Doing business in the network economy Hugo Velthuijsen, Professor New Business & ICT

Internet destroys businesses The internet lowers barriers to entry Example: Music industry Other businesses impacted: Travel Photography Postal services Banking And many, many more ... Production Marketing & Credibility Sales Distribution Business Model: from selling records to selling tickets Source: David Byrne (Talking Heads) in Wired 20-9-2018 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 20-9-2018 New Business & ICT

The internet is still developing Evolution of supporting tools 20-9-2018 New Business & ICT

Social media and your business Marketing & communication are getting out of your control Your business is being discussed on the internet right now You might as well listen to what is being said You might as well try to change opinions You might as well try to change your performan-ce accordingly 20-9-2018 New Business & ICT

Power shifts to the consumer R = G 20-9-2018 New Business & ICT

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Extreme competition China, India, former 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 20-9-2018 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 20-9-2018 New Business & ICT

Large groups of people are smarter than an elite few Crowdsourcing Making good use of other’s insights and creativity Large groups of people are smarter than an elite few Solving problems Creating new ideas Achieving innovation Making decisions 20-9-2018 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 But be prepared to reap what you sow! 20-9-2018 New Business & ICT

Making a difference Know what your own added value is Know your own worth Know what your own added value is Translates also to companies Concentrate on your own specialty Collaborate to add the rest Rise of the network economy 20-9-2018 New Business & ICT

Professional networks Xxxxxxxxx Crowd sourcing Collaborating in a network economy Some examples Xxxxx (Out)sourcing Professional networks Shared innovation Xxxxxxxxx Crowd sourcing 20-9-2018 New Business & ICT

The network economy is about A definition select, persistent, and structured sets of autonomous entities (individuals or companies, as well as non-profit agencies) engaged in creating products or services based on implicit and open-ended contracts to adapt to environmental contingencies and to coordinate and safeguard exchanges” Source: Jones et al., 1997, A general theory of network governance, exchange conditions and social mechanisms, Academy of Management Review, Vol 22 (4), 911-945 20-9-2018 New Business & ICT

Governance in the network economy What is governance? Governance provides mechanisms for promoting: that results are achieved, and that information gets there and only there where it is needed Question: How “to guarantee” results in a networked collaboration with implicit and open ended contracts? 20-9-2018 New Business & ICT

Governance in the network economy Comparison with traditional governance Market-based (traditional) Market orientation Short-term relations Competition Capitalist Shareholder value Low stakeholder loyalty Contract / Control Radical innovation Stakeholder conflicts Network-based Internal orientation Long-term relations Cooperation Collective Stakeholder value High stakeholder loyalty Trust Incremental innovation Stakeholder balancing

Governance in the network economy When and how to organise networked collaboration Tasks Persistent/recurrent Frequent interactions Clear purpose Uncertain results Goal oriented, but no clear prescription Solutions to be built incrementally Sufficient resources Clear roles Participants Relevance Expected gain Cost of contributing Strength of front runners Social mechanisms Currency or “reputation” Values & norms Cost of non-compliance Damage to “reputation” Exclusion Permeability Based on analysis of (Jones et al., 1997) and experience with success and failure of internet-based social communities

The impact of the internet on (international) business is huge Conclusions The impact of the internet on (international) business is huge Threat and opportunity are close neighbours on the internet Social media is not the end; Linkedin and Twitter not the answer Collaboration in the network economy will only succeed if the task is right, the community is right, and the right social mechanisms are in place 20-9-2018 New Business & ICT