The Network Economy Hugo Velthuijsen, professor New Business & ICT

Contents Network economy Sourcing KPN & India SMEs & Offshoring Market chains Health care Energy Domotica We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 2

Contents Network economy Sourcing KPN & India SMEs & Offshoring Market chains Health care Energy Domotica We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 3

The Network Economy Evolution of supporting tools

The Network Economy Customers: are better informed about you Changing the relationship of businesses with their customers Customers: are better informed about you are better informed about competitors are better informed about their own preferences are global have more choice expect better service are easier to communicate with

The Network Economy China, India, fomer Soviet Union Extreme competition China, India, fomer Soviet Union 3bn new capitalists India: 400.000 new IT bachelors graduate every year Better educated, more eager Seamless collaboration thanks to New IT / Web 2.0 / Broadband 14-9-2018 New Business & ICT

N = 1 R = G The Network Economy The power shifts to the customer 14-9-2018 New Business & ICT

The Network Economy Trias Politica Legislative Executive Judiciary Social networks organising citizen participation into a 7th power? Trias Politica Legislative Executive Judiciary Three additional powers Civil service Media External consultants

The Network Economy The IT industry is leading Traditional way of doing business is changing The IT industry is leading

Professional networks Xxxxxxxxx Crowd sourcing The Network Economy Some ways to exploit different forms Xxxxx (Out)sourcing Professional networks Shared innovation Xxxxxxxxx Crowd sourcing 14-9-2018 New Business & ICT

In the Next Industrial Revo-lution, Atoms Are the New Bits The Network Economy Transaction costs have changed 18.02 Mid-30s: Big organisations exist to minimize transaction costs (Ronald Coarse) Now: transaction costs are much lower Cost of overhead and bureaucracy much less offset In the Next Industrial Revo-lution, Atoms Are the New Bits

We define “The Network Economy” to encompass business activities Definition We define “The Network Economy” to encompass business activities achieved through temporary collaborations between independent individuals and/or businesses

The Network Economy Scope of this presentation Understanding the art of doing business with loosely dependent partners and to exploit the benefits

Contents Network economy Sourcing KPN & India SMEs & Offshoring Market chains Health care Energy Domotica We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 14

KPN & India Site visits October 2009

KPN & India Visited organisations

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KPN & India Most important learnings Amount of students educated is staggering (400,000 engineers / yr) Level is high (top students go to world wide top universities) The question is not can they do it, but can we do it High end IT & BPO companies conform to international standards CMM-I level 5 Native speakers in English Used to multi-cultural collaboration Need to invest in knowledge transfer and relationships For foreign employees to understand the needs and to build better solutions For own employees to exploit capabilities better For manageing employee turnover We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. * See also J. Rottman, Successful knowledge transfer within offshore supplier networks: a case study exploring social capital in strategic alliances, Journal of Information Technology, 23, 31-43, 2008 14-9-2018 New Business & ICT 22

and € II I KPN & India Further activities Kraljic model mate van standaardisatie standaard specifiek Toegevoegde waarde veel weinig werkplekbeheer communicatie applicatiebeheer I II datacenters Kraljic model uitdaging and € Bron: Lecture Outsourcing, Frank Willems, Twijnstra Gudde

KPN & India Efficiency & effectivity Company Outsourcing Offshoring Business department IT department Business owner IT demand IT supply IT proc Acc mgmt IT proc Acc mgmt IT ops 14-9-2018 New Business & ICT

Contents Network economy Sourcing KPN & India SMEs & Offshoring Market chains Health care Energy Domotica We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 25

Sourcing & SMEs Need for looking abroad Expected shortages of IT specialists Estimates between 8800 and 16,000 in the Netherlands once the financial crisis is over* Shortage equals approx 5-10% of available jobs requiring higher IT education Small & Medium Enterprises (SMEs) typically do not score top of the list of employers of choice IT specialist shortages will hit SMEs hardest SMEs need to look abroad for fulfilling IT need Bring the work abroad (offshoring), or Bring foreign IT specialists to the Netherlands And: cost, quality & know how! We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 26

