We are witnessing the early, turbulent days of a revolution as significant as any other in human history. A new medium of human communication is emerging -- one that may surpass the printing press, telephone, and television in its impact on our economic and social lives. Interactive multimedia and the information highway are creating a new economy based on the networking of human intelligence. -- Donald Tapscott The Digital Economy

The Network Era of Computing as an Economic Opportunity Bradley C. Wheeler Assoc. Professor of Information Systems Kelley School of Business Indiana University Bloomington, Indiana

Data Processing Era You are here. Organizations Learn how to get Value from Info Technology Network Era Micro Era Adapted from Nolan, Eras of Info Technology

1. Shifting Economics A greater proportion of economic value will be created by managing the bits. Being Digital, Negroponte

2. Technology Standards  Interoperability among private and public telecommunications networks using TCP/IP  Now: HTTP & HTML, GSM, Java Taking hold…XML, GPRS, Bluetooth  Soon: more Java,.Net, Distributed Objects, more XML, WAP, 3G, Bluetooth

3. Innovation  Digital products and processes can be created, adapted, deployed, adapted, bundled, adapted, unbundled, adapted in near-real time Does anybody know... Yes! You should ….. Dallas London Singapore

4. Rapid Diffusion  Metcalfe’s Law The Value of a network approximates the number of users 2 for large networks.  Coasean Economics Digital products/processes have very low transaction costs Network form of organizational design Focus on core competencies of the firm

5. Digital Convergence VoiceVideoData + Computing ~ Delegation New Capacity New Availability New Pricing

Thus, Organizations Realize Arie De Geus, Head of Planning, Royal Dutch/Shell “The ability to learn faster than your competitors may be the only sustainable competitive advantage”

1. Redefining Industries Industrial Age  Linear data flows  Proprietary data  Do it all, proprietary  Make and sell Network Era  Massively parallel data flows  Replicated or shared near real-time data  Coopetition in establishing roles  Customer intelligence has new urgency

Redefining Industry Structure Physical and Information Flows inbound opera- tions outboundsalesservice inbound opera- tions outboundsalesservice Profit Margin inbound opera- tions outboundsalesservice Profit Margin Industrial AgeNetwork Era Implications?

2. New Mediation  Disintermediation Fewer intermediaries in the physical flow of goods (Atoms)  Reintermediation Creation of new infomediaries in the flow of information (Bits), portals, content aggregators

Conventional Atom & Bits Dealer? Agent? Manufacturer FedEx Wholesaler Physical Flow of Goods (Atoms) Information Flow (Bits)

EC Diverges Atoms & Bits Infomediary: Dealer? Agent? Manufacturer FedEx Physical Flow of Goods (Atoms) Information Flow (Bits)

3. Pricing  The assumption is that prices will not be fixed Return to the old world bazaar Yield-based pricing models proliferating

4. New Resource View Scarce Resources  Time  Talent  Management Attention Plentiful Resources  Money  Computing Power  Service Providers Adapted from Geoffery Moore Are you rationing and leveraging the right resources?

5. IT/IS are Critical  Information Technology (IT) becomes a factor of production  Information Systems (IS) become increasingly strategic  IM is a strategic capability of the organization

e-Business Skills Behavioral “People” Technical “Tools” “ B usiness T echnologist”. Organizational “Strategy”

Summary Drivers  Shifting Economics  Technology Standards  Innovation via Networked Intelligence  Rapid Diffusion  Digital Convergence Effects  Redefining Industries  New Mediation  Pricing  New Resource View  IT/IS Skills Essential

An Alternate View from “Ten Deadly Myths of e-Commerce” Bert Rosenbloom Business Horizons, March-April 2002

Ten Deadly Myths 1. Myth of disintermediation 2. Myth of lower costs 3. Myth of real-time product flow 4. Myth of “profits don’t count” 5. Myth of first mover advantage 6. Myth of market cap worship 7. Myth of “convenience and efficiency are everything” 8. Myth of pure play 9. Myth of valuation by publicity 10. Myth of the Internet as a whole new culture

Defining Electronic Commerce

E-Commerce versus e-Business? E-Commerce - the online exchange of goods, services, and/or money within firms, between firms, between firms and their customers, and between consumers. e-Business - automating all business processes and integrating them with E-Commerce applications to create one seamless, digital enterprise serving customers and partners. eB eC

EC Segments To: From: Consumer/ Citizens BusinessGovernment Consumer/ Citizens ebay.compriceline.comirs.treas.gov Business 1800flowers.com depot.com orderzone.com Government irs.treas.govwww.ftc.govwww.gao.gov

PointCast Reflect.com Winners! Losers! ? What differentiates winners and losers in e-business?

Commerce Threshold Hyper-growth Computers & Electronics Aerospace & Defence Utilities Motor Vehicles Shipping & Warehousing Petrochemicals Pharmaceuticals & Medical Paper & Office Products Source: Forrester Research; adapted from The Economist 26th June 1999 Heavy Industries Food & Agriculture Construction Consumer Goods Leaders & Laggards : When Supply Chains move online

e-Business Questions What are some of the Big e-business questions confronting business? ?

Making Business Sense  How should a manager frame the decision to "weight the importance of protecting existing relationships with the distributors and partners that account for most of their current revenue against the advantages of establishing future strategic positions and revenue streams?"

Making Business Sense  "Pirates will probably emerge from the ranks of those innovative companies that can recognize where core value will be most effectively delivered to customers over a network."  How can managers identify real digital value opportunities?

The Network Era of Computing as an Economic Opportunity Bradley C. Wheeler Assoc. Professor of Information Systems Kelley School of Business Indiana University Bloomington, Indiana