of any other medium.

The Internet amplifies what the economy is already doing: it empowers individuals as buyers—to shop for the best price from dealers or suppliers around the world in a matter of seconds. It also lets businesses shape processes and practices from the ground up. In the past, gathering, analyzing, communicating and sharing information was difficult and costly. The Internet makes it far easier and cheaper to start and run a business. It allows a company to leapfrog or streamline most traditional supply, production, distribution, and sales channels. It makes world-class customer service more readily available than ever.

The Internet makes it possible to eliminate from our business processes virtually anything that does not add value. This intensifies competition: start-ups with a great idea and a good business model, catch up with veterans in a matter of months. All of this drives down prices and creates pressure to improve products and services. Nothing holds its value for long. When things are so easy to get, prices, margins and profits fall and keep falling.

What's needed is a new business model that encourages constant innovation, while drastically eliminating intermediate steps between the customer and the producer of a product or service. A new business model must stimulate demand by creating friendships with individual customers, a personalized way of doing business that builds a brand identity, an intimacy of service, that customers trust above all others.