E-Business and the New Economy

Internet & Money

E-Business

‘Any business activity whose main operations

take place on the Internet, regardless of the
relation between physical and virtual
dimensions of the firm.’
Structure of presentation

1. Introduction
2. The Network Enterprise
3. Financial aspects
4. Work in the e-conomy
5. Productivity and Innovation
6. The New Economy and its Crises
 Introduction

‘Internet is the fabric of our lives’

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 3 independent processes

 Globalization and need for management

flexibility

 Demands regarding individual freedom and

open communication

 Technological advancements (IT, ICT)

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 Internet
 Flexibilityand task performance
 Coordinated decision-making
 Decentralized execution
 Individualized expression
 Global communication

…bringing the 3 forces together, creating the

Network Society
Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 Internet and Business
 Supplier-customer relationship
 Management
 Production process
 Cooperation with other firms
 Financing
 Valuation of stocks

‘networked economy with an electronic nervous system’

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 The Network Enterprise

 Internaldecentralization of big firms

 Cooperation between big and small firms
 Linkage small and medium networks and large
corporations
 Strategic alliances

‘the network is the enterprise’

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 Example 1: Cisco
 Business model based upon internal and external
networks
– Interaction company, customers and suppliers
– Manufacturing communication online
– Employers interconnected
– Accounting
– Inventory
 Production outsourced
 Active acquisition policy

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 Example (2) – Zara
 Computerized network structure
– Daily interaction between sales and design
– Electronic transmission from design to factory

12.000 designs per year

Re-supply of stores twice a week
Time from design to store 2 weeks

‘The essence of e-business is in the Internet-based, interactive, networked

connection between producers, consumers, and service providers.’

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
Internet and the Network Enterprise

 Scalability (global network)

 Interactivity (real- or chosen time)
 Management of flexibility
 Branding
 Customization

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 e-Capital and Market Valuation

‘The computer networking capacity of trading

systems is transforming financial markets, and
the new rules of financial markets are providing
the necessary capital for the financing of the
Internet economy’

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 The new financial market

 Global characteristics and interdependencies

financial markets
 Electronic trading the core of financial markets
 A global exchange market concentrated in a
few nodes

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 Online investments

 Increased market volume

 Criticality online information
– Danger; perceptions represent reality
 Lessdependency on intermediate firms
 Reactions in real-time

 exponential increase in market volatility

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 Work in the e-conomy
 Self-programmable labor
– China, India, Eastern-Europe, Russia
 ‘brain circulation’ rather than ‘brain drain’
 Payment through stock options
– Low costs in wages
– Creating total commitment
 Flexibility, as a result of
– The networking form of business
– The fast pace of the global economy
– The technological ability to work online

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 e-Business and work

 Work flexibility
 Variable employment patterns
 Diversity of working conditions
 Individualization of labor relations

Coming up:
 self-employment, part-time and temporary work, and consulting

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 Productivity and Innovation

Sources of productivity growth in the Information

Age, an economy..

..powered by Information Technology

..dependent on self-programmable labor
..organized around computer networks

 Innovation stands at the base of this growth

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 Innovation
‘Innovation is the heart that pumps the New Economy’

 Facilitated by open access to information and

cooperation
– Network effects
– Path dependency
– Increasing returns
 Cooperation in innovation, competition in
applications and services

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 The New Economy and its Crises
‘Without money there can be no innovation’

 Essence of constant investments

 Essence of stock market
– Non-economic factors
– Expectations fuel investments

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 March 10, 2000
 Dot.com firms fail to meet expectations
 Wrong anticipations regarding relation with potential
customers
 Technological restructuring IT-industry
 ‘Mobile internet’ did not lift off
 Y2K follow-up
 Earlier irresponsible investments
 Political crises
 Influence of some conservative economists

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 Remedy

 Ability to react Just-in-Time essential

– Volatility of the market
 Endogenous R&D capacity
– Innovation less dependent on stock

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises
 The New Economy

‘..driven by a highly sensitive stock market that

finances high-risk innovation at the source of
high productivity growth.’

Introduction – The Network Enterprise – Financial aspects – Work in the e-conomy – Productivity and Innovation – Crises