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The New Economy
Defining Dimension
Excerpt from 1997 essay: |
Marketing Implications & Developments- to date: |
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A knowledge economy...
"Our key assets walk out the
door every night." This is increasingly true of all business. Knowledge
workers will themselves become the key form of capital."
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When Tapscott wrote his article--
"knowledge" in the knowledge economy was regarded as being derived
primary from the individual. But as we observed in the
initial weeks of this course, the economy is being propelled by
accelerating advances in an expanding array of intelligent technologies
which can analyze zetabytes of amassed & stored information. Indeed,
many of these new intelligent technologies are no longer being driven by
humans, but simply by code, algorithms and accompanying sensors. Today,
the real knowledge worker is more akin to IBM's Watson than Microsoft's
CIO. Moreover, it can be argued that perhaps the more valuable &
defining nature of "knowledge" in the knowledge economy is
Collective vs.
individual...
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A digital economy...
"When
information becomes digitized and communicated through digital networks,
a new world of possibilities unfolds. Vast amounts of information can be
squeezed or compressed and transmitted at the speed of light. The
quality of the information can be far better than with analog
transmissions. Information can be stored and retrieved from around the
world, providing instant access to much of the information recorded by
human civilization. New digital appliances can be created which fit in
your pocket and can impact most aspects of business and personal life."
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All
of this has certainly proved true-- but one of the most significant
ramifications of digitalization has been its impact on the cost of
production, storage & distribution. Given the pronounced
tendency for marginal costs to approach
zero in digital economies--
there has been a profound impact on business models pricing and
product line strategy.
 Chris Anderson discusses why $0.00 is the future of
business
Reduced/minimal distribution &
inventory costs allow one to realize significant profit by
selling small volumes of low-demand items to many customers VS.
selling large volumes of a few popular items. To wit:
The Long Tail
- Chris
Anderson's-The Long Tail |
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Virtualization...
"As
information shifts from analog to digital, physical things can become
virtual-changing the metabolism of the economy, the types of
institutions and relationships possible, and the nature of economic
activity itself."
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What's Next
For The Virtual Economy- "Ten
years ago in the Western world, there wasn't a place on the Internet
where you could possibly--without chuckling--say, "I have an account
there, I store currency in it and it's got real value." The rise of
virtual economies and the recent phenomena of trust is still very much
evolving, but it's clearly starting to be here."
Information
Age Economy - Virtual Worlds
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Molecularization...
"The new economy is a molecular economy. The old corporation is being
disaggregated, replaced by dynamic molecules and clusters of individuals
and entities which form the basis of economic activity. The organization
does not necessarily disappear, but it is transformed." |
"September '08-it all came toppling down. Those big
financial firms turned out to have been inflated by debt...The big car
companies crashed head-on into skyrocketing oil prices and plummeting
consumer demand. Big Pharma ran out of blockbusters...This crisis is not
just the trough of a cycle but the end of an era. ..What we have
discovered ..are growing diseconomies of scale. Bigger firms are harder
to run on cash flow alone, so they need more debt...small companies have
an advantage, from nimbleness to risk-taking...The rise of cloud
computing means that young firms no longer have to buy their own IT
equipment, which helps them avoid having to raise money or take on
debt....The
crisis may have turned our economy into small pieces, loosely joined,
but it will be the collective action of millions of workers hungry for
change that keeps it that way."
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A networked
economy...
The
Internetworked Business is a far-reaching extension of the virtual
corporation, because there will be access to external business partners,
constant reconfiguration of business relationships, and a dramatic
increase in outsourcing. The Internetworked Enterprise will behave just
like the Internet, where everyone can participate and the total effort
is greater than the sum of the parts. The overall economy will act in
the same way. Networks of networks along the Internet model are
beginning to break down walls among companies and their suppliers,
customers, affinity groups, and competitors."
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Since Tapscott's observation, the ability to identify,
engage, mobilize and leverage external resources has become a critical
componant of business strategy & practice-
A s the Networked
economy has grown- So too has the profit potential generated by "the Network
effect"-- which enables one to increase the value of your product or service as more
and more people use it ...
Big Future in
Small Batches- the New Class of
Entrepreneurship "Peer production, open
source, crowdsourcing, user-generated content — all these digital trends have
begun to play out in the world of atoms"
In the Next Industrial
Revolution
Atoms Are the New Bits
Chris
Anderson-Wired
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Disintermediation...
"Middleman functions between producers and
consumers are being eliminated through digital networks. Middle
businesses, functions, or people need to move up the food chain to
create new value or face being disintermediated. The "reintermediation"
opportunities are greater than the disintermediation perils." |
Disintermediation
As information-technology eliminates the
BullWhip-Effect it
also
eliminates/redefines the "middleman".
