New Economy:

New Business Models

Internet Power

Changing the Fundamental Nature of Competition and Doing Business

By: Vadim Kotelnikov

Founder, Ten3 Business e-Coach Inspiration and Innovation Unlimited!

"The Internet is the Viagra of big business." – Jack Welch

Fundamental Management Changes Engendered by the Internet

According to Bill Gates

  • Focusing on your core competencies and outsourcing everything else to outside suppliers

  • Maintaining a small central core of people, and employing others as and when required

  • Expanding rapidly and even globally from small or medium-sized bases

  • Escaping from geographic constraints by transferring work to where it is best and/or most economically done

  • Refocusing all processes on the customer, and constantly mutating to meet changing markets and competition

  • Increasing the pressure to shorten cycle time and increase the speed of all other processes

New Business Models Internet Power

Virtual Integration

Action Areas

  1. Integrate into customers' operations: To increase customer value-added and differentiate yourself from your competitors, integrate yourself into your customers operations. The more of your customers' work you undertake, the harder it is to find the line that separates you from them.

  2. Use Internet to transform the processes that link you with your customers, suppliers and other alliances and work intimately with them to reduce distinctions from them.

  3. Converge your core competences and outsourcing. With virtual integration, flawless coordination of outsourced processes, such as product design or coaching, can be achieved so that operations of different companies are intertwined and cannot exist independently.

 

 

 Discover more!

e-Business

e-Ventures

Business Model

New Business Models

Virtual Integration

New Economy

Overcommunication Problem

Case Studies

Amazon.com

Apple's New Business Models

Charles Schwab: Fast Company

Michael Dell

Fun4Biz – Breakthrough Social Network, Paradise for Creative Achievers

New Realities

The Internet changes the fundamental nature of doing business and competition. As new ways of building and delivering products and services online emerge, your competition goes beyond established competitors to include new companies, in addition to new innovations, ideas  or ways of improving existing processes or products.1

 

The wired world is a world in constant flux. Bill Gates, the Founder of Microsoft, describes the new Internet era as an environment of constant change, or "punctuated chaos." As all financial players are digitally connected, "any downturn or upturn in a major market creates overnight reverberations in other markets... The digital world is both forcing companies to react to change and giving them the tools by which to stay ahead of it".  IT helps you connect your business strategy with organizational response. Without IT there will be no fast response – and no company, as today "it's not the big that eat the small... it's the fast that eat the slow."

New Business Models

Internet commerce gives rise to new kinds of business models. But the web is also likely to reinvent tried-and-true models. Auctions are a perfect example. One of the oldest forms of brokering, auctions have been widely used throughout the world to set prices for such items as agricultural commodities, financial instruments, and unique items like fine art and antiquities. The Web has popularized the auction model and broadened its applicability to a wide array of goods and services.

In the most basic sense, a business model is the method of doing business by which a company can sustain itself – that is, generate revenue. Business models are perhaps the most discussed and least understood aspect of the web. The web changes traditional business models. Internet business models continue to evolve. New and interesting variations can be expected in the future. But there is little clear-cut evidence of exactly what this means.

Business models have been defined and categorized in many different ways.

Professor Michael Rappa of the Alan T. Dickson Distinguished University, United States, describes nine basic categories of business models on the Web: brokerage, advertising, infomediary, merchant, manufacturer (direct), affiliate, community, subscription, and utility. The models are implemented in a variety of ways, as described in the table below. Moreover, a firm may combine several different models as part of its overall Internet business strategy. For example, it is not uncommon for content driven businesses to blend advertising with a subscription model.

Some models are quite simple. A company produces a good or service and sells it to customers. Other models can be more intricately woven. Broadcasting is a good example. The broadcaster is part of a complex network of distributors, content creators, advertisers (and their agencies), and listeners or viewers. Who makes money and how much is not always clear at the outset. The bottom line depends on many competing factors.

Business models have taken on greater importance recently as a form of intellectual property that can be protected with a patent. Business models (or more broadly speaking, "business methods") have fallen increasingly within the realm of patent law. A number of business method patents relevant to e-commerce have been granted... More

 Case in Point  Amazon.com

Amazon.com is a company that is closely tied with the e-commerce phenomenon. Jeff Bezos, the founder of the company, broke the rules of the book business by using the Internet rather than conventional distribution channels... More

 

Mini-courses

  1. New Business Models

  2. Synergizing Value Chain

  3. SMART Business Architect

 

References:

  1. Direct from Dell, Michael Dell with Catherine Fredman

  2. "Business Models on the Web," Prof. Michael Rappa

  3. Roads to Success, Robert Heller