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Current Current Marketing Marketing
Issues SeminarIssues SeminarBA635Dr. Ed Forrest
TONIGHT:Delineate the Organizing Organizing Paradigm Paradigm of this Course
Waves of Change
Spheres of Society
Defining Dimensions & Operating
Principles
The Essence of Marketing
Anything/Everything one does to facilitate exchange
ERGO
Whatever impactsWhy-What-Where-When-
How Exchange occurs… is (or becomes)
an Issue…
Marketing Issues in Perspective
Marketing - part of Business & Business - part of Society
Marketing
Business Society
“Societal Change” creates
“issues” for Business…
which creates
“issues” for Marketing
One needs to identify-anticipate-
understand
Thus- in order to identify- anticipate- understand
Marketing Issues in particular
Societal Change in general
Society Defined:Society Defined:
A group of humans broadly distinguished by:
mutual interests, participation in
characteristic relationships,shared institutions, &a common culture
Hence- our search for marketing issues begins w/ examination of…
Patterns of/changes to:
human interests, relationships, institutions &
culture…
…become marketing issues
THUS-
In the final analysis marketing strategy is formulated to
address…
Course Organizing ParadigmCourse Organizing Paradigm“… begin in a more or less inductive or
empirical fashion by identifying
what all civilizations
have in common”
Alvin Toffler, Previews & Premises (William Morrow & Co. New York, 1983) Page197
All civilizations have:
an energy system…
a method of producing goods & services…
a system for distributing those goods & services…
Energy, production & distribution are all … tied together… to form a
TechnoSphere
“All societies have some sort of communication infrastructure–
an InfoSphere
Every civilization has a
SocioSphere consisting of interrelated social
institutions, associations, reference & affinity groups
‘PsychoSphere’= intimate relationships, subjectivity-personality
All societies operate within a BioSphere & have a PowerSphere-- authority allocated thru formal & informal political institutions
(The Third Wave, pg.198)
“Put together these spheres encompass most all that goes on in any civilization or society”
BIOBIO
SOCIOSOCIO
TECHNOTECHNO
PSYCHOPSYCHO
INFOINFO
POWERPOWER
… will explore each sphere
ascertain what changes are afoot and– as a consequence–
delineate what “marketing” issues have arisen/will arise…
Our
Seminar:Techn
oProduction & Distribution--
Customization & Customer-ization
Info Marketing Communication;
Internal & external- channels & strategies
Socio Changing consumer living-working
patterns; social, professional &
corporate networking
Psycho Consumer values; Socio-Psycho /Techno-Graphic Segmentation
Bio Societal/Green Marketing
PowerBusiness & Marketing Regulation; Corporate Citizenship & Social
responsibility
When change concurrently impacts
BIOBIOPSYCHO
TECHNO
SOCIOSOCIO
INFO
& ripples thru & across all Spheres…
You have a paradigm shift in the principles & processes that define a civilization…
Toffler's Waves Agricultural Industrial Technological
Key Commodity Land Capital Data
TechnoSphereEnergy.......
Man-imal Fossil Bio-Tech
Technology..... Widgets Electromechanical Digital/Genetic
Production........ Crafted/Self Use Mass/Exchange Prosumptive
Distribution..... Restricted Mass Disintermediated
Marketing 1:1/ Barter Product-centric Consumer-Centric
InfoSphere Communication
Interpersonal Mass-Mediated Interactive
SocioSphere Relationships
Spiritual Contractual Mutual/Networked
Business Indiv./Partnership Corporation/Bureaucratic Conglomerate/Ad Hoc
Family............ Extended Nuclear Expanded
Education Elitist In Mass/Standardized Specialized/Life-Long
PowerSphere Authority.....
Inherent Elected Semi-direct
PsychoSphere Identity.......
Inherited Divided Self Defined/Discovered
Social Wave Theory: When all Spheres totally transformed a new
Civilizational-Wave rolls over preceding waves
"In a time of change, it is learners who inherit the future. --The learned find themselves well equipped to live in a world that no longer exists." — Eric Hoffer
to knowledge based economy
to knowledge based economy
to primary focus on information gathering, analysis & marketing
to primary focus on information gathering, analysis & marketing
As early as 1969 Peter Drucker foresaw an “age of Discontinuity” w/ upcoming shifts:
From manufacturing based economy
From manufacturing based economy
From primary focus on engineering & manufacturing
From primary focus on engineering & manufacturing
Drucker, Peter F. The Age of Discontinuity. Harper & Row Publishers, Inc: New York, 1969.
In 1988 Drucker wrote “The Coming of the New Organization”
“by 2008 successful organizations “will be knowledge-based
… composed largely of specialists who direct … their own performance through organized feedback… from colleagues, customers & headquarters.”
