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Electronic Commerce Strategy An Introduction Richard T. Watson The University of Georgia [email protected]
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Capitalism, Socialism, and DemocracyJoseph 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 goodsInformation-based services
Methods of production and distributionThe Internet
MarketsGlobal information and services
OrganizationsObject-oriented firms
The object-oriented firm
physical flow
electronic flow
Bookwholesaler
inventoryorder
book
Parcel service deliverytracking
servicerequest
Customereditorial
sales
book
editorial
sale
Affinity groupsales
sale
check
credit card statement
creditauthorization
order
Bankpayment
Authormarketing
Amazon.comsales
marketingIS development
editorial
credit cardaccount details
The new organizationBryne, J. A. Business Week August 28, 2000, 84-96
Characteristic 20th Century 21st CenturyOrganization Pyramid The networkFocus Internal ExternalStyle Structured FlexibleSource of strength Stability ChangeResources Physical assets Information
The new organization
Characteristic 20th Century 21st CenturyOperations Vertical integration Virtual integrationProducts Mass production Mass customizationReach Domestic GlobalFinancials Quarterly Real-timeInventories Months HoursStrategy Top-down Middle-out
The new organization
Characteristic 20th Century 21st CenturyLeadership Dogmatic InspirationalWorkers Employees Employees &
free agentsJ ob expectations Security Personal growthMotivation To compete To buildImprovements Incremental RevolutionaryQuality Affordable best No compromise
Creative destruction
Private enterprise is continuallydestroying the oldcreating the new
The drivers of the revolution
Moore's LawThe power of computing doubles, while the
cost halves, roughly every eighteen months
Gilder's LawThe total bandwidth of the communication
system triples every 12 months
Metcalfe's LawThe 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
Informationserviceprovider
National InformationInfrastructure connection
The principles of the network economy
MatterSpaceTimePeopleGrowth
ValueEfficiencyMarketsTransactions Impulse
Matter
Processing bits is more profitable than processing atoms
People and knowledge are the strategic resource
High/unrealistic capitalization of bits businesses
ProblemHow do you manage knowledge?
Space
The overthrow of the tyranny of distance In the last three years, Amazon has sold books to 1.5
million people in 160 countries
Far fewer local monopolies US Telecos are competing with Internet telephony
startups in Israel
Nano markets emergeProblem
What happens to marketing?
Time
Fast response is criticalBuild to order is the coming expectationConstant changeUbiquitous connectivityHomogenization of timeBusiness continuity is criticalProblem
When does work stop?
People
People are the only resourceCritical skills shortageThe new millionaires
The options handcuffHalf-life of knowledge is decreasing Problem
How do we solve the the digital divide?
Growth
The land grabBrand buildingNetwork effectsViral marketing
Hotmail was able to grow a subscriber base of 10 million within two years
ProblemHow do you make each new customer add
value to existing customers?
Value
Free goods create value networksNetscape NavigatorRealPlayer
Value comes from plentifulness not scarcity
Network effectsProblem
What do your customers value?
Efficiency
Low friction economyEDIInternet and XML
DisintermediationInfomediaries
TravelocityMove to auctionsProblem
Where is your revenue management system?
Markets
Markets move towards perfectionSearch engines and shopping agents
Customers move towards perfect choiceBuild to order
Consumers empoweredAuto-By-TelEdmunds.com
ProblemWhat are the limits to choice?
Transactions
Information adds value to products and servicesInformation is serviceInformation is a significant part of the productStaples creates customized supply catalogs that
contain only those items and prices negotiated in contracts and retains lists of previously ordered items
Information is easier to customizeMass customizationProblem
How do you use information to differentiate?
Impulse
Massive choiceOversupplySophisticated and wealthy
consumersBuying is effortlessDay tradingProblem
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
Postal Electronic1.25 .35
What’s next?
U-commerceUbiquitousUniversalUniqueUnison
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?
