Ten Driving Principles of the New Economy

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Ten Driving Principles of the New Economy

• Business 2.0, March 2000

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10 Principles

• The New Economy is being driven by a profound
  development Individuals and companies worldwide
  are being electronically linked, a process as
  significant as an organism developing a nervous
  system. So it's no surprise that the rules of the
  game are changing..

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1. MATTER.

• It matters less.
• Despite very few physical assets and far fewer
  employees, a growing number of information-massagi
  ng companies have disproportionately large
  values.
• Consider the market cap of Yahoo!, which went
  from 400 million to 5 billion in two years.

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2. SPACE

• Distance has vanished.
• The world is your customer-and your competitor.
• You're exposed to worldwide competitors as well.
  The opportunity and the threat has never been
  greater.
• During the last three years, Amazon.com has sold
  books to 1.5 million people in 160 countries. Out
  of an office in Seattle.
• Meanwhile, the giant U.S. telcos are starting to
  face competition from Internet telephony startups
  founded in Israel and Europe.

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3. TIME

• It's collapsing. Instant interactivity is
  critical, and is breeding accelerated change.
• In a world of instantaneous connection, there is
  a huge premium on instant response and the
  ability to learn from and adapt to the
  marketplace in real time.
• Dell Computer has revolutionized PC sales by
  offering machines built directly from buyers'
  requests. Its lightning-fast inventory and
  purchase cycles terrify its competitors, and its
  analysis of customer orders allows it to adapt to
  trends ahead of the curve

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4. PEOPLE

• They're the crown jewels
• More than ever in history, huge value is being
  leveraged from smart ideas and the winning
  technology and business models they create.
• Microsoft successfully "locked in" one of the
  world's most talented work forces by giving them
  stock options worth literally billions of
  dollars.

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5. GROWTH

• It's accelerated by the network.
• The Internet can dramatically boost the adoption
  of a product or service by "viral marketing,"
  network-enhanced word of mouth. Communication is
  so easy on the Web, product awareness spreads
  like wildfire.
• Once a company reaches critical mass, it can
  experience increasing returns leading to
  explosive growth.
• In the New Economy, first-mover advantages are
  greater than ever.
• Hotmail, a free email service backed by
  relatively modest funding, was able to grow a
  subscriber base of 10 million within two years.
  It was bought by Microsoft at the end of 1997 for
  a reported 400 million, and today it is
  attracting more than 100,000 new sign-ups per day.

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6. VALUE

• It rises exponentially with market share.
• For products that help establish a platform or a
  standard, the network effect is even more
  pronounced
• The more plentiful they become, the more
  essential each individual unit is, a striking
  exception to the economic rule that value comes
  from scarcity
• Some companies give away their products to
  establish market share, then sell linked services
  later on.
• RealNetworks invested heavily in its streaming
  media players, distributed them free on the Web,
  and created a standard, which the markets now
  value as being worth hundreds of millions of
  dollars.

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7. EFFICIENCY

• "Infomediaries" replace intermediaries.
• Traditional distributors and agents are seriously
  threatened by a networked economy in which buyers
  can deal directly with sellers.
• They offer aggregated services, or intelligent
  customer assistance, or powerful technology-based
  buying aids, or an attractive, community-based
  buying environment.
• Wireless Dimension simplifies the dizzying array
  of cell phone service options, pricing plans, and
  competitive promotions with a one-stop online
  shopping guide. Other infomediaries include
  America Online, Travelocity, Cdnow..

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8. MARKETS

• Buyers are gaining dramatic new power and
  sellers new opportunity.
• It's no longer necessary for your customer to
  walk down the street to compare prices and
  services.
• Intelligent software will help buyers find the
  best deal.
• Those that have relied on physical barriers to
  competition will fail.
• The annoying haggling process of purchasing a car
  has been all but eliminated by online shopping
  services such as Auto-By-Tel, which allow you to
  research vehicle model and pricing information.
  Within 24 hours, you can be contacted with quotes
  from nearby dealers.

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9. TRANSACTIONS

• It's a one-on-one game. Information is easier to
  customize than hardgoods.
• The information portion of any good or service is
  becoming a larger part of its total value.
• Suppliers will find it easier and more profitable
  to customize products, and consumers will begin
  to demand this sort of tailoring.
• Office-product supplier Staples uses
  personalization to reduce the costs large
  companies incur when ordering office supplies
  electronically. Staples creates customized supply
  catalogs that contain only those items and prices
  negotiated in contracts, and retains lists of
  previously ordered items. In turn, Staples learns
  a great deal about its customers' preferences and
  uses that information to make customized special
  offers

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10. IMPULSE

• Every product is available everywhere.
• The gap between desire and purchase has closed.
• The impulse to buy and the purchase itself used
  to be separated by a combination of physical and
  mental barriers.
• When you heard a song on the radio, you had to
  both remember the song or the artist and actually
  go to a store to purchase. Online, it's
  different. Discover a product you desire, and
  just hit the "buy" button.
• The processes for marketing, sales, and
  fulfillment are merging
• A visitor to the Addicted To Noise Website who
  decides to buy a CD after seeing it reviewed can
  do so straightaway through a link with Music
  Boulevard without leaving the media context
  (the ATN site) in which the demand was generated.
  No more month-long waits before the next visit to
  a music store. The Internet's powerful audit loop
  means that the agent of demand generation ATN
  can be correctly identified, credited, and
  compensated.