From Electronic Commerce to the e-Economy

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From Electronic Commerce to the e-Economy
Strategies for a Digital World
Catherine PetersIndustry Canada ITS 15th
Biennial Conference September 4-7, 2004
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Electronic Commerce to e-EconomyOutline of
Presentation

• The Growth Story
• ICTs, Productivity and Growth
• The Internet as a Platform
• e-Business Networks
• Canadas Place in the World
• Canadas Digital Economy Report
• Broadband Gaps
• e-Business Deployment
• Canadas Challenges and Strategy Response

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The Growth Story

• Many countries that improved growth performance
  in the 1990s did so because they have been able
  to get fundamentals right they had created an
  environment that could take advantage of the new
  technologies and business opportunities when they
  emerged
• The New Economy Beyond the Hype,
• The OECD Growth Project, OECD, 2001

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ICT-Intensive Economies led Economic Growth
The Growth Story
Source The Sources of Economic Growth in OECD
Countries, OECD, 2003
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Historically, Technological Innovation
ICT Productivity and Growth

• Steam Engine
• Started First industrial Revolution Mechanized
  factory-based mass production
• Railroad, Postal and Telegraph communications
• Changed the way goods and services were produced
  and distributed as well as the mobility of
  people, creating the first national economies
• Electricity
• Propelled the growth of industrialized economies
  by the enhancement of production capacities and
  productivities and the proliferation of a vast
  array of household goods and services
• Internet and ICT Networks
• Alters market structure and industrial
  organizations, similar to the previous impact of
  railways and electricity

has fuelled rapid economic growth
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ICT-based Innovation
ICT Productivity Growth
Source The Sources of Economic Growth in OECD
Countries, OECD, 2003
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ICT Productivity Growth
Networks enhance Productivity Growth

• The productivity derived from Metcalfes law is
  inherent in the economics of networks, meaning
  that value gained from the operation of such
  networks exceeds the sum total of utility to the
  individual participants
• Moores law, combined with the networking of
  computers, produces a further range of benefits
  as a result of the convergence of network
  externalities with the massive growth of computer
  processing power
• Consequently, as networks spread and as computers
  and artificial
• intelligence becomes more and more pervasive in
  industrial processes of all kinds, these positive
  externalities can be captured throughout the
  economy.

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• Everything we ever said about the Internet is
  happening
• Andrew S. Grove, Intel Corporation

The Internet as a Platform
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Internet Usage Races Ahead
The Internet as a Platform
In Millions of Users
Sources http//www.nua.com/surveys,
Computer Economics, June 2002
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People are Well Connected to the Internet
The Internet as a Platform
Source World Information Technology and Services
Alliance, Digital Planet 2002, February 2002
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Businesses Also Well Connected
The Internet as a Platform
Businesses with Internet Access and Web Site,
2001 (Percentage of businesses with ten or more
employees)
Source OECD, Measuring the Information Economy
2002
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e-Business Networks
The use of ICT by businesses is directly linked
to innovation and the transformation of business
processes.
Technological innovations can disrupt not only
systems and business models, but also
organizational cultures. Creative destruction
indeed. Robert Bruner 2001
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E-Business has Entered the Economic Mainstream
e-Business Networks
The Economist, May 15 2004 E-commerce will
continue to change every kind of business,
offline as well as online
Business Week, May 10 2004 The Web players new
assault should keep the productivity gains
coming.
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E-Commerce Exceeding Expectations
Note Charts reflect "Internet Commerce", a
subset of electronic commerce that includes the
purchase or trade of goods and services via the
Internet / World Wide Web, but excludes financial
services' transactions Source International Data
Corporation, 1999 and 2002
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Larger Business and Economic Revolution Underway
e-Business Networks

• Supply chain transformation (B2B)
• Virtual firms
• Offshoring outsourcing
• Reshaping of the consumer marketplace
• Impact on industry competition
• Development of new electronic marketplaces
• Renewal of Public Services

Source Restructuring value chains Impact of the
Internet, EBIP, WPIE 2002
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Organisational Change Critical to Make ICTs
Effective
e-Business Networks

• ICT capital becomes more effective if a company
  is organised to exploit it
• This takes additional investment
• US1 investment in ICT require US9 of
  complementary investment
• Fundamental transformation of the conventional
  business process

We know that its a real business transformation
because it survived the economic downturn.
Alice M. Rivlin, Brookings Institute
Source ICT Business Performance, OECD
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Firm-Level Benefits from e-Business
e-Business Networks

• Reduce costs
• Increase transaction speed and reliability
• Improve management capabilities
• Develop or improve collaborative capabilities
• Create interdependencies
• Manage customer relations better
• Create more added value

