Electronic Commerce & the New Economy Richard T. Watson The University of Georgia

Capitalism, Socialism, and Democracy Joseph Schumpeter “The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumer goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalism creates.”

The new … Consumer goods Information-based services Methods of production and distribution The Internet Markets Global information and services Organizations Net-enhanced organization (NEO) Object-oriented strategy

The object-oriented firm

Creative destruction Private enterprise is continually destroying the old creating the new

The drivers of the revolution Moore's Law The power of computing doubles, while the cost halves, roughly every eighteen months Gilder's Law The total bandwidth of the communication system triples every 12 months Metcalfe's Law The utility of a network is exponential to the number of nodes in the network

The revolutions Agricultural Industrial Information Food Goods Services

Continuing the revolution Household network Household server Information service provider National Information Infrastructure connection

The principles of the new economy Matter Space Time People Growth Value Efficiency Markets Transactions Impulse

Matter Processing bits is more profitable than processing atoms People and knowledge are the strategic resource High/unrealistic capitalization of bits businesses Problem How do you manage knowledge?

Space The overthrow of the tyranny of distance Amazon has sold books to millions people in more than 160 countries Far fewer local monopolies US Telecos are threatened by Internet telephony startups in Israel Nano markets emerge Problem What happens to marketing?

Time Fast response is critical Build to order is the coming expectation Constant change Ubiquitous connectivity Homogenization of time Business continuity is critical Problem When does work stop?

People People are the only resource Critical skills shortage Offshoring Half-life of knowledge is decreasing Problems How do we solve the the digital divide? What happens to US high tech jobs?

Growth The land grab Brand building Network effects Viral marketing Hotmail was able to grow a subscriber base of 10 million within two years Problem How do you make each new customer add value to existing customers?

Value Free goods create value networks Netscape Navigator RealPlayer Value comes from plentifulness not scarcity Network effects Problem How do you value a NEO?

Efficiency Low friction economy XML Disintermediation Infomediaries Travelocity Move to auctions Problem Where is your revenue management system?

Markets Markets move towards perfection Search engines and shopping agents Consumers empowered Auto-By-Tel Edmunds.com Problem How do you handle disaffected and united consumers?

Transactions The Web transaction is the service encounter Transactions are the foundation of marketing and customer knowledge Information is service Information adds value to products and services Information is a significant part of the product Information is easier to customize Problem How do you use information to differentiate?

Impulse Massive choice Oversupply Sophisticated and wealthy consumers Buying is effortless Day trading Problem How to market for impulse flow?

The power of the new economy 15 billion invoices are mailed in the US each year $US13.5 billion a year savings

Metamorphosis Peter Drucker Innovation begins with abandonment It’s not what you start It’s what you stop that counts What can you creatively destroy to ensure success in the new economy?