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Networking Age - Impact on Organizations

What kind of companies are succeeding today and why?

Production, distribution, and control....they're all changing.   Physical and geographic boundaries decrease more in relevancy every day.  We've arrived at an age where the intangibles of business matter more than the physical processes.  What intangibles?  Ideas, information, creativity, service, and brand image for starters.  Harnessing collective intelligence baby.  And doing it more cost-effectively than ever before.

Indeed, where before we could measure a business by looking at the physical processes of its supply chain, today we have to broaden our focus to include these intangibles......by looking at the value chain.

The value chain identifies the value adding activities of an organization (not just the physical cost incurring ones).

Streamlining for Operational efficiency.  Value Chain Management (VCM)

intermediation.jpgdisintermediation.jpg

Disintermediation: "cutting out the middleman"

Value Chain - another view.  The value chain spans organizations.  Whole industry's are being redefined.
valuechain.gif

Hence, trends toward outsourcing.   Companies focus on their core competencies.  Build brand recognition.

With so much disruption in our modes of communication, production, distribution & control there are now newer, better ways to deliver products and services.  New Business Models have emerged.

What is a business model?

What problem does this business solve (what special opportunities does it create) and how does it do so profitably?  How does it out do its competition?

Wikipedia definition:  Business Model

Examples:

  • The way leasing has changed the auto-industry
  • The way Amazon has changed book buying
  • The way Dell changed the way personal computers are sold
  • The way Ebay, Priceline, and Typepad (the personal publishing service that I use to author this weblog) has created an entirely new service
  • The way Microsoft changed the computer industry by standardizing personal computers across manufacturers with its popular MS-DOS operating system.

More impacts:

New Markets/Cross-border selling

- Where is Amazon's headquarters? 

New Products/Service

- Priceline.com

New Competition

- Yahoo/MSN as travel agent, broker, car dealer?
 
Connected Intelligence

Buzzphrases like "Web 2.0", "Crowd-sourcing", and "User-generated content revolution" abound these days. While some of the hype is a little overzealous and often serves to simplify the underlying forces at work, there seems indeed to be some underlying reason for the fuss. One of those reasons is this: one of the great keys of success in developing new and innovative services that take advantage of the Networking age is in harnessing collective intelligence.

Tim O'Reilly has had a leading role in hyping these terms in a speech which included this exerpt

"When we first began thinking about Web 2.0, we asked ourselves what distinguished the companies that survived the dotcom bust from those that failed. And we came up with the surprising observation that in one way or another, each of them was good at harnessing user contributions, applying some of the same insights to consumer applications that leading edge software developers have applied to open source software projects like Linux.

Consider Google: their breakthrough in search, the famous PageRank algorithm, was the result of realizing that you could get better search results by studying the links that people make to documents, rather than just studying the content of the documents themselves. Every time one web site makes a link to another, that's a contribution to Google, one small step in making the search engine smarter.

Consider EBay: it's a marketplace of buyers and sellers, with EBay simply acting as an intermediary. More than 800,000 people now make a living full or part time via eBay, and millions buy goods from each other in the world's largest swap meet. Pierre Omidyar, the founder, likes to point out that it's fundamental to eBay's succes that has a positive social effect, not only creating new economic opportunities for individuals, but helping teach complete strangers to trust one another.

How about Amazon? They have the same product data as all of their competitors, but their tireless effort to get the users to annotate that data -- more than ten million user reviews, and countless other forms of user generated content -- have made them the most authoritative product catalog in the world.

Or consider recent successes like Flickr, the photo sharing service recently acquired by Yahoo! They became the fastest growing photo service because they harnessed the power of sharing. While previous internet photo sharing services focused on sharing photos with friends and family, Flickr made the default behavior to share with the world.

YouTube, the video sharing site, and MySpace, the social networking site, have similar dynamics. The users not only provide the content, they provide the marketing. These sites have become hugely popular without spending a nickel on advertising, because they rely on word of mouth.

Now consider the alternative -- dot-bombs like the infamous pets.com. They treated the customer as a dumb consumer, and the web merely as a broadcast medium, with millions of dollars of Superbowl advertising substituting for customer enthusiasm.

But even more important than their enthusiasm, the users of successful internet applications supply their intelligence. A true Web 2.0 application is one that gets better the more people use it. Google gets smarter every time someone makes a link on the web. Google gets smarter every time someone makes a search. It gets smarter every time someone clicks on an ad. And it immediately acts on that information to improve the experience for everyone else.

