Some Characteristics of the Internet Economy

• very high valuation of certain stocks based on the number of "eyeballs" they attract.  This has led to a great premium on free services. NetZero offers free Internet connections.  Search engines are all free, and have expanded their services to include email, news coverage, personalization. When.com offers free calendar services.  Now iwon.com is offering free entry into a contest with $10,000 paid a day and $1,000,000 on tax day.  Many publications are free, such as the NY Times. Slate, Microsoft's magazine, was charging and went back to being free.  Excite@Home bought BlueMountain for up to a billion dollars, even though it has almost no revenue. It is hard to see how these businesses will every make a profit, leading to numerous predictions that the "Internet bubble" is going to burst.But so far the bubble has not burst, and some people are making a lot of money.
• "rags to riches" stories, best known that of Sabeer Bhatia who arrived penniless from India on September 23, 1988, and sold Hotmail to Microsoft on New Year's Eve, 1997 for $400,000,000.  This was based on its lead in signing up subscribers to a service which seems obvious after the fact.
• Amazon.com, Jeff Bezos, another "rags-to-riches" story.  Idea was simple; marketing books.

• culture of entrepreneurship and innovation.  Venture Capital, business plans and IPO's are critical mechanisms.

• emphasis on youth culture, seeming disorder, "nerd" culture -  From The Nudist on the Late Shift, p. xxvii:  "it is wildly chaotic.  It tears itself down continuously.  It teeters on the brink of self-destruction.  But it is a chaos unlike any other chaos.  It is a smoothly working chaos.  It is the chaos of hard effort, rather than the chaos of need gratification."
• large number of start-ups and small companies, plus a few big ones.
• question of Microsoft "monopoly" is more of the PC software business than the Internet - the Internet is seen as a threat to Microsoft's dominance.  Does Microsoft provide a needed stability, hierarchy to balance the heterarchy of the entrepreneurial economy?

Jim Clark's story is an example.  Some questions to keep in mind as you read the story.

• how could Clark's profession be categorized? No good word for it, entrepreneur, businessman, trendsetter???
• what personality traits led to his success?  Do these differ from the personality traits which led to success in other epochs?  E.g., in Benjamin Franklin's?  The Robber Baron era?  The Organization Man era?  Restlessness, impulsiveness?  Uncomfortable in ordinary corporate job.
• what was the fundamental idea behind Silicon Graphics?  Geometry engine - real time 3D graphics
• what was the fundamental idea behind Netscape? commercializing a graphic web browser
• what was the fundamental idea behind Healtheon? connecting doctors, patients and insurance companies, handling paperwork
• why did Healtheon need a new "metric of success"?  What was it?  number of doctors enrolled
• what idea did Clark have that did NOT take off?  Why not?  interactive TV - technology was not there, packet switching doesn't do it, even with cable let alone with telephone modems
• can you think of another idea like these that could make someone like Clark a billionaire?  Webmind Applications?

• why is the Internet both "overhyped" and "undervalued"? It doesn't change everything, not everyone is on it, but it will have very important impacts.  Often the best known sites are not really the most important.
• how is the Internet being used in business to customer interactions?  How much impact is this having?  Buy directly on the WEB.  Margins are low, problems with shipping and order fulfillment.  Difficulty of paying.  Loss of enjoyment of shopping.  BUT very convenient.  Amazon one-click;  Land's end.  Very big impact on financial services - stock trading.  Created the whole hobby of "day trading."
• how is the Internet being used in business to business interactions?  How much impact is this having?  Bigger impact here, but less visible.  Makes purchasing and operations mroe efficient.  Cuts transaction costs need for intermediaries, unless they offer additional services.
• how much are the leaders of business resisting the Internet revolution?  Not at all
• what is meant by "network effects"?  How important are they?  If everybody else has something, you must too.  E.g., qwerty keyboard;  Microsoft software.
• how is the National Transportation Exchange (NTE) using the Internet?  What effects does this case illustrate? More efficient allocation of trucking resources, using empty space on return trips. It is an example of an xchange, creating liquidity in otherwise fragmented markets
• what does the Adauction.com. case illustrate? more efficient sales of advertising space;  it is an online auctioneer which offers a reliable channel to sell or buy perishable or time valued commodities
• what does the Chemdex Corporation case illustrate? one stop shopping for pharmaceuticals it is an aggregator:  it helps buyers in fragmented markets select products by providing up-to-the minute price and product information and a single contact point for service
• what does Forrester Research predict about the future of the Internet in business?  Has it already reached its peak? It will continue to grow, various services will consolidate, major corportions will move in in a long way
• what is Walmart doing on the Internet? Not much so far;  they have good purchasing capacities. How would it contrast with amazon.com? Amazon is becoming more Walmart-like.  One click shopping, efficient order fulfillment.
• How about IBM?  How important is the Internet to its operations?  Not an "internet company" but a big percentage of their business is involved with the internet.
• how has the Internet effected power relationships between buyers and sellers?  Has given power to buyers, easier to compare, more options.
• how has the Internet impacted on transaction costs?  Cuts them
• what kinds of new business opportunities has the Internet created? What are "infomediaries"?  Companies which specialize in the three functions discussed above:  exchange, allocation and auctioning.
• in the Economist's view, is e-business the biggest thing since the industrial revolution, or is the Internet just another useful tool for speeding up business communications? It is bigger than the telephone, but not quite an industrial revolution yet.

You begin with a short, two or three page, strategic plan.  Then you go on to develop a comprehensive business plan.  There are lots of books on how to do this, or you can get some help online.

The key to a business plan, of course, is the idea it proposes.  What you need is a Killer AP!
It is not so much a matter of new technology or a new scientific innovation, but a new marketable product no one anticipated.

For a creative project over the break, our support groups will work on developing a strategic plan to market electronic paper.