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The New Economy

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The New Economy compiled and presented by Abbas Foroughi, Ph.D. Professor of Computer Information Systems Coordinator of E-Business program School of Business – PowerPoint PPT presentation

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Title: The New Economy


1
The New Economy
compiled and presented by Abbas Foroughi,
Ph.D. Professor of Computer Information
Systems Coordinator of E-Business program School
of Business University of Southern Indiana 8600
University Boulevard Evansville, IN 47712-3597
aforough_at_usi.edu http//business.usi.edu/aforough
Tel 812-465-1667 Fax 812-465-1044
2
What is the New Economy / e-Economy / Knowledge
Economy?
  • A new global economic environment characterized
    by
  • Global competition
  • Rapid, rampant change
  • Faster flow of information and communication
  • Increasing business complexity
  • Pervasive globalization
  • More far-reaching technological advances
  • Consumers whose preferences are revised with the
    speed of a television commercial.

3
What is the New Economy / e-Economy / Knowledge
Economy?
  • The New Economy is a world in which
  • People work with their brains instead of their
    hands.
  • 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.
  • Innovation is more important than mass
    production.
  • Investment buys new concepts or the means to
    create them, rather than new machines.

4
What is the New Economy / e-Economy / Knowledge
Economy?
  • The New Economy is a world in which
  • Rapid change is a constant.
  • Reality is at least as different from what came
    before it as the industrial age was from its
    agricultural predecessor.
  • Its emergence can only be described as a
    revolution
  • Free markets are central. The Internet creates a
    level playing field globally

5
What is the New Economy / e-Economy / Knowledge
Economy?
  • Example
  • Bill Gates is the world's richest man.
  • Microsoft has annual sales of US11 billion.
  • Most of its assets walk in and out of the doors
    wearing T-shirts.
  • Yet the stock market values the company at well
    over 150 billion - far more than either IBM
    (sales 76 billion, market cap 100 billion) or
    General Motors (sales 160 billion, market cap
    50 billion).
  • Why? Because the rules of competition are
    changing to favor companies like Microsoft over
    paragons of the industrial age.

6
What is the New Economy / e-Economy / Knowledge
Economy?
  • Microsoft's rise is a testimony to
  • The power of ideas in the new economy.
  • Working with information is very different from
    working with the steel and glass from which our
    grandparents built their wealth.
  • In New Economy Information is easier to produce
    and harder to control than stuff you can drop on
    your foot.
  • For a start, computers can copy it and ship it
    anywhere, almost instantly and almost for free.
  • Production and distribution, the basis of
    industrial power, can increasingly be taken for
    granted.
  • Innovation and marketing are all.

7
What is the New Economy / e-Economy / Knowledge
Economy?
  • The New Economy is more open
  • it doesn't take a production line to compete,
    just a good idea.
  • More competitive.
  • Information is easy not just to duplicate, but to
    replicate.
  • Successful firms have to keep innovating to keep
    ahead of copycats nipping at their heels.
  • The average size of companies shrinks.
  • New products and knockoffs alike emerge in months
    rather than years,

8
What is the New Economy / e-Economy / Knowledge
Economy?
  • Market power is increasingly based on making
    sense of an overabundance of ideas rather than
    rationing scarce material goods.
  • Each added connection to a network's pool of
    knowledge multiplies the value of the whole - one
    reason for Microsoft's astonishing growth. The
    result
  • new rules of competition,
  • new sorts of organization,
  • new challenges for management

9
What is the New Economy?
  • Accelerated development of IT
  • Emergence of new distance activities
  • Emergence of new economic domains with impressive
    growth
  • Increased amount of knowledge activities and
    learning processes
  • Development based on innovation and competition
  • Fast and profound structural changes at
    macroeconomic, microeconomic and social levels

10
Forces Driving the New Economy
  • Technology
  • Deregulation
  • Increased worldwide competition
  • Freer trade and investment throughout the world
  • Venture capital system
  • Life long learning
  • Thinking
  • Dynamism
  • Constant innovation
  • Connectivity
  • Speed
  • Growth of intangible value

11
Main Principles in New Economy
  • Instantaneous access (and feedback)
  • Customized products and services
  • Simultaneous presence in different places
    (ubiquity)

12
New Rules in New Economy
  • From "places" to "spaces"
  • Everything is connected
  • Growing power of networks
  • Transparency
  • Members thrive when network thrive
  • Decentralization
  • Systems integration
  • Multiplication generates value
  • From problems to opportunities