It's for this reason that I argue that the real heart of Web 2.0 is harnessing collective intelligence.

And it's for that same reason that I argue that Web 2.0 represents not just a turning point for the computer industry but for the world as a whole."

 

Posted by Mark Hemphill on October 1, 2007 in Module II - eBusiness | Permalink

Comments

I like that companies are now looking at the value chain instead of just the supply chain. This means the interests of consumers are of the top concern of the business, which is in the company’s best interest.

Posted by: Chad Hayward | Oct 2, 2007 12:50:19 PM

Companies have turned their attitudes towards making the customer happy as opposed to making themselves happy. As Chad said, "the interests of consumers are of the top concern of the business". I think it's a great "turnaround".

Posted by: Katelyn Murnaghan | Oct 3, 2007 6:54:55 PM

I believe the growth of the value chain is because of advances in IT. The value chain has always been around, whether we noticed it or not, and it always has been a competive advantage for businesses. But in today's world, IT creates value from the marketplace to the marketspace, mirroring physical operations into virtual. Contrary to the industrial age, a lot companies' competive adantvage are now virtual rather than physical.

Billy

Posted by: Billy MacDonald | Oct 3, 2007 8:37:06 PM

In the eye of consumers, things are only looking up. Businesses now have more to compete with so they have to think of ways to differentiate themselves from the rest, and that usually means more perks for the customer. If Businesses are online, they need to think of a way to separate themselves from the others to grab the consumer, this could mean making their website more user-friendly, maybe free shipping, etc. This is definetly a good thing for the consumer but I think it is great that Businesses have to really investigate exactly what their customers want which is ultimately in the best instrest of the business as well, to agree with what Chad had commented before.

Posted by: Devon Gillis | Oct 4, 2007 11:47:29 AM

I think that sometimes businesses depend too much on the services the internet provides. I tried calling a hotel in Halifax to cancel a reservation and they told me I had to go on-line to cancel the reservation. Another time my husband went into a retail store to order something from the catalogue counter and the lady didn't know how to take his order. She told him he had to go home and call the order in or use the internet to place the order.

Posted by: Karen Deveaux | Oct 4, 2007 11:57:09 AM

What kind of companies are succeeding today and why? I believe that the companies that are succeeding in today's market are the ones that use the internet to promote and or sell there product. Dell for instance does not have their own stores to sell there product. They do all of there sales online. This is very cost effiecient as they do not have to employ as many staff this way. This way they can sell there product cheaper to the consumer. This is the key reason why they are succeeding in the business world.

Posted by: Kyle MacDonald | Oct 5, 2007 9:00:06 AM

This topic is interesting as you look back at the way business has grown over the years even since the 1930's-1940's we hit the sales and marketing eras then in the 1980's we moved into the finance era and finally today we are in the Global Era. I believe that the value chain has always been present but not made first priority like it is being done today. Because we are in the Global era I believe it makes it even easier to put customers needs at the top of the list as it is easier to see the needs of the customer and have direct B2C contact. The B2C contact is made more direct and easy as our technology grows. I believe this is awesome that we can so much more easily contact companies. It creates more of a democratic society as we play more of a role in how the company does business.

Posted by: Krista Mackenzie | Oct 5, 2007 10:46:47 AM

Consumers nowadays can access a wide range of information of products ever that before thereby going for the best quality and cost effective. In a increasingly competitive business world, I feel that for producers to have a competitive advantage marketwise, they have to go an extra mile to know the needs of consumers.With IT on the roll, business organizations can easily gather information about consumer behaviour and incorporate the information in the line production to stay at the top of the game.

Posted by: wycliffe ogucha | Oct 5, 2007 1:13:03 PM

I agree completely with what Wycliffe sais and I would even say that smart companies are taking advantage of the fact that they can reach such an enormous amount of customers. I am referring to brand recognition in a way, because if a company advertises properly they can make their brand worth alot more by making it "cool" or recognisable. There are many examples you can use and one of them is the one Mark uses in class of the $99.99 golf shirt he saw at Crowbush golf club and the exact same shirt at Value Village for $1.99 because it didn't have the Tiger Wood's crest.
So in a way both customers and businesses are winning because the value chain is being considered to the customers advantage and businesses (if they are smart) can take advantage of the customers wants.

