Briding a Smooth Transformation into the Internet Economy

©  Richardus Eko Indrajit, 2000

Bridging a Smooth Transformation into the Internet Economy presented by Dr. Ir. Richardus Eko Indrajit MSc. MBA Chairman of Renaissance Research Center TPE – CONNECTIVITY INDONESIA 2001 CONFERENCE SERIES ““eStrategy : Surviving and Succeeding in an Internet Economy”” Regent Hotel Jakarta, Indonesia Tuesday June 14th 2000

Special Presentation on


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OLD ECONOMY

INTERNET ECONOMY

Smooth transformation …

Bridging


SCOP

E OF

DIS

CUSS

ION

OLD ECONOMY

INTERNET ECONOMY

Culture ?

Ideology ? Politics ?

Social ?

Religion ? Business !

Behavior ?

National Defense ?

Education ?

Business ?


Understanding the Philosophy Behind the New Digital Economy Principles and Phenomena

Step One

Knowing Your Unique Existing Position within the New Business Environment (Virtual World)

Step Two

Determining the Target among Many Possibilities of Maximizing Wealth in the Digital Era

Step Three

Developing the Appropriate Scenarios of Strategy for Smooth Transformation

Step Four

PRES

ENTA

TION

AGE

NDA


Understanding the Philosophy Behind the New Digital Economy Principles and Phenomena

Step One


“Not an Old” Economy Principle ““Penghasilan

Sebesar-besarnya dengan

Pengorbanan Sekecil-kecilnya””

The Principle of

WEALTH MAXIMIZATION

  It requires strategy because of the scarce resources

  Resource = consist of atoms which are limited by time and space


Digital Technology = Digitization

10010001 atom bits

text audio video image voice data knowledge information process

real things abstract things

Bits characteristics: - easy to duplicate - cheap to produce - fast to restructure - good to represent

unlimited resources digital economy


Internet Economy

Digital Economy + Internet Development =

INTERNET ECONOMY INTERNET ECONOMY


Knowledge

Digitization

Virtualization

Molecularization

Integration/Internetworking

Disintermediation

1

2

3

4

5

6

Convergence

Innovation

Prosumption

Immediacy

Globalization

Discordance

7

8

9

10

11

12

New Economy Characteristics


THEME ECONOMY ORGANISATION

Knowledge Knowledge becomes an important element of products

Knowledge work becomes the basis of value, revenue, and profit

Digitization Products and services’’ forms are transformed into ones and zeros

format

Internal communication shifts from analog to digital

Virtualization Physical things (institution and relationship) can become virtual

The business transformation into virtual corporations type company

Molecularization Replacement of the mass media into molecular media

End of command-and-control hierarchy, shifting to team-based,

molecular structures

Internetworking Networked economy with deep and reach interconnections of economic

entities

Integration of modular, independent, organizational components for

network of services

Disintermediation Elimination of intermediaries and any stand between producers and

consumers

Elimination of middle managers, internal agents, etc. who boost the

communication signals

Paradigm Shifts


THEME ECONOMY ORGANISATION

Convergence Convergence of computing, communications, and content

Convergence of organizational structures responsible

Innovation Innovation becomes the key driver of business success

The only sustainable advantage is organizational learning

Prosumption Gap between consumers and producers blurs in a number of ways

Consumers of information and technology become producers

Immediacy It is a real-time economy that occurs at the speed of light

Required a new real-time enterprise that can adjust to changing business

conditions

Globalization Knowledge knows no boundaries, there is only a world of economy

The new enterprise enables time and space independence

Discordance Massive social contradictions are arising

Profound organizational contradictions are arising

Paradigm Shifts continue


PHYSICAL WORLD of value chain

The “Chain” Paradigm

  Business on the 80s-90s

  Business after the year of 2000

VIRTUAL WORLD of value chain

+


Key of Success

1.  Flow of Physical/Digital Products 2.  Flow of Money/Financial Data 3.  Flow of Documents/Information 4.  Flow of Services and Other Resources


Physical Value Chain

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

INBOUND LOGISTICS OPERATIONS OUTBOUND

LOGISTICS MARKETING AND SALES SERVICE

FIRM INFRASTRUCTURE



PROCUREMENT



FIRM INFRASTRUCTURE



PROCUREMENT



FIRM INFRASTRUCTURE



PROCUREMENT


LOGISTICS MARKETING AND SALES SERVICE   Industry Based Value Chain

  Best Practice Oriented   Software/Application Minded   Physical Flow of Goods


Gather

Organize

Select

Synthesize

Distribute

Business Model:   Info Based Process   Flow of Bits   Bit Restructuring   Digital Asset