1. Shift from a goods-producing to service economy
2. Be dominated by professional & technical class
3. Be knowledge driven4. & Future oriented
1. Shift from a goods-producing to service economy
2. Be dominated by professional & technical class
3. Be knowledge driven4. & Future oriented
In early ’70’s Daniel Bell foresaw coming post-industrial society-- that would:
Pre-Ind. Industrial Post-Ind.
Key Resource Land Machine Knowledge
Socio-locus Farm Corporation Lab
"Coming of Post-Industrial Society: A Venture in Social Forecasting; 1973
1980- Toffler’s 3rd Wave
First Wave ~8000BC Hunter Gatherer To Agricultural Age
Second Wave ~1750’sAgricultural Age To Industrial Age
Third Wave ~1950’sIndustrial Age To Information Age
Addressed transition from heavy industry to new tech- economy
As Machines emptied countryside...
& gave us factory-work in cities
Computers emptied factories
& gave us paper-work in offices
Toffler's Waves Agricultural Industrial Technological
Key Commodity Land Capital Data
TechnoSphereEnergy.......
Man-imal Fossil Bio-Tech
Technology..... Widgets Electromechanical Digital/Genetic
Production........ Crafted/Self Use Mass/Exchange Prosumptive
Distribution..... Restricted Mass Disintermediated
Marketing 1:1/ Barter Product-centric Consumer-Centric
InfoSphere Communication
Interpersonal Mass-Mediated Interactive
SocioSphere Relationships
Spiritual Contractual Mutual/Networked
Business Indiv./Partnership Corporation/Bureaucratic Conglomerate/Ad Hoc
Family............ Extended Nuclear Expanded
Education Elitist In Mass/Standardized Specialized/Life-Long
PowerSphere Authority.....
Inherent Elected Semi-direct
PsychoSphere Identity.......
Inherited Divided Self Defined/Discovered
1st Wave1st Wave 3rd Wave3rd Wave
LANDLAND
•Basis of economy•Life organized ‘round village•Economy Decentralized•Every village produce most of its necessities
CAPITALCAPITAL
•Like land- a zero sum commodity*
•Necessary for control of Production-Labor & Raw materials
InformationInformation
Uniquely different from previous key commodities
KEY COMMODITY2nd Wave2nd Wave
What’s so different about information?
•Expandable- infinity expansive commodity
•Transportable- geography no longer matters
•Compressible- can be summarized, encoded
•*Sharable- Value increases when shared
Toffler's Waves Agricultural Industrial Technological
Key Commodity Land Capital Data
TechnoSphereEnergy....... Man-imal Fossil Bio-Tech
Technology..... Widgets Electromechanical Digital/Genetic
Production........ Crafted/Self Use Mass/Exchange Prosumptive
Distribution..... Restricted Mass Disintermediated
Marketing 1:1/ Barter Product-centric Consumer-Centric
InfoSphere Communication
Interpersonal Mass-Mediated Interactive
SocioSphere Relationships Spiritual Contractual Mutual/Networked
Business Indiv./Partnership Corporation/Bureaucratic Conglomerate/Ad Hoc
Family............ Extended Nuclear Expanded
Education Elitist In Mass/Standardized Specialized/Life-Long
PowerSphere Authority..... Inherent Elected Semi-direct
PsychoSphere Identity....... Inherited Divided Self Defined/Discovered
TechnoSphere
-Energy
TechnoSphere
-Energy1st Wave: MANIMAL winches, wedges, catapults, winepresses, levers & hoists –amplified by man & animals
2nd Wave -
Electromechanical –
“w/ moving parts, belts, bearings & bolts– clacking & ratcheting along”
31
Initial Electro = Hydro & Direct Current necessitated Local Sourcing
Alternating allowed Central Utilities w/ Long-D Dist.
32
33
Info-Processing, Applications &
Storage
2010 20302020
ProductionNew Technologies powered by New Energy sources enabled mass production…
Adam Smith -1776-w/ the pin lesson & concept of “man-“man-ufacturing”ufacturing”
Applied in 1908 by Ford in production of Model T
New Technologies powered by New Energy sources enabled mass production…
Adam Smith -1776-w/ the pin lesson & concept of “man-“man-ufacturing”ufacturing”
Applied in 1908 by Ford in production of Model T
The Pin:The Pin:
One craftsman = ~20 pins/day
Break into 18 steps-
10 workers-each 1-2 specialized tasks = 4,800 pins/day
The Pin:The Pin:
One craftsman = ~20 pins/day
Break into 18 steps-
10 workers-each 1-2 specialized tasks = 4,800 pins/day
Division of Labor
The Model TThe Model T Requires 7,882 tasks requiring:
“949 strong men3,338 ordinary men670 legless 2,637 one legged2 armless715 one armed10 blind men”*
The Model TThe Model T Requires 7,882 tasks requiring:
“949 strong men3,338 ordinary men670 legless 2,637 one legged2 armless715 one armed10 blind men”*
*autobiography
Characterized by:
• Hi energy input
• Hi waste pollution
• Low skill
• Repetitive work
• Standardized goods
• Centralized control
2ND WAVE DISTRIBUTION
Sales rate volatility Production rate volatility
Supply chain management substitutes information for inventory
Supply chain management substitutes information for inventory
6%
8%
10%
12%
14%
16%
18%
20%
'68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04
Production Growth Volatility
Sales Growth Volatility
Standard Deviation, 10-yr Moving Average
Goods & Services Goods & Services Sold ; DistributedSold ; DistributedOnline Online
Toffler's Waves Agricultural Industrial Technological
Key Commodity Land Capital Data
TechnoSphereEnergy.......