Old intermediaries are disappearing-- but that is only part of the
picture. What seems to be disintermediation is but
one aspect of a larger dynamic- termed 'REintermediation.'
As digital communication technology reduces the cost of distribution- we see
distribution intermediaries multiplying in numbers and diversity, as they
provide ...electronic payment services, shipping services... digital
exchanges linking any buyer to any seller and, of course, customer support
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Convergence...
"In the old economy, the automotive industry was the key sector. The
dominant sector in the new economy is the new media, a product of the
convergence of the computing, telecommunications, and content
industries." |
By 2006- Tapscott's prediction of the
convergence of the telecom,
computer, media & entertainment industries was well established ...and
more recently "at the turn of another
decade, there are signs of a possible new dawn for the idea of
convergence" |
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Innovation...
"The new economy is an innovation-based economy.
"Obsolete your own products." ... If you've just developed
a great product, your goal is to develop a better one which will make the
first one obsolete. If you don't, someone else will."
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While
innovation has always been essential to an economy's & enterprise's
development-- it's the extreme pace & source
of that innovation that distinguishes innovation in the New Economy.
Industrial-age innovation was predominately a function of corporate R&D. NewE innovation is much more an entrepreneurial affair and increasingly
a consequence of
involuntary entrepreneurship (the rate of which
mirrors the unemployment rate). It remains:
"innovation is the only way to survive in an ever
more global, competitive business arena"
Ergo-
*INNOVATION
INSANITY |
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Prosumption...
"In the
new economy, the gap between consumers and producers blurs. As mass
production is replaced by mass customization, producers must create
products that reflect the requirements and tastes of individual
consumers. In the new economy, consumers become involved in the actual
production process."
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Prosumption- AKA:
Customerization, Peer Production,
User-Generated-Content, Collaboration, CrowdSourcing, Embracing the Customer:"
Now we have armies of
amateurs, happy to work for free. Call it the Age of Peer Production .. From Amazon.com
to MySpace to Craigslist, the most successful Web
companies are building business models based on
user-generated content. ..
The tools of production, from blogging to
video-sharing, are fully democratized, and the
engine for growth is the spare cycles, talent, and
capacity of regular folks, who are, in aggregate,
creating a distributed labor force of unprecedented scale. (Anderson,
People Power,'06)
The benefits of "energizing
& embracing" the consumer to participate in the marketing
process has been documented (in the TechnoSphere)--
albeit there is also a downside to be considered -when involving the
consumer
"in
the actual production process"
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Immediacy...
"The
new enterprise is a real-time enterprise, continuously and immediately adjusting
to changing business conditions through information immediacy." |
Without question- the phenomenon of "immediacy"
has become increasingly pronounced. Indeed, in the past year an entirely
new school termed "REAL-TIME MARKETING"
has taken hold. The “right offer, right time, right marketing channel”
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Globalization...
"As Peter Drucker says, "Knowledge knows no boundaries." There is no
domestic knowledge and no international knowledge. With knowledge
becoming the key resource, there is only a world economy, even though
the individual organization operates in a national, regional, or local
setting."
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Why the World is
Flat-
the New Economy
is a global economy--outsourcing is just one consequence of a confluence of
events occurring around the world. ... Intellectual work & intellectual capital can be
delivered anytime, anywhere--it can be "disaggregated, delivered,
distributed produced and put back together again"
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Discordance...
"Unprecedented social issues are beginning to arise, potentially causing
massive trauma and conflict. As we stand on the frontier of the new
economy, we can also see the beginnings of a new political economy that
will raise far-reaching questions about power, privacy, access, equity,
quality of work life, quality of life in general, and the future of the
democratic process itself. As tectonic shifts in most aspects of human
existence clash with old cultures, significant social conflict will tear
at the fabric of structures and institutions."
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As predicted --There is no shortage of
conflicts to be found within the NewE: Between the Culture Wars,
the War on Terror, the Mid-East War, the Tea Party, the Energy Crisis, the
Unemployment Crisis, the Debt crisis... to.. the on-going
debate
as to
whether or not computers, the internet, multitasking, juggling
e-mail, phone calls and other incoming information are warping our
brains.
However, the broader overarching
conflict ultimately remains between- "those whose
pocketbook & psyches are hitched to the previous system (who
think of the American economy in terms of assembly lines ... centralized
government ..and underestimate the importance of intangible
capital).. And those who embrace the "digital revolution, the rise of
biotechnology, and the fast-paced, "Internetted" way of life"... lines,
Toffler argues, that are formed on the basis of another
War Between the Waves
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