Jan Annerstedt

Infocom Related Industry: What’s New?Technology-induced change

– Drastic changes in technological capabilities due to digitization

– Major shifts in the way electronic products are being applied

– Evisceration of competitive boundaries between traditionally distinct sectors or between sub-segments within a sector

– Dramatic changes in the governance of the new e-conomy: from ex ante regulation to market competition

– A shift in the balance of power from the supply side to the demand side, from providers to users

Jan Annerstedt

Preconditions for a ’new e-conomy’

Internet as

1. A network och networks

2. A medium

3. A self-aware fabric that is always in the backgrund (all the way to wireless access)

Jan Annerstedt

What’s new?- Productivy enhancement

Dramatic changes over the past 20 years (in US and Europe)

What’s ’the cause’? ICT & ’knowledge’

1. Tangible assets

2. Intangible goods

3. Intangible competencies

Jan Annerstedt

Intangible goods

-Licences, quotas, franchises

-Copyright or patent-protected ...

-Film, music, artistic, scientific, literary entities, incl. software

-Other Intellectual property

Enforcable ownership rights that can be traded in disembodied form

Jan Annerstedt

Intangible competencies

-Innovation competencies

-Market competencies

-Human resources

Distinctive factors of competitive advantage that differentiates one company from another

Jan Annerstedt

Infocom Related Industry: What’s New?Organizational change

– New firms as drivers

– Big (traditional) firms are restructuring

– Supply and distribution systems are altered dramatically

Jan Annerstedt

Infocom Related Industry: What’s New?Changing terms of competition

– New industry boundaries, changing industry borders

– From ‘bricks and mortar’ to ‘clicks and mortar’

– New ways of entering markets, new barriers of entry

– New ways of capturing value in the changing value chains

– New intermediaries, ‘dis-intermediation’, new industry logistics

Jan Annerstedt

10 Driving Principles of the New E-conomyMatter. ‘It matters less’: value is found

in the firm’s intangible assets (persons, ideas, information-driven activities)

Space. Distance seems to be vanishing

Time is collapsing: instant interactivity is critical to most firms

Jan Annerstedt

10 Driving Principles of the New E-conomyPeople. Grey matter, brain power,

intelligence, human resources, etc. Are the key to success

Growth is accelerated by the networked economy. First mover advantages.

Value rises exponentially with market share

Jan Annerstedt

10 Driving Principles of the New E-conomyEfficiency. Infomediaries replace

intermediaries. Value chains are being handled more directly by aggregation of various functions

Markets. The demand side of the economy is being enforced. The supply side restructured

Jan Annerstedt

10 Driving Principles of the New E-conomyTransactions. More of one-to-one

relationships. Information is easy to customize or tailor-make to particular needs

Impulse. Every product is available everywhere: processes of marketing, sales and consumption are merging

Jan Annerstedt

Markets Are ‘One-click Away’

But, what is a market in the e-conomy?– Physical or geographic constraints– Products and services become ‘perishable’– Products as bits– E-tailers and e-malls– Content portals, infomediaries– Value chain integration– Value chain service providers

Jan Annerstedt

What’s a Market (in the Old Economy)?A place (area, region) where

transactions take place and commodities are being exchanged

Always involves associated activities:– Information of prices– Customer relationships– A culture of commerce

Jan Annerstedt

What’s a Market (in the Old Economy)?Institutional underpinnings of

‘organized exchange’

Exchange involves:– Contractual agreements– Exchange of property rights– Protection of rights (checks and balances)– Means of transfer of the goods and services

Jan Annerstedt

What’s a Market (in the Old Economy)?Markets are ‘organized exchange’,

supported by institutional arrangements which:– Help regulate and establish consensus over prices– Communicate information regarding products,

prices, quantities, potential buyers and sellers– Create protection of rights (‘checks and balances’)– Provide means of transfer of the goods and services– In general: facilitation and structuring

Jan Annerstedt

Markets in the New E-conomy

Same old markets, but some new features

Explicit or implicit legal contracts

Protection of parties involved (buyers, sellers) through sanctions (incl. Legal means)

Yet: there is still ‘non-market exchange’ (e.g. custom-built goods)

Jan Annerstedt

Markets in the New E-conomy

The institutional contexts within which markets do function are changing

Markets are social institutions– Markets transmit information, create and

mold individual preferences, shape expectations, support actions, etc.