Man-imal Fossil Bio-Tech
Technology..... Widgets Electromechanical Digital/Genetic
Production........ Crafted/Self Use Mass/Exchange Prosumptive
Distribution..... Restricted Mass Disintermediated
Marketing 1:1/ Barter Product-centric Consumer-Centric
InfoSphere Communication
Interpersonal Mass-Mediated Interactive
SocioSphere Relationships
Spiritual Contractual Mutual/Networked
Business Indiv./Partnership Corporation/Bureaucratic Conglomerate/Ad Hoc
Family............ Extended Nuclear Expanded
Education Elitist In Mass/Standardized Specialized/Life-Long
PowerSphere Authority.....
Inherent Elected Semi-direct
PsychoSphere Identity.......
Inherited Divided Self Defined/Discovered
11stst Wave Wave 3rd Wave3rd WaveInterpersonalInterpersonal
Face to faceFace to face
1:1Augmented by:•Listening post
•Distance Runner•Town Crier
•Pigeon•Pony Express
Mass
Mediated
1:Many•Newspaper•Magazine
•Film•Radio
•TV
InteractiveInteractive
VirtualVirtualAny 1:Every 1
Networking: many-to-many
Internet•WiFi
•Cellular•Satellite
The INFOSPHERE
22ndnd Wave Wave
Media EvolutionFrom Mass Mind to Blip Culture
“Instead the masses receiving the same message-
smaller fragmented groups/individuals send &
receive their own thoughts & images” …(the BLOG??)
“On a personal level .. besieged by blips… Info-
Blips that are contradictory & unrelated”
Toffler- 1980
Toffler's Waves Agricultural Industrial Technological
Key Commodity Land Capital Data
TechnoSphereEnergy.......
Man-imal Fossil Bio-Tech
Technology..... Widgets Electromechanical Digital/Genetic
Production........ Crafted/Self Use Mass/Exchange Prosumptive
Distribution..... Restricted Mass Disintermediated
Marketing 1:1/ Barter Product-centric Consumer-Centric
InfoSphere Communication
Interpersonal Mass-Mediated Interactive
SocioSphere Relationships
Spiritual Contractual Mutual/Networked
Business Indiv./Partnership Corporation/Bureaucratic Conglomerate/Ad Hoc
Family............ Extended Nuclear Expanded
Education Elitist In Mass/Standardized Specialized/Life-Long
PowerSphere Authority.....
Inherent Elected Semi-direct
PsychoSphere Identity.......
Inherited Divided Self Defined/Discovered
Dramatic Shift in Marketing Reality
Toffler's Waves Agricultural Industrial Technological
Key Commodity Land Capital Data
TechnoSphereEnergy....... Man-imal Fossil Bio-Tech
Technology..... Widgets Electromechanical Digital/Genetic
Production........ Crafted/Self Use Mass/Exchange Prosumptive
Distribution..... Restricted Mass Disintermediated
Marketing 1:1/ Barter Product-centric Consumer-Centric
InfoSphere Communication
Interpersonal Mass-Mediated Interactive
SocioSphere Relationships Spiritual Contractual Mutual/Networked
Business Indiv./Partnership Corporation/Bureaucratic Conglomerate/Ad Hoc
Family............ Extended Nuclear Expanded
Education Elitist In Mass/Standardized Specialized/Life-Long
PowerSphere Authority..... Inherent Elected Semi-direct
PsychoSphere Identity....... Inherited Divided Self Defined/Discovered
The SocioSphereThe SocioSphere
Element 1st wave 2nd wave 3rd wave
Relationships
Spiritual Contractual
Mutual
Family Extended Nuclear Expanded
Education Elitist Mass/ Standardized
LifeLongBusiness Ind./Partn. Corp.
