The New Economy:

~New Rules, New Means & New Models~ of Business

        "When we talk about the New Economy, we're talking about a world in which people work with their brains instead of their hands. A world in which communications technology creates global competition - not just for running shoes and laptop computers, but also for bank loans and other services that can't be packed into a crate and shipped. A world in which innovation is more important than mass production. A world in which investment buys new concepts or the means to create them, rather than new machines. A world in which rapid change is a constant. A world at least as different from what came before it as the industrial age was from its agricultural predecessor. A world so different its emergence can only be described as a revolution..." (Wired's- Encyclopedia of the New economy)

>> Lecture: The New Economy- PowerPoint

In his classic 1997 essay-- Strategy In The New Economy  -- Don Tapscott delineated the 12 defining dimensions of the New Economy. Accordingly, these dimensions are again delineated below-- with each dimension accompanied by selected readings & viewings which elaborate on its marketing implications & developments to date:

The New Economy Defining Dimension

Excerpt from 1997 essay:

 Marketing Implications & Developments- to date:


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."

   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...

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."

 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.

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


"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."

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


 "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."

 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."

Since Tapscott's observation, the ability to identify, engage, mobilize and leverage external resources has become a critical componant of business strategy & practice-

As 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"

Wired Issue 18.02


 In the Next Industrial Revolution

 Atoms Are the New Bits

Chris Anderson-Wired


"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."


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


 "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"


"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."

 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


 "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."

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 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"


"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” 


 "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."

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"


"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."


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


    Interesting video-bits: Alvin Toffler discusses the nature & effects of the New Economy on Business & Society- drawing on his '06 book Revolutionary Wealth (each segment is ~10 minutes in length)