Sourcing & SMEs Finding the way Corporate Large SME SOHO

Seminar SME & Offshoring planned for June 9, 2010 Sourcing & SMEs The challenge Strategy What?, core business?, partners?, … Operations Tooling, interfacing, … Finance Reporting, risk management, ... Organisation and human resource management Functions, competences, … Legal Intellectual property, Open Source, shaping collaboration, … Governance Seminar SME & Offshoring planned for June 9, 2010

Contents Network economy Sourcing KPN & India SMEs & Offshoring Market chains Health care Energy Domotica We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 29

Market chains Healthy ageing and Energy transition are focus points for Hanze University and RUG and City and Province of Groningen Health care and Energy each form complex market chains Inerests of different roles often not aligned Need for win-win-win business cases Dominant incumbents – limited innovation track record Need for big macro-economic transitions (ageing, contraction, CO2 reduction, fossil fuel depletion) Strong governmental interference on a macro-economic level Difficult markets for innovation and entrepreneurship (micro-economic activity) We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 30

Contents Network economy Sourcing KPN & India SMEs & Offshoring Market chains Health care Energy Domotica We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 31

Health care example IT Health Care studies The Intelligent monitoring of mentally handicapped persons IT Health Care studies Hanze Institute of Technology Human technology, Law 14-9-2018 New Business & ICT

Health care example Key issues User acceptance Impact & business case 14-9-2018 New Business & ICT

Health care example Dialogue on main issues Building metaphor Dialogue on main issues Technical details for the professional Incremental requirements Weighing of costs vs needs

Health care exampel Agile for user acceptance Interactive Iterative Explorative Cost based 14-9-2018 New Business & ICT

Health care example Claims An agile development approach achieves user acceptance Stakeholder analysis and scientific approach allows correct identification of business case requirements IT approach supports self reliance of mentally handicapped IT allows care to become more proactive IT contributes to resolving shortage of man power IT allows employees in health care organisations to a more tactical and strategical approach to care IT prevents escalating undesirable behaviour We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 36

Contents Network economy Sourcing KPN & India SMEs & Offshoring Market chains Health care Energy Domotica We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 37

Energy example Energy transition

Energy example Local Energy Cooperative Energy production that exceeds own consumption is a marketable product Product can be stored, traded, or sold Business question: Is there value in local cooperation? Operational question: How to manage energy and money transfer

Contents Network economy Sourcing KPN & India SMEs & Offshoring Market chains Health care Energy Domotica We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 40

+ = Domotica Domotica Domotica = electronics in the home 14-9-2018 New Business & ICT

Explanations for lack of success: Too much technology driven Domotica After 20 year of projects and pilots market reach is limited Explanations for lack of success: Too much technology driven Not sustainable after pilot phase Too much “island thinking” Not user friendly enough Not extensible enough Too expensive Source: Statements by Domotica Plaform Nederland 14-9-2018 New Business & ICT

It is better to have a reasonable market share in a very large market Different sectors are convergeing in the home… … but they are not CONVERGEING! Gaming Audio Video Health care Different players in different sectors see the home as their future market of growth Some of these players are world players (Sony, Philips, Microsoft, Google, etc.) Most larger players aim for dominant market shares (of their perceived market) Few players aim at transsectoral innovation Commu-nication Security Energy & Sustain-ability Lighting Comfort It is better to have a reasonable market share in a very large market than market dominance in a very small market! 14-9-2018 New Business & ICT

Domotica “Island thinking”: vertical integration Koala Zorg op Afstand Google Powermeter PConTV company Sony Essent Oxxio Etc. application specific equipment na TV various na na Camera/ TV PC TV Thermo- staat PC PC TV display PS2 PConTV modem HR-e ketel Smart meter Smart meter Box hub WiFI PLC WiFi GPRS ? Cat5 Infrastructuur RG RG RG GPRS netwerk ? RG Gateway 14-9-2018 New Business & ICT