Conglom
W/ Divorce of Production & Consumption— Relationships became set of transactions
Society not based on kinship, friendship, tribal allegiances- but on contracts
2nd wave emergence of the Company Man
RelationshipsRelationships
The Family:From Mother Hubbard to Ozzie & Harriet to Big Brother
1st Wave: Extended Family--Aunts & Uncles; Grand Pa & Ma: In-laws & In-breds under one roof
2nd Wave: Nuclear Norm (working Pa, housekeeping Ma + 2kids, a dog & BBQ) everybody else own unit or institutionalized
3rd Wave: Aggregate HH’s: Mother-Other; Poly-Parents By 1980’s: <7% US-HH’s nuclear; 20% Single, 1:7 single Mom (1:4 Urban); in one Chicago neighborhood 86 different adult configurations…
Education:From Athens, to Ohio State to Phoenix
1st Wave: For Privileged
2nd Wave: For Masses: w/ Standardized Curricula Texts & Tests w/ Bell Curve
3rd Wave: For Individual Life-Long/ Personalized in Time & Mode of delivery
BusinessFrom Dad & Sons to GM to AOL-Time-Life-Warner-Turner…
1st Wave: Shopkeepers & Partnerships
2nd Wave: The Corporation & Franchise 9-5, Strict Labor – Management hierarchy
3rd Wave: Resurgence of small business & Emergence Global AlliancesHorizontally, vertically & strategically
integrated Conglomerates— thru leveraged buyouts, hostile
take-overs; out-sourcing, networking & symbiotic alliances
Ad-Hocracy replaces bureaucracyFlex—Time, Task & TitleMany bottom-lines
Toffler's Waves Agricultural Industrial Technological
Key Commodity Land Capital Data
TechnoSphereEnergy.......
Man-imal Fossil Bio-Tech
Technology..... Widgets Electromechanical Digital/Genetic
Production........ Crafted/Self Use Mass/Exchange Prosumptive
Distribution..... Restricted Mass Disintermediated
Marketing 1:1/ Barter Product-centric Consumer-Centric
InfoSphere Communication
Interpersonal Mass-Mediated Interactive
SocioSphere Relationships
Spiritual Contractual Mutual/Networked
Business Indiv./Partnership Corporation/Bureaucratic Conglomerate/Ad Hoc
Family............ Extended Nuclear Expanded
Education Elitist In Mass/Standardized Specialized/Life-Long
PowerSphere Authority.....
Inherent Elected Semi-direct
PsychoSphere Identity.......
Inherited Divided Self Defined/Discovered
Meta-convergence: “the tightening of connections among spheres that have hitherto been more
independent”
"Culture, religion, politics, environment, ethics, are all going to interpenetrate one another to an extent never before seen, and they will, in turn, penetrate business in all sorts of strange new
ways…“ Riding the third wave: A conversation with Alvin
Toffler
The 21st Century- Spherical The 21st Century- Spherical Meta ConvergenceMeta Convergence
Ecological impactEcological impactLabor conditionsLabor conditions
PollutionPollutionHealth & safety concernsHealth & safety concerns
Human rights abusesHuman rights abusesChild laborChild labor
Working in-w/ anti-democratic regimesWorking in-w/ anti-democratic regimesGlobalizationGlobalization
-Industry & Business
Associations
Corporate, & activist –
Shareholder organizations
-NGO’s- IMF, WTO, World Bank
-Religious & Secular Groups
-Local, State & National Gov’t
Agencies
-Special Interest & Affinity groups
ILO-list 450+ Activist Org. W3-sites
“promulgating policy initiatives”
~ie~
The only business of business is business--Milton FriedmanThe only business of business is business--Milton Friedman
…to the extent that customers express satisfaction in a product or a service, in continued purchases, the producer serves the "public interest."
A successful business satisfies enough customers at a high enough price so as to return a profit to those who have invested in the entrepreneurial activity…
Stark Contrast w/ 2nd wave Mantra:
“--- want max profit for shareholders…with honesty in business practices,…safety in the workplace, ..and also serve larger environmental & social issues.”
“--- want max profit for shareholders…with honesty in business practices,…safety in the workplace, ..and also serve larger environmental & social issues.”
Today's Managers must balance the bottom-line
against the ideals –
Toffler's Waves Agricultural Industrial Technological
Key Commodity Land Capital Data
TechnoSphereEnergy.......
Man-imal Fossil Bio-Tech
Technology..... Widgets Electromechanical Digital/Genetic
Production........ Crafted/Self Use Mass/Exchange Prosumptive
Distribution..... Restricted Mass Disintermediated
Marketing 1:1/ Barter Product-centric Consumer-Centric
InfoSphere Communication
Interpersonal Mass-Mediated Interactive
SocioSphere Relationships
Spiritual Contractual Mutual/Networked
Business Indiv./Partnership Corporation/Bureaucratic Conglomerate/Ad Hoc
Family............ Extended Nuclear Expanded
Education Elitist In Mass/Standardized Specialized/Life-Long
PowerSphere Authority.....
Inherent Elected Semi-direct
PsychoSphere Identity.......