Digital Value Chain


Opportunity in the Internet Economy

The Value Matrix


P1 Purchasing

and Inbound Logistic

P2 Production

and Operation

P3 Outbound

Logistic and Distribution

P4 Sales and

Marketing

P5 Customer

Supports and Services

P1 V1 Gather

P1 V2 Organize

P1 V3 Select

P1 V4 Synthesize

P1 V5 Distribute

P2 V1 Gather

P2 V2 Organize

P2 V3 Select

P2 V4 Synthesize

P2 V5 Distribute

P3 V1 Gather

P3 V2 Organize

P3 V3 Select

P3 V4 Synthesize

P3 V5 Distribute

P4 V1 Gather

P4 V2 Organize

P4 V3 Select

P4 V4 Synthesize

P4 V4 Distribute

P5 V1 Gather

P5 V2 Organize

P5 V3 Select

P5 V4 Synthesize

P5 V5 Distribute

P1OB P2OR P3OB P4OB P5OB

P1OC P2OC P3OC P4OC

Po5C

PiV1OB

PiV2OB

PiV3OB

PiV4OB

PiV5OB

PiV1OC

PiV2OC

PiV3OC

PiV4OC

PiV5OC

P1IB P2IB P3IB P4IB P5IB

P1IC P2IC P3IC P4IC P4IC

Business

Consumers

Indrajit Model


Customers

Customers

Enterprise A

Enterprise B

Enterprise C

Enterprise D

Internetworking


P1 Books

Publisher

P2 Inventory

P3 Distribution

P4 Physical

Bookstore

P5 Courier Services

P1 V1 Gather

P1 V2 Organize

P1 V3 Select

P1 V4 Synthesize

P1 V5 Distribute

P2 V1 Gather

P2 V2 Organize

P2 V3 Select

P2 V4 Synthesize

P2 V5 Distribute

P3 V1 Gather

P3 V2 Organize

P3 V3 Select

P3 V4 Synthesize

P3 V5 Distribute

P4 V1 Gather

P4 V2 Organize

P4 V3 Select

P4 V4 Synthesize

P4 V4 Distribute

P5 V1 Gather

P5 V2 Organize

P5 V3 Select

P5 V4 Synthesize

P5 V5 Distribute

C U S T O M E R S

C U

S T O M

E R S P

A R

T N

E R

S

Amazon.com


P1 Subjects & Contents

P2 Online

Training

P3 Formal Exam

P4 Retake Exam

P5 Certificate Deliverable

P1 V1 Gather

P1 V2 Organize

P1 V3 Select

P1 V4 Synthesize

P1 V5 Distribute

P2 V1 Gather

P2 V2 Organize

P2 V3 Select

P2 V4 Synthesize

P2 V5 Distribute

P3 V1 Gather

P3 V2 Organize

P3 V3 Select

P3 V4 Synthesize

P3 V5 Distribute

P4 V1 Gather

P4 V2 Organize

P4 V3 Select

P4 V4 Synthesize

P4 V4 Distribute

P5 V1 Gather

P5 V2 Organize

P5 V3 Select

P5 V4 Synthesize

P5 V5 Distribute

C U S T O M E R S

C U

S T O M

E R S

P A

R T

N E

R S

C

U S

T O

M E

R S

Brainbench.com


P1 Freeware & Shareware Warehouse

P2 Components

Download

P3 Software

Demo

P4 Purchasing

P5 Full

Download

P1 V1 Gather

P1 V2 Organize

P1 V3 Select

P1 V4 Synthesize

P1 V5 Distribute

P2 V1 Gather

P2 V2 Organize

P2 V3 Select

P2 V4 Synthesize

P2 V5 Distribute

P3 V1 Gather

P3 V2 Organize

P3 V3 Select

P3 V4 Synthesize

P3 V5 Distribute

P4 V1 Gather

P4 V2 Organize

P4 V3 Select

P4 V4 Synthesize

P4 V4 Distribute

P5 V1 Gather

P5 V2 Organize

P5 V3 Select

P5 V4 Synthesize

P5 V5 Distribute

C U S T O M E R S

C U

S T O M

E R S

P A

R T

N E

R S

Download.com


P1 List of Used

Goods

P2 Auction

Registration

P3 Auction Session

& Winner

P4 Payment

& Settlement

P5 Goods

Deliverable

P1 V1 Gather

P1 V2 Organize

P1 V3 Select

P1 V4 Synthesize

P1 V5 Distribute

P2 V1 Gather

P2 V2 Organize

P2 V3 Select

P2 V4 Synthesize

P2 V5 Distribute

P3 V1 Gather

P3 V2 Organize

P3 V3 Select

P3 V4 Synthesize

P3 V5 Distribute

P4 V1 Gather

P4 V2 Organize

P4 V3 Select

P4 V4 Synthesize

P4 V4 Distribute

P5 V1 Gather

P5 V2 Organize

P5 V3 Select

P5 V4 Synthesize

P5 V5 Distribute

C U S T O M E R S

C U

S T O M

E R S C

U S

T O

M E

R S

Ebay.com


Knowing Your Unique Existing Position within the New Business Environment (Virtual World)

Step Two


Indrajit Matrix

Know the Paradigm

Impact on Existing

Business

Reactive Action

Highly Possible Output

Yes Yes Yes Survive

Yes Yes No Business Threat

Yes No Yes Opportunities Taken

Yes No No Adding Knowledge

No Yes Yes Boomerang

No Yes No Dangerous

No No Yes Gambling Adventure

No No No Nice Watcher


Population

Internet Users

Internet Business

B2B

B2C

C2C

1

2 3

Virtual and Physical Community


DISTRIBUTORS

SUPPLIERS

CUSTOMERS

PARTNERS

Finance and Management

Manufacturing and Production

R&D and Engineering

Procurement Distribution

Supply Chain Logistics

Marketing Advertising

Sales Customer Care

Inward Focused Core Business Process and Applications

Internet/Intranet/Extranet

The World of Internet Economy


The 18 Internet Imperatives

1.  Power Shift to Customer 2.  Global Sales Channel 3.  Reduced Costs of Buying and Selling 4.  Converging Touch Points 5.  Always Open for Business 6.  Reduced Time-to-Market 7.  Enriched Buying Experience 8.  Customization 9.  Self-Service 10.  Reduced Barriers of Market Entry 11.   Demographics of the Internet User

12.  Power Shift to Communities-of-Interest 13.  Cybermediation 14.  Logistics and Physical Distribution 15.  Branding: Loyalty and Acceptance Still

Have to be Earned 16.  When Most Markets Behave Like the

Stock Market 17.  Auctions Everywhere 18.  Hyper-Efficiency


1.  New Business (products/services) 2.  New Market (customers) 3.  New Revenue (business model)

4.  New Company (business transformation)

5.  New Image (business community)

6.  New Wealth (paradigm shift)

Etc. Key Points:   From “nothing” to “existing”   From “existing” to “creating”   From “creating” to “improving”   From “improving” to “growing”   From “growing” to “performing”

The Winners


1.  Loss market share (products and services) 2.  Loss revenue (customers) 3.  Loss competitive advantage (business model)

4.  Loss trust (business community)

5.  Loss resources (competition)

6.  Loss opportunity (cost)

Etc. Key Points:   From “performing” to “stopping”   From “stopping” to “decreasing”   From “decreasing” to “surviving”   From “surviving” to “eliminating”

The Losers


Determining the Target among Many Possibilities of Maximizing Wealth in the Digital Era

Step Three


Corporate Enhancement Old Company plus Internet

DotCom

Start from Scratch in Internet Extended Supply Chain

Upstream Connection through Internet (Suppliers)

Customer Relation

Downstream Connection through Internet (Customers)

1

2

3

4

Four Types of eCompany


Corporate Enhancement

Stakeholders

Management Control Finance – Accounting - Auditing

Emplo

yees

Admi

nistra

tive C

ontro

l HR

MS –

ORMS

- Pu

rchas

ing

Customers, Resellers

Selling Chain Management

Customer Relationship Management Marketing – Sales – Customer Service

Business Partners Suppliers, Distributors, Resellers

Supply Chain Management

Enterprise Resource Planning Logistics – Production - Distribution

Knowledge Tone

Applications

Enterprise Application Integration


DotCom

Consumer Management

Registration

Credit Processing

Consumer Fulfillment

History

Account Maintenance

Catalogue Management

Product Description

Samples

Availability

Prices

Order Management

Order Accounting

& Settlement

Web-Enabled Call Center

Payment Processing

Sales Reporting

Delivery Management

Source Product and Delivery

Services

Track and Trace

Merge in Transit and Installation

Services

Delivery

Inventory Management

Availability to Promise

Pick, Pack, and Ship

Warehousing

Product Replenishment

Business Operations Management

Information flow Money flow Physical flow

End Consumers

Producers Suppliers

Who is buying ? What is being offered ?

What is being ordered ?

How is the order being fulfilled ?

Who is supplying the product ?