Posted by: Eric Horne | Oct 5, 2007 3:16:56 PM

I think companies looking at the value chain instead of the supply chain is a more benefical way of operating. The concept of the value chain has existed for years, but we are only now noticing that businesses are finding a competive strategy to achieve the best business performance. Companies are seeing in todays society that the more effective the vale chain, the more profitable they will be.

Posted by: Stephanie Doucette | Oct 6, 2007 4:00:02 PM

Organizations need to use the internet nowadays to succeed. However, they can't depend on it. Like Karen said trying to cancel a reservation at a hotel had to be done online, that's just an inconvenience for some people who aren't familiar with all of the new technology. Walmart is a successful corporation. It caters to everyone. People can visit the store, find what they want online, and if there are problems, visit them at the store and if there isn't a store near you, they have a help-line. They're succeeding because they're thinking about everyone.

Posted by: Colin Butler | Oct 8, 2007 8:34:48 PM

Still can't seperate some ebusiness companies. Such as ebay and Amazon. And these companies have pretty similar way to make money.In my opinion, how to attract more people to enter and join in the website is the key for a good ebusiness company.

Posted by: XiaoJiang | Oct 13, 2007 9:32:52 PM

Wow I really never considered the fact that people do use eBay as a full or part time job simply by selling odds and ends from around the house. The opportunities that these ebusiness companies are creating is absolutely phenomenal.

Posted by: Alesia Gallant | Oct 14, 2007 7:22:51 PM

Wow I really never considered the fact that people do use eBay as a full or part time job simply by selling odds and ends from around the house. The opportunities that these ebusiness companies are creating is absolutely phenomenal.

Posted by: Alesia Gallant | Oct 14, 2007 7:23:25 PM

Because businesses are depending on the value chain more than the supply chain it is benefitting them and making their business more efficient and bringing in more profit. Though I agree with the Dell example, about not having a physical store you can go to , I think they would benefit also from having a store. A lot of people don’t buy Dell computers because if they have to be fixed you have to send them back, and for certain parts you have to go online and order them, and you can’t buy them at a chain store like most other companies. It could also take longer then slipping out to a store, depending on where the Dell is located that you are ordering from. The internet has also helped people find jobs and work just from the internet to make money like the people who use eBay as their full or part time job. The downside of businesses using the internet for everything, is that some people are not familiar with this type of technology and it makes it harder for them. However, I think there are more positive things then negative when it comes to the internet, and it has changed everything and has created great opportunities for a lot of people.

Posted by: Holly MacInnis | Oct 15, 2007 3:57:45 PM

In response to holly:

Chain stores also kinda suck for computer support too though. Although this isn't dell, the support I received when dealing with a company directly was actually kind of convenient. I bought my xbox 360 the day they were released and when I needed support I had to deal directly with the company. This was extremely easy to do. I just called the hotline, told them my problem, they sent me a pre-paid box within like 3 days to put my xbox in and away it went. I didn't even have to deal with superstore or zellers or where-ever i bought it (which is sometimes a hassle). Thats what I think the key to networking in organizations is the ability for organizations to connect directly to the customer.

Posted by: Erica Wagner | Oct 18, 2007 11:57:25 AM

We all know Google acquired YouTube(thanks to the internet scavenger hunt) for $1.65 billion.This amount is all because of the value added to the YouTube.In the real world,YouTube sheds approx. $500,000 every month for the high bandwidth and computer servers.But I think after google kicks-off with its ads on YouTube, they will earn a fortune!

Posted by: Nishant | Oct 18, 2007 12:14:44 PM

I think that the two biggest impacts on organizations in the ebusiness age are speed and networking. Speed because think are done so much quicker these days because of disintermediation, value chain's, outsourcing and more. And networking because in this day and age we are connected to the best products and people.

Posted by: Katelyn Tweedy | Oct 18, 2007 5:24:31 PM

Cutting out the middle man is one of the best things companies can do. By doing so, u lower costs, which u can then return to the customer by making your product cheaper, but still getting the same profit. this is good because you are not losing money on the less expensive product, and the consumers are happy because they dont have to spend as much. its a minor setback for the middle-man that gets cut out, but thats the way the world works.

Posted by: Sean Hughes | Dec 4, 2007 10:08:59 AM

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