Inherited Divided Self Defined/Discovered
Origins of our identity
Our individualityindividuality = result of Nature & Nurture
Our commonalitycommonality = results from our shared culture & experience
War; civil unrest; social movements
Political persons & events; economic swings
Scientific/Technological discoveries & advances
Tragedies: Natural & Man-made
Entertainment: Movies, TV, Music; artists, celebrities
Clothing styles; Lifestyle trends, Fads
Generational Imprint as we Come of age
Each generation molded by world events that occur during its formative years.
… distinct historical experiences create characteristics that stay w/ people thruout rest of their lives
Each generation molded by world events that occur during its formative years.
… distinct historical experiences create characteristics that stay w/ people thruout rest of their lives
Generational Marketing: Reaching the Hearts and Minds of Consumershttp://circman.com/ar/marketing_generational_marketing_reaching/
Generational Marketing: Reaching the Hearts and Minds of Consumershttp://circman.com/ar/marketing_generational_marketing_reaching/
February 08, 2005 Lax Natarajan & Sully Romero Ordonez 62
Generational Life ExperiencesCalled “Markers”
Values are shaped by:
EventsCulturePoliticsEconomyTechnologyPersonalities
EventsCulturePoliticsEconomyTechnologyPersonalities
Common ExperiencesCommon
Experiences
Common AIO’s, values, tastes, style...
Common AIO’s, values, tastes, style...
Common responses
to marketing mix
variables
Common responses
to marketing mix
variables
•Generational mindsets … are major factors in determining
what & how consumers buy…
The notion a group of people bound together by sharing experience of common historical events 1st introduced by Karl Mannheim - early 1920s
Generations Variously Named & Dated:
1. Matures – < 1946 2. Baby Boomer – 1946-1953 3. Generation Jones – 1954-1964 4. Generation Rerun – 1965-1975 5. Generation Xceptional – 1976-1986 6. Generation M – 1987-1995 7. Millennials – 1996 and beyond
1. Matures – < 1946 2. Baby Boomer – 1946-1953 3. Generation Jones – 1954-1964 4. Generation Rerun – 1965-1975 5. Generation Xceptional – 1976-1986 6. Generation M – 1987-1995 7. Millennials – 1996 and beyond
Depression cohort (1912 to 1921)
WWII cohort (1922 to 1927)
Post-war cohort (1928 to 1945)
Baby Boomer cohort #1 (1946 to 1954)
Baby Boomer cohort #2 1955 to 1965)
Generation X cohort (1965 to 1976)
N Generation cohort (1977 to date)
Depression cohort (1912 to 1921)
WWII cohort (1922 to 1927)
Post-war cohort (1928 to 1945)
Baby Boomer cohort #1 (1946 to 1954)
Baby Boomer cohort #2 1955 to 1965)
Generation X cohort (1965 to 1976)
N Generation cohort (1977 to date)
THE GI GENERATION: 1901-1924THE SILENT GENERATION: 1925-1942BABY BOOMERS: 1943-1960 GENERATION X: 1961-1981GENERATION Y: 1982-PRESENT
THE GI GENERATION: 1901-1924THE SILENT GENERATION: 1925-1942BABY BOOMERS: 1943-1960 GENERATION X: 1961-1981GENERATION Y: 1982-PRESENT
Waves of change affect Waves of change affect different generations in different generations in
different waysdifferent ways
1925 1955 20001965 19751935 198519601945
GI
Depression
Boomer
SilentGen
XWar Baby
Rode the Last Wave
Caught Between Waves
Gen Y
Grow Up w/ New Wave
Riding the wave
Toffler's Waves Agricultural Industrial Technological
Key Commodity Land Capital Data
TechnoSphereEnergy.......
Man-imal Fossil Bio-Tech
Technology..... Widgets Electromechanical Digital/Genetic
Production........ Crafted/Self Use Mass/Exchange Prosumptive
Distribution..... Restricted Mass Disintermediated
Marketing 1:1/ Barter Product-centric Consumer-Centric
InfoSphere Communication
Interpersonal Mass-Mediated Interactive
SocioSphere Relationships
Spiritual Contractual Mutual/Networked
Business Indiv./Partnership Corporation/Bureaucratic Conglomerate/Ad Hoc
Family............ Extended Nuclear Expanded
Education Elitist In Mass/Standardized Specialized/Life-Long
PowerSphere Authority.....
Inherent Elected Semi-direct
PsychoSphere Identity.......
Inherited Divided Self Defined/Discovered
Completely
Different Society
Completely Different
Operating Principles
Old EconomyOld Economy – Manufacturing driven
New EconomyNew Economy – Information driven
Standardization & Duplication
Economies of Scale- Mrkt Share/sales volume
Hierarchical -Bureaucratic
Differentiation & customization
Economies of Scope- Versatility –Long Tail Inventories, Marginal Prdtn & Dist. Costs; Networked Customer base
Diversified -Adhocracy
“There’s a new economy out there – and it looks nothing like the old one”
January 3, 2000, page S1
At Least Ten Key Differences
At Least Ten Key Differences
1. Tangible assets
2. Rigid-Vertical Org.
3. Protected markets
4. Competition
5. Distribution hierarchy
6. Rigid barriers
7. Standardization
8. Domestic
9. Prdt-Life Cycle=Years
10. Seller power
1. Tangible assets
2. Rigid-Vertical Org.
3. Protected markets
4. Competition
5. Distribution hierarchy
6. Rigid barriers
7. Standardization
8. Domestic
9. Prdt-Life Cycle=Years
10. Seller power
1. Intangible assets
2. Fluid & Modular
3. Open markets
4. Hypercompetition
5. Direct to customer
6. Flexible entry
7. Personalization
8. Global
9. PLC=months
10. Buyer power
1. Intangible assets
2. Fluid & Modular
3. Open markets
4. Hypercompetition
5. Direct to customer
6. Flexible entry
7. Personalization
8. Global
9. PLC=months
10. Buyer power
Old EconomyOld EconomyOld EconomyOld Economy New EconomyNew EconomyNew EconomyNew Economy
“The new economy is not just a dot.com thing.
It’s not just about high tech, computers or microchips.
- it is about new ways of doing things in every industry, every government.
It’s about speed, quality, flexibility, knowledge and networks. It will affect everything.”(Collaborative Economics)
Tapscott’s Defining Dimensions of the New Economy
Knowledge Digitization Virtualization Molecularization Integration Disintermediation
Convergence Innovation Prosumption Immediacy Globalization Discordance
Strategy in the new economy Don Tapscott. Strategy & Leadership. Chicago: Nov/Dec 1997
Knowledge
“The new economy is:
a knowledge economy
based on human capital & networks”
Old EconomyOld Economy – Manufacturing driven
New EconomyNew Economy – Information driven
Buildings, tools & equipment are assets people are expenses
Buildings, tools & equipment are expenses people are assets & knowledgeable people greatest asset of all…
How many mfgg plants & office buildings does Microsoft own?
What is the value of all the equipment in its offices?
How much inventory does it have?
Microsoft’s real assets walk out the door every night…
The New Economy
A Knowledge EconomyBy 1990 -1/2
American workers are knowledge workers
Today -80%+ of new jobs are in information intensive sectors
A Knowledge EconomyBy 1990 -1/2
American workers are knowledge workers
Today -80%+ of new jobs are in information intensive sectors-5
5
15
25
35
45
55
65
75
1860 1990
% “Information-
Workers”
2%
50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
%of GNP
1850 1950 2050
AgricultureManufacturingServices
Another Dimension to Consider:
Digitalization!Digitalization!Digitalization!Digitalization!11010010110100100100100100110001011010010110100100001001001100010110100101101001001001001001100010110100101101001001001001001100010110100101101001001001001001100010110100101101001001001001001100010110
The “Media Fusion” Bomb
Akin to energy generated by nuclear
fusion, communication power generated by media
fusion is formidable…
W/ digitalization all media become
translatable into each other –and
gives one ability to digitally mix all
media on a common palette…
The New Economy: Digitalization
A Digital EconomyOld information flow: atoms - paper
• Cash, checks, invoices, maps, photographs…New information flow: bits
• All things - done digitally
“Being Digital” (’95) is understanding the significance of...
The movement of compressed weightless bits of data/ informationTransmitted at speed of lightCombined seamlesslyRetrieved instantly, anywhere24/7 around globe
The movement of compressed weightless bits of data/ informationTransmitted at speed of lightCombined seamlesslyRetrieved instantly, anywhere24/7 around globe
Virtualization
The Virtual:Partner/
CommunityOffice/ CorporationStore/ Mall
The Virtual:Partner/
CommunityOffice/ CorporationStore/ Mall
““As information shifts from analog to digital, As information shifts from analog to digital, physical things can become virtual…physical things can become virtual…
Changing the Changing the metabolismmetabolism of the of the economy, the types of economy, the types of institutions institutions & relationships& relationships possible, & possible, & nature nature of economic activity itself ”of economic activity itself ”
Entering the infosphere Journal of International Affairs ; New York; Spring 1998; Michael Vlahos
Virtualization
Molecularization
“The old corporation is being disaggregated
replaced by dynamic molecules & clusters of individuals which form the basis of economic
activity”
“The old corporation is being disaggregated
replaced by dynamic molecules & clusters of individuals which form the basis of economic
activity”
The knowledge worker (atom) forms working clusters/ molecules
The knowledge worker (atom) forms working clusters/ molecules
Integration & Internetworking
“The new economy is a networked economy, integrating molecules into clusters which network w/ others for the creation of wealth”
Enables small companies to
• Overcome advantages of large companies economies of scale & access to resources
• Avoid burdens Bureaucracy, hierarchy & inflexibility
“The new economy is a networked economy, integrating molecules into clusters which network w/ others for the creation of wealth”
Enables small companies to
• Overcome advantages of large companies economies of scale & access to resources
• Avoid burdens Bureaucracy, hierarchy & inflexibility
... Work has become Communication!... Work has become Communication!
From work dominated by machines & production-- to work dominated by people & conversation.
Going to work is to going meet....
Work, education & entertainment are mixed. Work goes on anywhere, anytime... we become nomads as technology becomes mobile
Bo Dahlbom: President of the Swedish Research Institute for Information Technology http://www.informatics.gu.se/
Disintermediation
Middleman functions …being eliminated thru digital networks
Musicians don't need recording companies
Airlines, Hotels don't need travel agents
Food Companies don’t need wholesalers
Middleman functions …being eliminated thru digital networks
Musicians don't need recording companies
Airlines, Hotels don't need travel agents
Food Companies don’t need wholesalers
30%
0%
20%
40%
50%60%70%80%90%
100%
Japan Britain United States
Mfgrs
Retailers
Wholesalers
Number of companies involved in each level of the food industry, % of total, 1993
Number of companies involved in each level of the food industry, % of total, 1993
‘Disintermediation’= removal of business process layers in value chain
Reduces Transaction Costs:
Reduces costs of finding buyers, collecting payments, & (in some cases) delivering product
Facilitates Dynamic Pricing:
Real-time interactions between buyers & sellers determine worth of items
Reduces Transaction Costs:
Reduces costs of finding buyers, collecting payments, & (in some cases) delivering product
Facilitates Dynamic Pricing:
Real-time interactions between buyers & sellers determine worth of items
INFORMATION SYSTEMS IMPACT
EFFECT OF INTERNET ON BUSINESS MODELS
THE EFFECT OF THE INTERNET ON BUSINESS MODELS
Convergence
“ the dominant economic sector is
being created by three converging
industrieswhich, in turn, provide
the infrastructure for wealth creation by all
sectors” - Tapscott.
“ the dominant economic sector is
being created by three converging
industrieswhich, in turn, provide
the infrastructure for wealth creation by all
sectors” - Tapscott.
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Over 100 years ago a technology convergence fueled a new economy
Electric Power
Mechanical Engineering
Material Sciences
The resulting Industrial Economy defined the business landscape for the 20th centuryThe resulting Industrial Economy defined the business landscape for the 20th century
Today, another technology convergence is fueling a new
economy
Computing Computing TechnologiesTechnologies
Communication Communication TechnologiesTechnologies
Content Content TechnologiesTechnologies
The resulting Techno/Info-sphere is re-defining the business landscape for the 21st
century
COMPUNICATIONS
COMPUNICATIONS
Innovation
“The new economy is an innovation-based economy.
…Obsolete your own products
The collapse of product life cycles• ‘96 Sony introduced 5000 new products
• “No matter how good you are, you are only 18 months away from failure”
“The new economy is an innovation-based economy.
…Obsolete your own products
The collapse of product life cycles• ‘96 Sony introduced 5000 new products
• “No matter how good you are, you are only 18 months away from failure”
Prosumption
3RD Wave finds gap between consumers &
producers blurringCUSTOMERS INVOLVED IN PRODUCTION
PROCESS•Levi’s – Original Spin•Levi’s – Original Spin
2nd Wave created situation where vast majority of food, goods n’ services destined for exchange (Sector B)
Virtually wiped out goods produced for self-consumption (Sector A)
Created civilization where almost no one– not even farmer was self-sufficient
2nd Wave created situation where vast majority of food, goods n’ services destined for exchange (Sector B)
Virtually wiped out goods produced for self-consumption (Sector A)
Created civilization where almost no one– not even farmer was self-sufficient
Dominant Economic Sector
1st Wave= Sector A
2nd Wave= Sector B
3rd Wave
Mixed
ProductionProduction Crafted/ for
Self Use
Mass/ for Exchange
Prosumption
Prosumption
3rd Wave Rise of PROSUMPTION:
1970’s few self service retail outlets nor tools, building materials, medical instruments sold to consumers
1980’s DIY explosion in full force
3rd wave characterized by massive growth of sector A
1970’s few self service retail outlets nor tools, building materials, medical instruments sold to consumers
1980’s DIY explosion in full force
3rd wave characterized by massive growth of sector A
1970 1980
Self-Serve Gas
8% 70%
Tools <30% >70%
PG ID 0 ~20 million
Customerization
CRAYON- http://www.crayon.net/ CRAYON- http://www.crayon.net/
Principle of Prosumption- variants=
Crowdsourcing&.
