E-Business and the New Economy

Internet & Money

E-Business
‘Any business activity whose main operations take place on the Internet, regardless of the relation between physical and virtual dimensions of the firm.’

Structure of presentation
1. 2. 3. 4. 5. 6.

Introduction The Network Enterprise Financial aspects Work in the e-conomy Productivity and Innovation The New Economy and its Crises

Introduction

‘Internet is the fabric of our lives’

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

3 independent processes
 Globalization

and need for management

flexibility
 Demands

regarding individual freedom and open communication advancements (IT, ICT)

 Technological

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

Internet
 Flexibility

and task performance  Coordinated decision-making  Decentralized execution  Individualized expression  Global communication …bringing the 3 forces together, creating the Network Society
Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

Internet and Business
 Supplier-customer  Management  Production

relationship

process  Cooperation with other firms  Financing  Valuation of stocks
‘networked economy with an electronic nervous system’
Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

The Network Enterprise
 Internal

decentralization of big firms  Cooperation between big and small firms  Linkage small and medium networks and large corporations  Strategic alliances
‘the network is the enterprise’

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

Example 1: Cisco

Business model based upon internal and external networks
– – – – –

Interaction company, customers and suppliers Manufacturing communication online Employers interconnected Accounting Inventory

 

Production outsourced Active acquisition policy

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

Example (2) – Zara

Computerized network structure
– –

Daily interaction between sales and design Electronic transmission from design to factory
12.000 designs per year Re-supply of stores twice a week Time from design to store 2 weeks

‘The essence of e-business is in the Internet-based, interactive, networked connection between producers, consumers, and service providers.’

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

Internet and the Network Enterprise
 Scalability

(global network)  Interactivity (real- or chosen time)  Management of flexibility  Branding  Customization

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

e-Capital and Market Valuation
‘The computer networking capacity of trading systems is transforming financial markets, and the new rules of financial markets are providing the necessary capital for the financing of the Internet economy’

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

The new financial market
 Global

characteristics and interdependencies financial markets  Electronic trading the core of financial markets  A global exchange market concentrated in a few nodes

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

Online investments
 Increased

market volume  Criticality online information
Danger; perceptions represent reality
 Less

dependency on intermediate firms  Reactions in real-time
 exponential increase in market volatility

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

Work in the e-conomy

Self-programmable labor

China, India, Eastern-Europe, Russia
 ‘brain circulation’ rather than ‘brain drain’

Payment through stock options
– –

Low costs in wages Creating total commitment The networking form of business The fast pace of the global economy The technological ability to work online

Flexibility, as a result of
– – –

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

e-Business and work
 Work

flexibility  Variable employment patterns  Diversity of working conditions  Individualization of labor relations
Coming up:  self-employment, part-time and temporary work, and consulting

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

Productivity and Innovation
Sources of productivity growth in the Information Age, an economy..
..powered by Information Technology ..dependent on self-programmable labor ..organized around computer networks  Innovation stands at the base of this growth

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

Innovation
‘Innovation is the heart that pumps the New Economy’

 Facilitated
– – –

by open access to information and cooperation
Network effects Path dependency Increasing returns

 Cooperation

in innovation, competition in applications and services

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

The New Economy and its Crises
‘Without money there can be no innovation’

 Essence
– –

of constant investments  Essence of stock market
Non-economic factors Expectations fuel investments

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

March 10, 2000
       

Dot.com firms fail to meet expectations Wrong anticipations regarding relation with potential customers Technological restructuring IT-industry ‘Mobile internet’ did not lift off Y2K follow-up Earlier irresponsible investments Political crises Influence of some conservative economists

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

Remedy
 Ability

to react Just-in-Time essential R&D capacity

Volatility of the market Innovation less dependent on stock

 Endogenous

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises

The New Economy

‘..driven by a highly sensitive stock market that finances high-risk innovation at the source of high productivity growth.’

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises