Speaking about new economy means speaking of the world where people work using their brains, not hands. The world in which communication technologies create global competition not only for sport shoes or computers but also for banking loans and other services which can not be packed and shipped. The world where innovations are more important than mass products. The world which is quickly and permanently changing. The worl which is as much different from the industrial age as that was different from the agrarian one. The world, so much different, that its appearance can be only described with the word “revolution”.
Only those businessmen and companies which possess non-material assets in abundance can be revolutionaries. These qualities have long ago been taken into account when capitalizing companies, and they have often been appraised higher than “material” assets. It is thanks to them that small, aggressive, quickly learning companies often obtain advantages as compared to old-fashioned clumsy monsters. Many of these monsters went down already. In 2000, 176 American corporations went bankrupts; in 2001 they numbered already 257. The capitalization of many of them lowered by 2/3. What are the main features of the new economy?
Internetization. In traditional economy the geography helped companies: customers from one city were unlikely to have access to competitors from other cities. Now, thanks to Internet the number of competitors grows in geometric progression. And the attempts of anti-globalists are naïve – economy is similar to ecology where organisms develop together and remain in permanent movement. Fighting with globalization means, first of all, fighting with global information and knowledge exchange.
Though Internet has a lot of advantages, it cannot do one thing, i.e. create information and knowledge. Having paid a very significant price during the crisis of 2000, developed countries are recovering from children’s disease of “nice” but absolutely non-functional Internet resources. Amazon.com and other commercial sites created with the participation of marketing specialists have survived this crisis. Top managers of American business have understood that effective Internet is sine qua non and in 5 years all companies will turn into Internet companies. Those who fail to do it will disappear.
Electronic commerce. Its volumes have already exceeded a trillion dollars. It is quite evident that we all shall become remote purchasers sooner or later, at the same time remaining usual buyers. It was only a couple of years ago that traditional trade made laughing-stock of the pioneers of on-line trade. Bookshops persuaded eccentrics from amazon.com that nobody will buy a book without looking it through previously. It was difficult for them to imagine the assortment of services which a virtual bookshop created with the help of talented marketing specialists can offer to its customers. The founder of Amazon has set a task from the very beginning – to create the most customer-oriented company in the world. The success of amazon.com is not a technical success but a marketing one. Bill Gates says: “I buy all my books from Amazon because I am busy and this is convenient. They have a great choice and they are reliable”. Supermarkets made still more fun of their on-line competitors. They thrust the results of focus-group investigations under the nose of silly founders of virtual food shops – nobody will buy anything without having touched the “melon”. And now we shall read an enthusiastic opinion of the MVA school students of San Francisco about visiting the virtual food shop Peapod servicing 100000 families: “We could go along virtual shelves of the shop and compare the articles by prices, contents of fats, calories and by other parameters. The calculator in the corner of the screen showed the current amount of the cyber-basket. The process of ordering is simple. There are plenty of additional useful things. We could read the information on the package. The possibility to save previous order has significantly simplified the task”. Simultaneously, on-line shop are permanently improving all their operations striving to give to the customer maximum unique services which he cannot get at an ordinary shop.
The company’s core. The experience shows that maximal return from Internet can be received only in the situation when Internet-marketing, Internet sales, Internet planning, etc. literally pierce the whole company. Internet should not be considered as a division or a site but as a strategy, as something penetrating the whole company from the core. At the beginning you make Internet the basis of your sales, then you begin to elaborate plans, corporate finances, operations, rendering services to customers, enrollment, personnel management, scientific and design work, interrelations with customers and partners on the basis of the net. A number of companies have been performing 50-75% of their transactions through Internet, and this is not considered to be the limit.