13
Markets
ISSUE OLD INDUSTRIAL ECONOMY NEW KNOWLEDGE ECONOMY
Economic Development Steady and linear, quite predictable Volatile - extremely fast change, with explosive upsurges and sudden downturns, and chaotic - the direction of the economy's changes is not perfectly clear4
Market changes Slow and linear Fast and unpredictable
Lifecycle of Products and Technologies Long Short
14
Markets (Cont.)
ISSUE OLD INDUSTRIAL ECONOMY NEW KNOWLEDGE ECONOMY
Key Economy Drivers Large industrial firms Innovative entrepreneurial knowledge-based firms
Scope of Competition Local Global hypercompetition
Competition Name of the Game Size The big eats the small Speed The fast eats the slow
Marketing Name of the Game Mass marketing Differentiation
15
Enterprise
ISSUE OLD INDUSTRIAL ECONOMY NEW KNOWLEDGE ECONOMY
Pace of business Slow Appreciably faster with ever-rising customer expectations
Emphasis on Stability Change management
Business Development Approach Strategy pyramid vision, mission, goals, action plans Opportunity-driven, dynamic strategy
Success Measure Profit Market capitalization
Organization of Production Mass production Flexible and lean production
16
Enterprise (Cont.)
ISSUE OLD INDUSTRIAL ECONOMY NEW KNOWLEDGE ECONOMY
Key Drivers to Growth Capital Resources people, knowledge, capabilities
Key Sources of Innovation Research Research, systemic innovation, knowledge management, integration, new business creation, venture strategies, new business models
Key Technology Drivers Automation and mechanization Information and communication technology, e-business, computerized design and manufacturing
17
Enterprise (Cont.)
ISSUE OLD INDUSTRIAL ECONOMY NEW KNOWLEDGE ECONOMY
Main Sources of Competitive Advantage Access to raw materials, cheap labor, and capital for conversion cost reduction through economies of scale Distinctive capabilities institutional excellence, moving with speed human resources, customer partnership differentiation strategies competitive strategies
Scarce Resource Financial capital Human capital
Decision Making Vertical Distributed
Innovation Processes Periodic, linear Continuous, systemic
18
Enterprise (Cont.)
ISSUE OLD INDUSTRIAL ECONOMY NEW KNOWLEDGE ECONOMY
Strategic Alliances with Other Firms Rare, "go alone" mindset Teaming up to add complementary resources
Organizational Structures Hierarchical, bureaucratic, functional, pyramid structure Interconnected subsystems, flexible, devolved, employee empowerment, flat or networked structure
Business Model Traditional command-and-control New refocused on people, knowledge, and coherence
19
Work Force
ISSUE OLD INDUSTRIAL ECONOMY NEW KNOWLEDGE ECONOMY
Leadership Vertical Shared employee empowerment self-leadership
Work force characteristics Mainly male, high proportion of semi-skilled or unskilled No gender bias high proportion of graduates
Skills Mono-skilled, standardized Multi-skilled, flexible
Education Requirements A skill or a degree Continuous learning
20
Work Force (Cont.)
ISSUE OLD INDUSTRIAL ECONOMY NEW KNOWLEDGE ECONOMY
Management-Employee Relations Confrontation Cooperation, teamwork
Employment Stable Affected by market opportunity / risk factors
Employees Seen as Expense Investment
21
New Economy Summary
Old New
Security Learning
Job Preservation Job Creation
Status Quo Speed and change
Innovation is more important than Mass
Production People will work with their Brains vs.
Hands
Source John Doerr, Venture Capitalist
22
Business Paradigm shifts in the new economy
  • In new economy, there is a change in the
    organizational pattern that defines
  • how we manage our company,
  • how we view and value our employees,
  • most importantly how we solve problems.

23
Classical vs. New Economy Organizations
Issues Classical industrial culture e-business culture
Attitude power is wielded by hoarding information.   value is placed on sharing information and transparency
Focus management focuses on optimizing individual processes. management focuses on collecting and communicating key information
Management decisions are made centrally and filtered down a pyramid of managers is inherently distributed, with implementation and management decisions made locally.
24
Classical vs. New Economy Organizations
Issues Classical industrial culture e-business culture
Coordination Accomplished through rigid organizational structures, progress meetings and backward-looking quarterly reports.   Accomplished by sharing key information collected automatically from users (such as a barcode reader on a production line) and organized as needed, on demand
Communication Publisher-push model. User is sent data just-in-case it might be needed. User-pull model. Users proactively seek information based on current requirements
25
Bottom Line for New Economy
Old economy New economy
To increase profits you increased prices To increase profits you decrease costs
Organized around standardized mass production Organized around flexible production of goods/services
26
The New Economy
  • We always have some part-time positions
    available for people who only want to work 60-80
    hours a week!

27
eProcesses in New Economy
28
New Economy Issues to Consider
  • A final thing we don't know is
  • where - or how
  • the New Economy
  • revolution will end.
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