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The New Economy, business performance and the current economy :

The New Economy, business performance and the current economy : CYBERGEOGRAPHY and its BUSINESS IMPLICATIONS. Dr Howard A. Rubin EVP, META GROUP Howard_rubin@compuserve.com 914 764 4931. Distributed Computing. Information Technology. The Internet Pervasive Computing.

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The New Economy, business performance and the current economy :

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  1. The New Economy, business performance and the current economy : CYBERGEOGRAPHY and its BUSINESS IMPLICATIONS Dr Howard A. Rubin EVP, META GROUP Howard_rubin@compuserve.com 914 764 4931

  2. Distributed Computing Information Technology The Internet Pervasive Computing It is time to reshape your thinking about technology, business, and society This is not simply a new business as usual

  3. What We Are Hearing About 21st Century IT: The New Economics of IT • After decades of expansion, the growth rate of the IT economy is slowing: 45% 42.05% 40% • The average company will spend an average of 3.84% of revenues on IT in 2001, compared to 3.50% in 2000 • Average IT spending per employee was $10,052 in 2000, up from $8,407 in 1999; it will be $12,700 in 2001 • As a result, the pressure on IT to produce more effectively for less will continue to increase 36.70% 35% 30% 25% 22.34% 20% 15% 13.65% 9.70% 10% 3.50% 3.16% 3.84% 2.59% 2.15% 5% 0% 1997 1998 1999 2000 2001 (Est) IT $ as Percent of Revenue IT Spending Change

  4. What We Are Hearing About 21st Century IT: The New IT Economics in Financial Services

  5. What We Are Hearing About 21st Century IT: The New IT Economic Rankings

  6. What we are hearing about IT in the 21st century company:The overall financial view Overall Change in IT Spending and IT Spending as a Percent of Revenue Time scale distorted

  7. There are now both Digital Divides and Digital Opportunities It is time to reshape your thinking about technology, business, and society

  8. Both can be easy to miss • Heavier than air flying machines are impossible • Lord Kelvin, President of the Royal Society, 1895 • Everything that can be invented, has been invented • Charles Duell, Commissioner/US Patent Office, 1899 • The wireless music box has no imaginable commercial value. Who would want to pay for a message sent to nobody in particular? • Advisors to David Sarnoff in 1922 • Who the hell wants to hear actors talk? • H. M. Warner of Warner Brothers, 1927 • Computers in the future will have to weigh more than 1.5 tons • Popular Mechanics’ March of Science, 1949 • There is no reason anyone would want a computer in their home • Ken Olson, Chair and Founder Digital Equipment Corp, 1977

  9. Reshape your thinking about technology, business, and society Panel used with permission of IBM Global Services and Michel Shank

  10. Reshape your thinking about technology, business, and society • It’s fair to say that the rules of business are changing faster today than ever before… In the next 10 years, this will have a profound effect on the winners and losers. • It’s not as simple as saying that everybody has got to have a Web site and do electronic commerce. It’s a profound change in terms of how information flows inside companies, to partners, and to customers. Bill Gates

  11. Reshape your thinking about technology, business, and society “There is growing confidence that the so-called legacy companies – and I count Chase as one of them – not only play a role in the new “Dotconomy, but have the key assets to succeed. We should not be defensive about the word “legacy”. We bring a number of strengths to the table. We’ve got proven products and services, distribution and fulfillment capabilities, and financial strength. Most importantly we bring power brands to the table. Very few of the dot-coms have those advantages! All the elements are there: Customers who trust us; technology that enables us; and an untapped market of spectacular proportion.” Bill Harrison, Chase

  12. Network age facts During this briefing 6,000 people will have used the Internet for the first time 10,000 people will get mobile phones in the U.S. 38,000,000 voice mails will be sent worldwide 300,000,000 e-mails will be logged + Cyber-communities have been created The tectonic plates of the “web” have shifted

  13. Leveraging globalization & digitization If you don’t know where you are going, any road will do! If you don’t know where you are, a map won’t help!

  14. The evolution of the Internet 1

  15. The evolution of the Internet

  16. The evolution of the Internet

  17. The evolution of the Internet

  18. Cybergeography Thelandscapefor business iscybergeographyThecybergeographyof the planet ischangingcontinuously

  19. Mapping Cybergeography New indices • In the past year, our research team developed the Global New e-Economy (GNEI) index to attempt to assess the tremendous amount of changes occurring as a result of digitization, globalization, and the New e-Economy. The GNEI index measures across five main variables: • Knowledge Jobs: • Technological Innovation Capacity: • Economic Dynamism & Competition: • Globalization: • Transformation to a Digital Economy:

  20. Globalization Deregulation Digitization Why?: New factors are driving economic and business success in today's information and knowledge based economy.