Production based on knowledge. Another name of the new economy is the economy of knowledge, corporate knowledge. This should be understood as joint intelligence, qualification and innovation of the employees, up-to-date devices, freedom of creation, immediate response to the arising tendencies and the culture of permanent perfection – all the above should be simultaneously directed for creating something really specific, something which would charm customers. The experts note that material aspects are being replaced by immaterial qualities. Let us take for an example a motor vehicle. Traditional materials in a motor vehicle are now replaced by know-how in the form of plastics and composite materials. Dimensions and weight and, consequently, the required power are being constantly diminished. Modern motor vehicles possess a greater computing capacity than a PC. Its vehicle-borne electronics is more expensive than the steel contained therein. The vehicle will be more and more connected to a decentralized electronic network. The vehicle of the future will resemble an electronic module on wheels. It will be easier now to imagine aircrafts as chips with wings, farms as chips with land, houses – as chips with inhabitants. All these objects will certainly have weight but this weight will be financially insignificant in comparison with the vast volume of knowledge laid in them. Even such low-technology article as concrete and cement will be delivered by trained drivers-entrepreneurs on trucks connected via Internet and satellite with computer network of the company. By the moment of arrival to the customer (accuracy within 10 minutes) the articles shall incorporate so many results of someone’s knowledge that they shall have been considered highly technological products. Thus, the further the more knowledge will penetrate literally everything in our life.
Training and self-training. In the economy of knowledge the process of training and self-training is permanent. Brain storms, quality societies, informal discussions are used. Training usually is concentrated around the search of decision for a real task. Many companies spend up to 10% of working time on training, at these expenses incurred for training are not considered expenses but investments. The emphasis is laid on the skill of learning and on the development of marketing thinking. The companies strive to make the initiative free with the purpose to turn all departments into self-organized sub-divisions and to turn employees into businessmen.
Personnel. When an owner of a modern company is asked about the price of his company its actual price can be defined as equal to the price of the personnel. Skilled team showing harmony in work is the capital. In new economy combined knowledge and skill of the team becomes the main wealth of the company. The concept of an employee as a small screw is in the past. A new image of an employee as a partner, businessman, owner is being formed. Such an employee is independent, mobile, demanding and even a bit capricious. He expects responsibility and results, satisfaction and even pleasure. He expects an opportunity of carrier growth and due compensations. At that, the more the company is based on knowledge the more fragile its standing becomes because still larger part of the company’s valuables will go home by the end of the working day.
Talents. The role of talented people who are main bearers of knowledge and ideas has increased. The all-American poll of successful managers from various fields has allowed to come to the conclusion: if you get to the essence of the success of all companies everything comes to the ability not to leave out the talent. But it should be taken into consideration that talented people are attracted by the environment which assists the development of their intelligence. They blossom in the atmosphere of healthy competition and permanent improvement. Such atmosphere should be specifically created.
Interrelations. Strict administrative instructions, rigid information channels, taking decisions behind closed doors, antagonism among departments, segregation of management, attitude to employees as if they were children (uniform, badges, control over arrival to work, control and search when leaving work) were characteristic of traditional economy. There existed the opinion that employees were interested only in salary and nothing else. But the research has shown that employees value first of all the contents of their work and the feeling of involvement in the company’s affairs. In new economy the companies should decline traditional half-military structure of management. The role of the manager now consists not only in directing the others’ activities but in providing for the process of training and development aimed at approaching to the situation when everyone can manage his own work. This gives every member of the team control and authority over the results of the work. It is called self-leadership. Thus, the new atmosphere means the minimum of bureaucracy, comprehensive mission of the company, access to financial and other information, participation and taking decisions, a series of fascinating projects, complete freedom and responsibility with reasonable accounting, permanent innovations. Tolerant attitude to mistakes should be particularly underlined. If an employee makes too little mistakes he should be dismissed. The conception of a family – company with an open, non-formal, perceiving, somewhat playful environment becomes standard. It is characterized by respect and trust, friendly relations and support, flexible working hours, possibility to work part-time, parties, sporting and other ”family” events.
It is important to develop the psychology of owners — businessmen with the employees. A Brazilian company looked still farther ahead. It stimulated the employees to open their own companies associated into a “satellite” network around the main company. The company leases the equipment for acceptable prices to all interested persons and consults in all matters. Everything mentioned above is senseless without recognizing the merits and without generous compensations for each one.
