The Internet is having a drastic effect not only on the way people do business, but the very structure of business itself.
To survive in this new economy, you must understand what’s driving the changes, says Jack Shoykhet, president and CEO of Gov24.com. Gov24.com provides integrated Web-based solutions for government entities, allowing for better access to government services and information.
Shoykhet spoke at the Jones, Day, Reavis & Pogue e-commerce conference in March. Here is his hit list of 10 trends driving the new economy:
1. Matter. It’s not as important as it once was. Matter, the materials of an operation, has been supplanted by processing information. The value of a company is “not in its tangible assets, but in its intangible assets: people, ideas and the strategic aggregation of key information-driven assets.”
Ninety percent of the value of a car is in the software, Shoykhet says, not in the metal and plastic that make up its weight.
2. Space. Businesses may no longer be restricted by physical location, but that doesn’t make it easy to expand a company’s customer base. So while the globalization of commerce through the Internet offers access as never before, it also means more competition.
“The world is my customer, and also my competitor at the same time,” Shoykhet says.
3. Time. “Time is collapsing. The market punishes those that don’t change,” Shoykhet says. “In a world of instantaneous connection, there is a huge premium on instant response and the ability to learn from and adapt to the marketplace in real time.”
4. People. There are currently 473,000 open technology positions nationwide. But there’s also a need for constant retraining. “We need an enormous amount of money pumped into the economy for training,” he says. It’s similar to the situation nearly 100 years ago, when the rise of automobiles forced 2 million people involved in horseshoe production to restructure their lives.
5. Growth. Word of mouth is very important to company growth, he says. “Communication is so easy on the Web, product awareness spreads like wildfire. Once a company reaches critical mass, it can experience increasing returns leading to explosive growth.”
6. Value. A product’s value rises with its market share. That’s why a company will give a product away, then sell linked services later. “The more plentiful they become, the more essential each individual unit is, a striking exception to the economic rule that value comes from scarcity.”
7. Efficiency. The amount of information available is staggering. At the same time, sellers can reach buyers without using traditional distributors. That combination of factors creates a new brand of middleman Shoykhet calls “infomediaries.” “These people transform dumb data into usable information. They also offer aggregate services or intelligent customer assistance or powerful technology-based buying aids or an attractive, community-based buying environment.”
8. Markets. Buyers have new power and sellers have new opportunities. “It’s no longer necessary for your customer to walk down the street to compare prices and services. Businesses that genuinely offer unique services or lower costs will flourish, benefiting from a flood of new buyers.”
9. Transactions. Information is easier to customize than hard goods, which means “the information portion of any good or service is becoming a larger part of its total value,” Shoykhet says. “Thus, suppliers will find it easier and more profitable to customize products, and consumers will begin to demand this sort of tailoring.”
10. Impulse. “Every product is available everywhere. The gap between desire and purchase has closed. When you heard a song on the radio, you had to both remember the song or the artist and actually go to a store to purchase (it). Online, it’s different. Discover a product you desire, and just hit the buy button.
“The process for marketing, sales and fulfillment are merging.”
How to reach: Gov24.com
Daniel G. Jacobs ([email protected]) is senior editor of SBN.