  21. What is the motivation for a new economy index --- the Global New e-Economy Index? Nations and businesses need New Economy data to make the right decisions in the uncharted regions of cyberspace . We are operating in a region where longitude and latitude have simply not been defined

  22. What is the motivation for a new economy index --- the Global New e-Economy Index? • The dynamics of the New Economy are now truly global. • Industrial age measures of production and performance are decreasing in relevance in the information age. • It seems reasonable to speculate that better predictors of a nation’s or region’s growth and potential can be found by looking at their information processing capacity and capability.

  23. What is the motivation for a new economy index --- the Global New e-Economy Index? Only 2 to 5 out of 100 people today can pass this Global Economy/New Economy “IQ” test..

  24. What is the motivation for a new economy index --- the Global New e-Economy Index? Global Questions • Which countries have the fastest growing GDP? • Ireland, China, Poland, Hungary, India • Which countries have the greatest computers per capita? • US, Sweden, Finland, Iceland, Norway • Which countries have the greatest number of Internet hosts per capita? • Finland, US, Iceland, Norway, Canada, New Zealand • Which countries have the greatest number of phones per capita? • Luxembourg, Sweden, US, Switzerland, Norway • Which have the greatest number of cell phones per capita? • Finland, Sweden, Norway, Hong Kong, Iceland • Which 5 countries have the lowest international phone costs? • US, Israel, Norway, Netherlands, France • Which 5 countries have the greatest labor productivity (GDP per employee hour)? • Luxembourg, Belgium, US, Italy, Ireland

  25. What is the motivation for a new economy index --- the Global New e-Economy Index? U.S. National Questions • Which states have the largest on-line populations? • Alaska, Colorado, Maryland, Utah, New Hampshire • Which states have the most high tech job density? • New Hampshire, Colorado, Massachusetts, California, Vermont • Which states have the highest degree of workforce educational attainment? • Colorado, Alaska, Utah, Washington, California • Which states have the most job dependent upon exports? • Alaska, Washington, Connecticut, Texas, Massachusetts • Which states have the highest percentage of workforce employed by foreign companies? • Hawaii, South Carolina, North Carolina, Massachusetts • Which states have the highest number of patents per capita? • Delaware, Connecticut, Vermont, Massachusetts, New Jersey

  26. Viewing the Digital Divide US, Japan, Germany, France, Finland Start of 2nd drop off on the “digital divide continental shelf” First “drop off” Start of primary “digital divide” South Africa, Venezuela, Slovenia, Thailand

  27. What is the relevance of this information? • National leaders, business leaders, strategists, technology leadership, and the new breed of knowledge worker need a new basis for decision making to answer key questions • where are the new markets? • where should I be locating my physical facilities? • where are the new sources of labor? • what is the “cybergeography of the planet? • how fast is it all changing?

  28. Technical Innovation Capacity Japan US Germany Russia (39 overall) China (37 overall) Economic Dynamism and Competition Finland Netherlands Taiwan USA Sweden Who are the leaders? Knowledge Jobs Philippines (26 overall) US Germany Russia China Globalization US UK Germany France Japan

  29. PositionHolding:Finland, France, Germany, UKGainers:Austria, Denmark, Ireland, The Netherlands,Sweden, SwitzerlandLosing position:Belgium, Italy, Luxembourg,Norway, Portugal, Spain Top 5: USA, Japan, Germany, France, Finland Last 5: Slovenia, Russia, South Africa, Indonesia, Venezuela

  30. CUSTOMERS TECHNOLOGY Network Relationships Business Models E-Community Technology Capabilities EMERGING ORGANIZATION OTHER STAKEHOLDERS Human Resources SUPPLIERS COMPETITORS The Cybergeography of Business The New Economy company is a e-community and competes with other e-communities. An e-community is characterized by identity, shared values, a global business perspective, relationship growth, the ability to rapidly accumulate and share individual experiences to create organizational capital, the cultivation of an intelligent society, and a focus on grasping opportunities and turning the future into an asset.