Extended Supply Chain

Engineering Contractor

Value Added Suppliers

3rd Party Logistics Installers

Commodity Suppliers

Contract Manufacturing

3rd Party Service

e-Supply Chain Management

Collaborative Planning   On-line collaborative planning and forecasting   Supply chain available-to-promise   Inventory and order visibility   Dynamic scheduling and reprioritization   Real-time decisions based on demand, capacity, costs, and

responsiveness   Real-time demand profiles

Web Fulfillment   Real-time capture of customer orders into manufacturing systems   On-line training and information   Real-time product information / engineering changes

e-Supply Chain Management   Utilize information as a substitute for inventory   Compete on supply chain agility and speed   View partner collaboration as a strategic asset


Customer Relation

Joint Offering Partners

Indirect Channels Partners

Existing Customers

New Customers

New Markets e-Customer Relationship Management Real-Time Ordering   Customer-specific pricing and products   Accurate order status 24 x 7   Real-time available-to-promise

Opportunity Management   Competitive intelligence capability   Tracking of channel partner performance   Customer and channel partner incentive programs

Value Added Services via the Web   Training   Customer-specific functionality and branding   Demand full from customers’ service provisioning   Cycle time monitoring from lead to installation

Customer and Partner Self-Service   Interactive customer assistance   Personalized extranets

e-Customer Relationship Management   Anticipate customer needs   View customer information as a strategic asset   Treat each customer as unique   Provide single face to customer   Mine customer information for sales purposes   Provide integrated multi-channel customer service


Developing the Appropriate Scenarios and Strategy for Smooth Transformation

Step Four


Gather Organize Distribute Select Synthesize

Facts

Data

Information

Knowledge

Wisdom

Business Value of

Information System

Add Value customers and markets

Reduce Costs transactions and processes

Minimize Risks market, financial, legal,

operational risks

Create New Realities intelligence (social, political, technological, etc.)

The Main Philosophy


SAVE MONEY 2 Financial, Manufacturing, Services 1 Administrative

MAKE MONEY 4 Mega Decisions 3 Marketing, Distribution, Customer Service

REMAIN IN BUSINESS 5 People Systems, Home Computers

OPERATIONAL CONTROL 2 Asset Management 1 Process Management

ORGANIZATIONAL EFFECTIVENESS 5 Restructuring of the Industry 4 Restructuring of the Organization 3 Growth and Increase in Market Share

FUNCTIONAL USE MANAGEMENT FOCUS

Reducing Costs

Leveraging Investment

Enhancing Products and Services

Enhancing Executive Decision Making

Reaching the Consumer

Above the Line

Below the Line

1

2

3

4

5

Conservative Approach


Localized Exploitation

Integration

Business Process Redesign

Business Network Redesign

Business Scope Redefinition

LOW Range of Potential Benefits HIGH

LOW

HIGH

Deg

ree

of B

usin

ess

Tran

sfor

mat

ion

Revolutionary

Evolutionary

MIT Approach


Communities Of Interests

Brochureware

Customer Interaction

Transaction Enabler

Real-Time Organization

Time

Evolution of Internet Usage

Common Approach


Commodity Exchanges

Value-Added Services

Knowledge Networks

Value Trust Networks

Value Proposition

Com

plex

ity

Other Approach


The History of DotCom

AA: Traditional “invest for future” going- concern success

AB: Dark Model Profitless growth, war of corporate attrition

AC: Black Hole Massive company generates negative

cash flow, never recovers


New DotCom Grow Up Paradigm

CHARACTERISTICS NET-PHASE 1 NET-PHASE 2

Ideal company Thin float IPO, all-new online standalone start up

Second generation bricks ‘n clicks hybrid with compelling market proposition

Foundation investor/shareholders Individual online investor, buying anything in current Cant Miss sector on dips

Institution, adapting value investment principles to volatile internet

Key player Startup originators, early stage angles, VC, top IPO investment bankers

Killer model developers, secondary (mainstream) financiers

Primary management focus Positioning: Being in the right sector

Viable business plan that ensures survival today, segment leadership tomorrow

Presence Participation Domination (40/40)

Market share capture approach Bottom up Top down


CHARACTERISTICS NET-PHASE 1 NET-PHASE 2

Positive cash flow in the future Communicated via “perceptions management”

Through specific forecasts and commitments

Net-Brand development Reliance on high risk, low-yield, high-cost traditional media

Extending the few highly successful key net nameplates and bricks ‘n clicks hybrid nameplates leveraging on traditional market presence

Mergers and acquisitions emphasis Cross-Dot-Com commercial contracts with spin as special alliances

Industry group strategic alliance announcement: overpromise

Market share capture strategy Bottom up Top down

New DotCom Grow Up Paradigm cont.


The Conclusion

Old Company

+ Information Technology

= Old and Expensive Company


Thank You

Richardus Eko Indrajit

http://www.indrajit.org

[email protected] [email protected]

Q&A

Briding a Smooth Transformation into the Internet Economy

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