No overhead for potential future additions; lower one-off costs Vertical integration Advantageous for one-offs; disadvantageous for multiple solutions Advantages Integrated solutions Easy to install No overhead for potential future additions; lower one-off costs Optimized design for single application Disadvantages Difficult to integrate with different solutions Higher overall costs due to duplication of a single function by different solutions Potential design drawbacks for additional solutions 14-9-2018 New Business & ICT

The Domotica market is a composite of different markets Advancement of domotica in the home as a sequence of life time decisions People will make stand alone decisions on buying domotica-style products and services at different times Each decision stands at its own at that time, but is influenced by the installed base At different times, people may have different decision criteria (cost, quality, reliability, ease of use, comfort) and fall within different market segments Each time one solution competes with numerous other solutions Low incremental costs as well as ease of use will usually be deciding factors if a new product is bought and which new product is bought Example of a family lifecycle Triple play (phone, TV, Internet) Babyfoon Energy conservation Audio & video to multiple rooms Gaming Security system Upgraded energy conservation system Remote health care Home assistance The Domotica market is a composite of different markets 14-9-2018 New Business & ICT

Generic contolling device Domotica Platform view: Horizontal integration application specific equipment PC other display TV Generic contolling device hub Generic infrastructure Infrastructuur Generic gateway Gateway 14-9-2018 New Business & ICT

Business model consequences Cost comparisons Typically, closed, dedicated solutions are cheaper and therefore more attractive to potential buyers Generic infrastructures have low perceived consumer added value Different possible solutions: Someone with deep pockets (the government?) invests in a common infrastructure (without applications; thus no real business case) Someone develops an open platform and application(s) with sufficiently high volume and economies of scale to create a ‘de facto’ standard (like the Iphone example), Someone develops a truely incremental model Others? 14-9-2018 New Business & ICT

Can this model work for Domotica? Open innovation like Apple Iphone? Iphone is a great product with good basic applications An open applications programming interface (API) for adding numerous other applications 1 distribution platform > 150,000 applications, developed by ‘everybody’ Caveat: there is always more creativity outside the company than inside! Can this model work for Domotica? 14-9-2018 New Business & ICT

Thank you Any questions? We, as the whole Hanze University have 20.000 students. Students can choose between 18 different schools. Our academic staff counts roundabout 1100 persons, the supporting staff 900. 14-9-2018 New Business & ICT 50

Source: David Byrne (Talking Heads) in Wired The internet has the power to destroy The internet as the great equalizer Production Marketing & Credibility Sales Distribution Business Model Example Music industry Source: David Byrne (Talking Heads) in Wired 14-9-2018 New Business & ICT

An example New Business 12 yrs young Ambition: to make available all information on Earth Business model defined after 5 years Market capitalization is starting to equal Microsoft’s New common enemy (was MicroSoft) Last innovations through acquisitions Google Earth Gmail Etc. 14-9-2018 New Business & ICT

Niches are getting more important Thanks to the internet: Smaller markets become addressable Lower marketing & distribution costs More choice Results in: Decline in “best sellers” More items Higher total volume Market growth 14-9-2018 New Business & ICT

Free mobile Free CD Radiohead Free demo software Free web service Nothing in life is free… Free mobile Free CD Radiohead Free demo software Free web service Free club entrance Free drugs Free google search 14-9-2018 New Business & ICT

The whole world can help you Open innovation Caveats There are more ideas outside the company than inside Profit from the ideas of others Being smarter more important than being first 14-9-2018 New Business & ICT

Integrating in business practices Solving SMEs problems? Crowdsourcing The wisdom of crowds Business communities Social networking Integrating in business practices Solving SMEs problems? Good employees State of the art knowledge Innovative power Global sourcing 14-9-2018 New Business & ICT

Select your competitive edge Crawford model Level Access Experience Price Product Service Dominate Solution Intimacy Agent Inspire Customize Differentiate Convenient Care Consistent Dependable Educate At par Easy Respect Honest Credible Accommodate Sub par Hassle Disrespect Misleading Poor Forgettable Recipe for success: Dominate with 1 attribute; differentiate with a 2nd, operate at par with the rest (from: “The myth of Excellence”, Crawford & Mathews, 2001) 14-9-2018 New Business & ICT

Market development 14-9-2018 New Business & ICT