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Fundamental
Management Changes Engendered by
the Internet
According to
Bill Gates |
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Focusing on your
core competencies and
outsourcing everything else to outside
suppliers
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Maintaining a small central core of people, and employing others
as and when required
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Expanding rapidly and even globally from small or medium-sized
bases
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Escaping from geographic constraints by transferring work to
where it is best and/or most economically done
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Refocusing all processes on the
customer, and
constantly mutating to meet changing markets and competition
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Increasing the pressure to shorten cycle time and
increase
the speed of all other processes
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Virtual Integration
Action Areas |
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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.
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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.
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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.
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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
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
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