Wisdom of the Crowd
Wisdom in vs. of the Crowd
• Wisdom in = CrowdSourcing• Wisdom of =
aggregating estimates or
aggregating contributions
(collective intelligence)
CrowdSourcing:
Microsoft’s most valuable professionals (MVP) program- MVPs answer more than 10 million questions each year and provide vital feedback
TripAdvisor – relies on the opinions and reviews of its members to provide information to people interested in a flight, trip or vacation. With over 40 million reviews
Walkers Crisps “Do us a flavour” campaign – Walkers brand regard was eroding and competition was increasing. Through their “Do us a flavour” campaign they handed over creation of their next crisp flavour to the public.
uTest – provide software testing services. They have a global community of over 30,000 professionals providing software companies with a new way to test their applications
10 examples of how crowdsourcing is changing the world. We Are Hunted Ranks the Web's most popular songs based on
blogs, Twitter, MySpace, Facebook, forums, peer-to-peer file sharing services and more
James Patterson's AirBorne let members of the public write most of the chapters for his new book, AirBorne. He handled the first and last chapters of the "chain thriller," then let members of the public submit the other 28.
Galaxy Zoo Lets any astronomer, amateur or pro, help classify one million different galaxies that were photographed by the Sloan Digital Sky Survey. ..now packed with more than 50 million classifications
GooseGrade Can't afford a proofer or fact-checker for your site? Just sit back, relax and let your anal-retentive readers do the work for you!
CrowdSpring- Lets you post design projects or brief copywriting assignments, name your price, then pick from a wide range of solutions submitted from around the world. On average, projects get 68 submissions.
Brand Tags Shows you a company logo and asks you to write the first word that comes to mind.
Twitter Tees by Threadless Lets you nominate your favorite Twitter posts to be turned into T-shirts, designed and sold by the popular Threadless.com. You can even get a cash reward for your submission, up to $500
TipJar by Google Collects money-saving tips from people around the world. Advice is divided into categories such as shopping, food and travel.
BioMapping Creates a map showing how people's emotions are affected by different parts of a certain city or area. The project relies on more than 1,500 volunteers who agree to wear a device that measures their "Galvanic Skin Response," a sign of heightened emotion.
Tapscott,
ImmediacyEconomy
is global-24/7/365
TechnologyTechnology -capture/filter/disseminate information
Organizationcontinuously analyze-adjust to changing business conditions
In an economy based on bits Immediacy becomes a key driver
Product life cycles compressed:
From concept to production. In 1990, autos took 7 years; In
1997 < 2
From Introduction to Mass DiffusionNew products taken up
much more quickly
Product life cycles compressed:
From concept to production. In 1990, autos took 7 years; In
1997 < 2
From Introduction to Mass DiffusionNew products taken up
much more quickly
Market Adoption Sequence: Traditional and Internet Life Cycles
Source: Patel, McCarthy; 2000; Digital Transformation; Mc Graw Hill
“If it works, it’s obsolete.”
—Marshall McLuhan
“In the old economy, an invention like Polaroid camera ensured revenue stream for decades.
Today-consumer electronic products have a typical lifespan of 2 months”
“In the old economy, an invention like Polaroid camera ensured revenue stream for decades.
Today-consumer electronic products have a typical lifespan of 2 months”
From Adoption to Obsolescence- a matter
of months
*Strategy in the new economy Don Tapscott. Strategy & Leadership. Chicago: Nov/Dec 1997
“If things seem under control, you’re just not
going fast enough.”
Mario Andretti
Acceleration QuizQ: Disney & Sony (respectively) produce
and launch one new product every _________?
“Disney =every five minutes…
Sony launches three new products per hour…”
http://www.enlightennext.org/magazine/j28/business.asp
Elizabeth Debold, The Business of Saving the World
Discord The natural occurrence when waves/civilizations collide
LITTLE JOB MOBILITY BETWEEN OLD INDUSTRIAL & NEW TECHNOLOGICAL WORKFORCE
THE “HAVES’ PARTICIPATE FULLY IN SOCIAL & COMMERCIAL LIFE –
THE "HAVE-NOTS" WILL FALL BEHIND-INCREASED SOCIAL STRATIFICATION
Are jobs obsolete?
Globalization
“Borders are Becoming Meaningless”Work performed globally….
continuously….“The entire globe is now tied
together in a single electronic market moving at the speed of light. "There is no place to hide”
• Walter Wriston, Citicorp Chairman
globalization & technology =2 main forces create a new level of interlocking fragility in world economy.
the world economy entered new era marked increasingly frequent periods of turbulence = the new normality
The new normal in the global economy =continuous & unpredictable turbulence that is punctuated by periodic & intermittent spurts of prosperity and downturn 2009
Globalization
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