class 1 the network economy
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ManagementInformation Systems
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The NetworkEconomy
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The New Economy
Also called The network economy, the knowledge
economy, the Web/Internet economy, etc. A controversial issue
The imortance o! knowledge
"igh tech o!ten relaces humancommunication and brainower
Electronic transactions
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The Network Economy
The advent was !oreseen in 1#$# by%eter &rucker Teacher, writer, consultant, thinker, and
lecturer on the contemorary organi'ation Wall (treet )ournal editor and !re*uent
"+ contributor
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The Network Economy
-onnected World
Increasing Web tra!!ic
Novice users ac*uire comuters The number o! eole with mobile
Internetenabled devices eceeds the
number o! landline Internet users New web articiants
Web bots, intelligent agents, mobile ob0ects,
etc.
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The Network Economy
-onnected World
oore2s 3aw
4ryder5s 3aw 6ilder2s 3aw
etcal!e5s 3aw
+ell2s 3aw
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The Network Economy
The observation made in 1#$7 by 6ordonoore, co!ounder o! Intel.
The number o! transistors er s*uare inch onintegrated circuits had doubled every year
since the integrated circuit was invented. oore redicted that this trend would continue
!or the !oreseeable !uture. In 8917, it is 8: ;$ months.
Initially, most eerts, including oore himsel!,eected oore5s 3aw to hold !or decades. oore recently stated that this trend is unlikely
to continue !orever. -urrently, the growth slowed down, but
scientists elore new materials and concets.
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The Network Economy
Kryder's Law The density o! the storage area o! a magnetic disk
increases much !aster than the increase in the -%alue
As the number o! nodes increases
linearly, the value o! the network growseonentially
The network2s value is derived !rom
lentitude E.g., as volume o! online transactions
increases, the cost o! every transaction
diminishes
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The Network Economy
Eonential >alue Metcalfe's Law
obert etcal!e !ounded ;-om
-ororation and designed the Ethernetrotocol !or comuter networks
etcal!e5s 3aw states that the
use!ulness, or utility, o! a networke*uals the s*uare o! the number o!
users
Network
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The Network Economy
Bells Law The birth and death o! comuter
classes
-omuter class B a set o! comuterswithin a articular rice range with uni*ue
caabilities 3ess eensive alternative to the reviously
widely used class o! comuters Aears aroimately every 19 years
The new class threatens to the revious class The revious class takes action, changes, and
eventually disaears
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The Network Economy
Bells Law The birth and death o! comuter classes
1#$9s B main!rames
1#D9s B microcomuters 1#9s B %-s
1##9s B Web services, cloud and grid
comuting
8999s B Notebooks, netbooks, handheld
devices and mobile email
8919s B Tablet comuters e.g., i%adC
=uture B odular comutersF
http://www.youtube.com/watch?v=r-ox90oXq8chttp://www.youtube.com/watch?v=r-ox90oXq8c -
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The Network Economy
3i!esan o! Innovation
In -anada and the
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The Network Economy
The (miling -urve
The valueadded otential in an IT
industry is di!!erent !rom that in the
older sectors, such as agriculture,natural resources, and manu!acturing The greatest value is catured in the
beginning G&, idea generation,concet, I%C and the end marketing,
brand, serviceC o! the value chain. The
lowest value is catured in the middle o!
the value chain roductionC.
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The Network Economy
The (miling -urve
&ownside B high revenues high
cometition
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The Network Economy
Increasing eturns
A!ter the dotcom crash, some
individuals have become Hdotcomaverse2
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The Network Economy
&ecreasing %rices
-onsumers may count on suerior
*uality !or less rice over time
(cientists !ind way to get more out o!
less material -omuters, cars, electronic devices,
bandwidth, etc.
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The Network Economy
In!ormation is the king
The value o! accurate and timely
in!ormation increases I! you have er!ect in!ormation, the
best deal is guaranteed
Technology may emower the user
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The Network Economy
In!ormation is the king (hoing bots B rice comarison
engines
%er!ect in!ormationhttJ//www.booksrice.com
#D99D;;D$8
Evendors tend to commoditi'e o!!erings Name, delivery otions, shiing time
(ingle !ree cometition market with 'ero
longterm ro!it B %rice wars
Evendor bots
http://www.booksprice.com/http://www.booksprice.com/ -
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The Network Economy
%eole eect !ree
=reeware or at least trial versions o!
so!tware rograms are taken !orgranted
6et a roduct !or !ree and ay !or
service or suort E.g., )ava language
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The Network Economy
"igh &eendency In a linked economy, the !ate o! an
organi'ation deends on other
comanies in the suly value chain,their cometitors, and the eternal
environment
Krgani'ations have to become highlyadative
ecent World Economic -risis
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The Network Economy
"igh ate o! &islacement
The agricultural era B industrial era
%eole have to change ro!essions
-omanies have to change roduct
lines and restructure
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The Network Economy
(ummary
-onnected world
Eonential value o! a network
3i!esan o! innovation
The smiling curve Increasing returns
&ecreasing rices >alue o! in!ormation
%eole eect !ree
&eendency
&islacement