  31. Business Network Mapping is a technique that allows the visualization of these relationships Example: FORD topology unscaled

  32. Interpreting a Business Network Map Example: FORD Scaled view

  33. Examples: Media sector as viewed from e-space

  34. Examples: Amazon.com

  35. Examples: IBM

  36. Merrill as viewed from business e-space

  37. Insurance competitors

  38. What does the competitive landscape look like? “Swamped by Waves” Turnaround “Making the Waves” Redefinition Revolutionary Degree of Change “Catching the Waves” Adjustment “Riding the Waves” Anticipation Evolutionary Reactive Proactive Follower / Leader

  39. What does the competitive landscape look like? Survive “Swamped by Waves” Turnaround Defend “Making the Waves” Redefinition Revolutionary Degree of Change “Catching the Waves” Adjustment “Riding the Waves” Anticipation Evolutionary Sell Arms to Both Sides Reactive Proactive Follower / Leader Attack

  40. Financial Services: Brokerage • Attackers • Ameritrade • Schwab • E*trade • TD Waterhouse • Defenders • Merrill Lynch • Paine Webber • ………

  41. Financial Services: Banking • Attackers • Wingspan • Compubank • E*Trade/telebank • Defenders • B of A • Chase • Citi • Etc. • ………

  42. Financial Services:Insurance • Attackers • Answer Financial • Quotesmith • Annuity.net • Defenders • AIG • Allstate • Hartford • Progressive • ………

  43. Financial Services:Who are the “arms dealers” • AOL • Yahoo! • Microsoft • Answer Financial • Quotesmith • CFN • Rewards Plus • ………

  44. What we are hearing about 21st century IT:The challenges you are facing • The essential focus areas for the high performance 21st century IT organization • Value creation • Cost management • Investment management • Risk management • Global technology management • Human capital management • Performance management and communication • The critical business-IT transformations • From cost center to value center • From constraining to agile • From reactive to proactive

  45. What should you be doing in IT to meet these challenges? The IT Business, Business Models, and Metrics

  46. What we are hearing about 21st century IT:Responses to the challenges • Meeting the challenges • Adopt an investment mindset and disciplines • Introduce a new funding model for IT as an investment portfolio • Enact a new management model which is consistent with the value generation focused needs of the enterprise META Technology Leaders Index META Index Dow Jones S&P 500 In the majority of sectors we track, the technology leaders outperform their peers and generate exceptional shareholder value

  47. What we are hearing about 21st century IT:IT readiness to meet the challenge is low A profile of IT organizations in F1000 companies today • About 30% are "frozen in the past"… IT managed as a cost; still mainframe based; long development lead times; not flexible • About 55% are "in the abyss"… spending growing but not managed as an investment; distributed computing is growing with uncontrolled complexity; strategic work content is low • About 10% are "competitive"…. Spending is under control; the portfolio is being managed; development is effective and strategic content is high • About 5% are "leading"…. Spending managed as an investment; package-based solutions play a key leveraged role; sourcing is also leveraged; a "market ready" mindset. To evolve and transform you must know where you are today! Do you?

  48. Value Transformation Step 1a:From Cost Center to Value Center Changing to a Value Center META Group Credibility/Dependency Matrix Efficiency Effectiveness • View IT as a business of products and services • Treat the IT investment as a portfolio of assets • Set the stage for business/IT “fusion” not “fission” High Collaboration Investment 5% Business Perception of Dependency Respect Cost Trust 25% 70% Low Low High Business Perception of IT Credibility Transformation requires the adoption of a new operating model for IT and a new form of business IT partnership

  49. Value Transformation Step 1b:From “factory” to “strategic” Efficiency Effectiveness Strategic Partner Investment High Business Perception of Dependency on Information Preferred Partner Cost Low Supporting the Business Low High Business Perception of IT Credibility The transformation of IT’s role in the enterprise is critical

  50. Value Transformation Step 2:Move IT to a True Business Model • Eight Basic Tenets of Running IT Like a Business • Costs are known and auditable • Budgets are developed using clear models • Critical business information is available in real-time. • The work backlog is managed from a value perspective • Performance is visible internally and to the customer • The organization is “market ready”. • There is a focus on cost reduction, quality improvement, and customer facing performance • IT performance is judged on day to day performance, application delivery, and the ability to Run IT Like a Business • Adopt a business discipline philosophy, beginning by clearly understanding the fully allocated costs of IT products and services • Manage and balance the IT portfolio to drive higher levels of value and lower levels of risk • Benchmark current IT product/service offerings to begin identifying an IT regime capable of supporting ongoing business innovation

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