Source Restructuring value chains Impact of the
Internet, EBIP, WPIE 2002
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The Digital Economy in Canada
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Canadas e-Report Card 2002
Canadas Digital Economy
Progressing Rapidly
gt
II
lt
gtgt
Falling Behind
Paused
Progressing
e-Business Readiness
Investment Image
Growth Acceleration
Venture Investment
gt
Businesses Online
gt
II
e-Business Talent
Tax and Regulatory
gt
gtgt
gt
Consumers Online
SME Adoption
Privacy and Security Practices
II
e-Business Brand
e-Business Supply
lt
II
Source Fast Forward 4.0, Growing Canadas
Digital Economy, Canadian e-Business Initiative
(CeBI), May 2003
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E-Business Benefits are Captured by Canadian
Firms, but 50 of SMEs have not Adopted an IBS
Canadas Digital Economy
Satisfaction with Internet Business Solutions
(IBS) Investment, as of Respondents
Size of Cost Reductions and Revenue Increases Due
to IBS Investment
Dont know
Highly satisfactory
Satisfactory
Neither satisfactory or unsatisfactory
Unsatisfactory
Increase in revenue
Decrease in cost of goods sold
Decrease in sales and general administration expen
ses
Highly unsatisfactory
Source The Canadian e-Business Initiative, Net
Impact Study Canada, The SME Experience, November
2002. Based on 398 Canadian enterprises with
50-500 full-time employees. Net Impact Canada
IV, 2004.
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Uneven e-Business Deployment
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High Business Connectivity, but Low
AdoptionRates of Advanced Online Activities
Online Business Activities in Canada - 2000-2002
Percentage of firms
Source Survey of Electronic Commerce and
Technology, Statistics Canada, April 2003.
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Uneven e-Business Deployment
Not All Sectors Are Capturing the Benefits

• Six leading sectors account for 80 of all
  Canadian Internet Sales
• Private firm sales were 18.6 billion in 2003
• Leading e-Commerce Sectors are Wholesale Trade,
  Transportation and Warehousing, Manufacturing and
  Retail Trade 67 of sales

e-Commerce Sales by Industries 2003
Source Survey of Electronic Commerce and
Technology 2003 Daily April 16, 2004, Statistics
Canada
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Broadband Gaps
"The broadband problem is particularly
frustrating because it is the one piece of the
physical infrastructure of computing that is
limiting a 'miracle environment' of new
applications thanks to ever-increasing computer
speed, power and video-display capabilities." Bil
l Gates, September 2001
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Worldwide Internet and Broadband Use Continues to
Grow
Broadband Gaps
Broadband and Internet use, world, millions
700
10.7
Broadband as of Internet users
Internet
600
7.4
Broadband
500
4.0
400
1.4
300
0.3
200
0
0
0
100
0
1995
1996
1997
1998
1999
2000
2001
2002
Source ITU
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Broadband Gaps
Canada is Well Positioned . . .
Broadband subscribers per 100 inhabitants Top 10
Countries End of June 2003
23.2
14.8
14.5
13.1
12.3
11.6
11.4
10.8
10.7
9.8
. . .To Adopt High-Speed
Ethernet LANs, two-way direct satellite, fibre
to the home, and fixed wireless.
Source OECD, ICCP Broadband Update, December 2003
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Broadband Deployment
Broadband Gaps

• Market problems business case for deployment
  nonexistent in rural/remote areas, in particular
  in low density countries such as Canada,
  Australia
• Relevance for community development and digital
  divide
• Relevance for business and delivery of public
  services

Broadband, or what they call high-speed
Internet, is critical in making our high-speed
economy even more productive The goal is to be
ranked 1st when it comes to per capita use of
broadband technology. Its in our nations
interest. Its good for our economy. President
George W. Bush, Speech at the Department of
Commerce, June 24, 2004
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The growth of e-Business requires Broadband
platform and service deployment and availability
Investment in E-business
Development
Investment in Broadband
Infrastructure
The deployment of broadband services would help
spur the growth of e-commerce and vice versa.
The future is very bright for both. Bruce
Mehlman, U.S. Dept. of Commerce, Aspen Institute
Summit, August 2002 Several applications, such
as broadband and e-commerce are still in their
early stages and may have a large potential for
future growth. Meeting of the OECD Council at
Ministerial Level, Seizing the benefits of ICT in
a digital Economy, 2003

• Creating Economy-wide Platform fore-Business

• Access for SMEs

• Greater Availability, Affordability

• Sector-wide deployment

Virtuous Circle

• Increased Capability of Networks

• Profitability

• Increased Sustainability

• Generating Revenue Streams for Infrastructure
  Investment

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The economic, social and cultural potential is
enormous

• Advanced networks are the key to productivity
  growth
• Existing businesses need them in order to grow
• New businesses become possible with them
• ICT is a major industry in its own right
• Advanced networks can deliver social programs
• Healthcare
• Education
• Government On Line
• Advanced networks offer new cultural
  opportunities
• HDTV
• Interactive video
• Internet radio
• Online specialty television

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The e-Economy Agenda

• Centre Canadas economic strategy on the
  contribution of networked-based information
  technologies
• Accelerate the rollout of broadband
  infrastructure
• Build a world-class intelligent infrastructure
• Ensure that Canada continues to have the worlds
  best legal and policy environment for innovation
• Strengthen stakeholder partnerships and
  cooperation
• Develop sectoral-specific strategies for
  industrial e-business adoption, particularly
  among SMEs
• Remove cross-border and inter-jurisdictional
  barriers that inhibit the global spread of
  e-commerce and its benefits

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Canadas e-Economy Targets

• Reach levels of SME e-readiness comparable to the
  United States
• Continue to lead all G8 countries in access and
  availability of broadband networks
• Upgrade all industrial and resource sectors and
  supply chains to North American best practices
  for employing e-solutions and conducting business
  online
• Bring the education and health sectors to the top
  rank in technology use and innovation
• Rank 1 in terms of the speed, size,
  functionality and intelligence of advanced
  networks

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From Electronic Commerce to the e-Economy
Strategies for a Digital World
Catherine PetersIndustry Canada ITS 15th
Biennial Conference September 4-7, 2004