Dying away professions. In February 1999 the “Business Week” was published with the question on the cover: “Who needs a broker?” – this profession began losing the positions under the press of free information exchange. What do I need him for? This question is heard more and more often nowadays. Dozens of professions and businesses are disappearing or fundamentally changing their contents: dealers in cars and realtors, insurance agents and wholesale agents. Traditional middlemen rack their brains over the question: “What can we offer to the client that he cannot get without leaving his PC?”.
Changes as a mode of life. During the last 30 years the lifetime of the companies has decreased by half. But the number of working places and the income of population show the fastest growth in the cities with the shortest lifetime of the companies (according to the research conducted in the USA). Long term stability of economy is supported by permanent shaking. The system that has reached equilibrium begins to rot. There is a saying: “ Do not solve problems but search for possibilities”. When you solve problems you make investments in soft points; when you search for possibilities you use advantages. The inscription was found on an ancient Chinese vase: “The one who has felt a wind of changes should build a windmill, not a windshield”.
Extreme marketing. In the economy with a satisfied, spoilt, well-informed customer “satisfying the needs” may turn into Hercules labor. You may accumulate a vast volume of knowledge, saturate your company with Internet and other modern technologies, create an ideal atmosphere in the company, attract the most talented people of the world, etc., but all this will be useless if your efforts will not be supported by aggressive marketing basis which will allow you to offer to customers the most competitive product, and to formulate it better, the most competitive decision of the problem of a qualitatively new customer. Competition in the new economy shall be to a great extent transferred to Internet. With the aid of the net a new customer can even order unique configurations of certain products directly from the manufacturer. It is not without reason that some companies, for example Dell, have returned to direct sales. Corporate clients become more demanding too. Ken Tompson, vice-president of Intel, speaking before their suppliers, said that Intel is expecting from them excellent products, precise deliveries and competitive prices but if this is the maximum the suppliers can provide them with, they can be replaced by hundreds of candidates. Intel needs suppliers that could help them to stay competitive: that could be a permanent source of great ideas. The term of life of many products is continuously decreasing, sometimes to several months. Many leading companies are actively attacking themselves, releasing more and more developed products. Practically each product presents a combination of goods and services, the proportion of services constantly increasing. In many commodity categories there appeared so many brands, and their quality, advertising and prices became so much alike, that the so-called “commodization” i.e. the number of adherents of many brands is decreasing. People extend their adherences to 5-6 brands and select from their number an offer with the best momentary conditions (sales, promotion, coupons, etc.). The world is recovering from the mistake that Internet advertising means generally banner games. It is clear that the system of banners is useless or even harmful if it brings visitors to a helpless site. Advertising potential of Internet is first of all the advertising potential of sites. Companies wishing to acquire an effective site should begin from marketing specialists. The new economy requires the skill of taking marketing decisions in a new way – quicker, more daring and aggressive. Due to the fact that the dynamics of market simply leaves no time for research, the experience and intuition of a marketing specialist turn out to be more important than field information. Even the necessity in research becomes no longer relevant because the major part of goods will be based on a continuous flow of innovations. Experience has shown that after releasing innovation goods market polls render useless results. This was magnificently confirmed by Sony experience. In 1955 – 1979 Sony presented the world with 12 successful revolutionary products, from transistor radios to Walkman. They were supported by Akio Morita, a genius of intuitive marketing decisions. The motto of his team was “Watch attentively how people live, learn to understand what they need on the level of intuition and create it. Do not conduct market research!”.
Statistics. Now Internet contains more than 650 million documents placed on almost 48 million servers. At that, 37% of Internet resources are free of charge. In most cases open Internet sources cover any separate commercial database. For example, the largest Russian service contains only 43 million documents in 3200 databases, and similar American service contains 3 billion documents in 28000 databases. At the same time a number of free Internet servers provide for search among 3,5 billion documents. Books, periodical editions, radio, TV, consultants, separate computerized databases simply cannon compete with Internet.