1、November 17, 1999,Northwestern University High Tech Club,Competing in the Digital Economy,Agenda,Introduction What is the Digital Economy? Drivers of the Digital Economy New Business Practices What Does it Take to Win? Time-Value Competition Content and containers Intelligent Markets - the Digital V

2、alue Network Intelligent execution - competing on insight Intelligent organizations,Introduction to the Digital Economy,DigitalEconomy,The last three decades have seen the emergence of a digital economy characterized by an increased emphasis on computing and communications,This increased use of comp

3、uting and communications (“digitization”) is changing the world of business,IndustrialEconomy,Pre-IndustrialEconomy,Pre-1850,1850-1960,1960-Present,This period is comparable to previous economic upheavals and impacts all industries,New economies emerge at the inflection point of previous economies a

4、nd co-exist with their predecessors,Information is becoming the key input, which is changing the way businesses operate and the nature of work,Ratio of Expenditures on Information to Production Technology,1980,1975,1970,1965,1983,80,60,40,20,Notes:(1) Consists of service workers, including positions

5、 such as finance, marketing, etc. in industrial companies (2) Consists of physical workers in industrial firms Sources: “Information Technology and the Corporation of the 1990s” (1994), U.S. Bureau of Labor Statistics (1996),U.S. Employment By Occupation(Percent Of Total),Digitization allows work to

6、 occur any time, any place leading to a dramatic increase in global activity,Drivers Reduced costs of communication Immediate access to information Rapid diffusion of technology Increased access to new markets Increased number of competitors,Sources: F.C.C., U.S. Department of Treasury,U.S. Direct O

7、verseas Investment ($ Billion),1980,1993,1980,1993,Foreign Direct Investment In The U.S. ($ Billion),1980,1995,1985,1990,Overseas Telephone Calls ($ Million),Information Technologys Share of the GDP continues to grow, fueling the Digital Economy,Drivers of the Digital Economy,Advances in technology

8、and improvements in information management are driving digitization,Metcalfes Law of Network Value,Greater Storage Capabilities,Cheap, Deregulated Communications,Internet Access Pervasive email usage,Java and Jini,Fixed and removable Hard drives CD-ROMs,DVDs,Telephones Satellites,Faxes Modems,Increa

9、singly Digitized Business Processes,Moores Law of Microcomputing,Microprocessors Personal computers,Workstations “Smart” products (Embedded computing),Moores Law of Microcomputing,Every 12-18 months, the processing power of microchips doubles,103,104,105,106,107,108,109,4004,8080,8086,80286,80386,80

10、486,Pentium,Pentium Pro,80786,Transistors per Chip,Date,Moores Law of Microcomputing,And with each successive generation, the price per MIPS plummets,Metcalfes Law of Network Value,The value of the network grows exponentially as the number of members or nodes on the network grows,Number of Members,V

11、alue of Network,Extranet / shared network,Manufacturers,Distributors,Suppliers,Logistics,Greater Storage Capability,As with the increasing processing power (Moores Law), storage density for all types of media is growing at a staggering rate allowing data, images, sound, and other mass content to be

12、stored and accessed digitally,Desktop Hard Drive Capacity,Gigabytes,Megabytes,Desktop Memory Capacity,Cheaper, Deregulated Telecommunications,Telecommunications was one of the last industries to fall to de-regulation globally still in process. Before de-regulation we had Groves Law telecommunication

13、s bandwidth doubles every hundred years (somewhat in jest). Where de-regulated, price has plummeted, service and bandwidth have increased,Bandwidth to the home is rising at a rate commensurate with Moores Law and the growth of storage medium,Putting it all Together,When taken together, the combined

14、effects of increased computing power, network growth, storage capacity growth, and bandwidth growth provide entire new computing capabilities with each successive generation The idea of a real-time video phone relying on bandwidth, computing power, and storage was once science fiction and is quickly

15、 becoming a reality Distributing digital quality pre-recorded and live music and video, again relying on bandwidth, computing power, and storage, has become a reality only in the past year Forward thinking companies are employing these new technology capabilities to break the rules, transforming exi

16、sting industries, and creating entire new ones This convergence of technology development and resultant new business practices are making traditional business models very unstable and forcing companies to cannibalize traditional markets, and adopt these new business practices if they are to survive,

17、New Business Practices Winning in the Digital Economy,The advent of the Digital Economy is altering “traditional” business paradigms,Computing erases information asymmetries previously used to obtain market power Digitization will blur industry, enterprise and geographic boundaries Knowledge, facili

18、ties, and capital will be more easily accessible eliminating the existing asymmetries Supply chains are moved from a sequential flow of information to parallel activities Digitization will enable immediate access to information by all participants Products, services, relationships and funds are exch

19、anged and altered simultaneously The changes will impact operations first, and ultimately change the structure of entire industries Content and computing standards reduce high switching costs which previously created exit barriers for customers,Several characteristics shape the digital economy,Time-

20、Value Competition Content and containers Intelligent Markets - the Digital Value Network Intelligent execution - competing on insight Intelligent organizations,In the Digital Economy, consumers will have too many choices, too much information, and far too much complexity to deal with. What they wont

21、 have near enough of is TIME Incorporating Time into your offering will become a primary differentiator of products and services. Understanding and communicating the Time-Value of an offering will be a key to success,Time-Value competition,Time Available for Desired Activities,Time Available for Req

22、uired Activities,Consumer Perception of Time Consumption,Agricultural Industrial Digital Economy Economy Economy,Time Value Case Study Mobil Speedpass,“ to achieve competitive differentiation and customer loyalty within our target market, we chose to focus our strategy on customer service based on s

23、peed (or time) and convenience.” Brian Baker, President, North American Marketing Monorail Website ,End Customers,MONORAIL,Federal Express,Sun Trust Bank,Sykes Enterprises,SCI,Order processing Shipping/Delivery,Technical support,Product design Product marketing,Manufacturing Assembly Warehousing,Cre

24、dit Invoicing/Collections A/R management,Intelligent Markets Case Study - Monorail,Intelligent execution - competing on insight,Farmers leverage satellite monitoring systems to yield dramatic savings on key inputs such as seed, fertilizer, and insecticide,Gauge mineral / nutrient content,Monitor yie

25、ld + Adjust dispersal,Measure sunlight + Detect disease,Source: CIO Magazine “Lean Acres” 10/1/98,Analyze,Intelligent Organizations,Technology is making markets more efficient, and creating new markets for products and services that were traditionally done within the 4 walls of corporations As techn

26、ology drives down the transaction costs associated with sourcing any kind of service and efficient markets evolve to fulfill those services, the definition of “firm” is being changed Companies are being forced to focus on their value added competencies those things they do well and that have tangible value in the eyes of the consumer A new form of organization will emerge in the digital economy one in which all functions that are not explicitly a value added competency are sourced