– Markets help structure the norms, beliefs and codes of conduct among the actors involved

Jan Annerstedt

Non-Market Exchange Continue to ExistThere is still a need for non-market

exchange– Specialized contracts for specialized goods– Unique, heterogeneous products– The costs to enter a market may be too

high– Personal contacts still matter– Innovative products are promoted via

personal contacts

Jan Annerstedt

No Such Thing As ‘Perfect Competition’Perfect competition presupposes that

there are no structures or conventions in the marketplace

Yet, there are always risk and uncertainty involved in any transaction: buyers and sellers typically fall back on others’ judgements

Jan Annerstedt

Three phases of ’internet related’ economic activity (or other technology-induced change

1. The ’hype’ phase

2. The ’utility’ phase

3. The ’transparency’ phase

Jan Annerstedt

’Network effects’ of the ’e-conomy’

All network are subject to network effects

Metcalf’s law (the value of the network is the square of the number of network members)

The law of community (the value of the network is the square of the number of network communities connected)

Jan Annerstedt

’Network effects’ of the ’e-conomy’

Radial networks: members connected through a ’center’ (a dot.com server such as Amazon.com)

Combinatorial networks: networks of combinations (or communities) of users

Jan Annerstedt

Is there such a thing as a ’new e-conomy’?

Always the ’new big thing’ effect by way of a new technology

Always a ’sobering period’

Yet: A series of new features of ’deep craft’ developments (new technology based on new scientific advancements supported by ’new cultures of practice’) on high-velocity markets

Jan Annerstedt

Four fields of European action

1. Regulatory environment

-telecom regulation

-digital economy framework (copyright, web-signatures, etc.)

-protection of privacy and personal rights

Jan Annerstedt

Four fields of European action

2. Infrastructure and access

-connection to international networks

-national and regional infrastructure

-individual and collective access (e.g. public access points)

Jan Annerstedt

Four fields of European action

3. Human capital development

-education and training

-access to public data and information

-etc.

Jan Annerstedt

Four fields of European action

4. Applications and services

-adaptions to cultural and linguistic diversity

-local and regional economic development

-’not-for-profit’ (but viable) activities

Jan Annerstedt

Basic ‘Info Elements’ of the New E-conomyData

Information

Intelligence

Jan Annerstedt

Basic ‘Info Elements’ of the New E-conomyData: could be reduced to code

Information: units of data that are easily stored, processed and transmitted

Intelligence (specialized knowledge): A capability or capacity of translating information into action

[Knowing what, who, when, why,…?]

Jan Annerstedt

Information = a ‘Pure Public Good’Information is not a normal (private)

commodity in a market

Infinite ‘expansibility’

Very low marginal transfer costs

Often high fixed costs of production

Jan Annerstedt

Information = a Pure ‘Public Good’Competitive markets typically fail to

allocate ‘public goods’ efficiently

Marginal costs are often uncovered, even with large production scales

External use benefits are not properly valued by a private willingness to pay

Conceptual designs are not rewarded

Jan Annerstedt

Knowledge Appropriation

How to benefit from information and knowledge investments in the new e-conomy?

‘Intellectual property’ solutions: if you use the idea for commercial purposes = you pay

‘Public subsidy’ solutions: patronage

‘Socialist production system’ solutions: public provision, public procurement

Jan Annerstedt

Knowledge Appropriation

Which are the current tendencies in the new e-conomy?

Property rights are becoming central

Patronage (public or private) is becoming less important

Public provisions are becoming less important

Jan Annerstedt

Knowledge Appropriation

Which are the tendencies in today’s ‘information disclosure regimes’?

Towards a more ‘closed system’ of information dissemination

A ‘meltdown’ in the republic of science

An expansion of the realm of technology

Jan Annerstedt

References

Shapiro, Carl and Hal R. Varian. Information Rules: A strategic guide to the network economy. Boston: Harvard business school press, 1999

Levine, Rick, Christopher Locke, Doc Searls & David Weinberger (eds): The Clue Train Manifesto: The end of business as usual, New York: Perseus books, 1999

Magretta, Joan, ed., Managing in the new economy. Cambridge, MA: Harvard business review publishing, 1999.