NETWORK ECONOMY AND THE IMPACT TO BUSINESS MODEL

strategy | innovation | performance

Network Economy and the Impact to Business Model

Riri SatriaFounder and CEO – Value Alignment Advisory (VA2)


What is Network Economy?• The network economy is the emerging economic order

within the information society.

• The name stems from a key attribute - products and services are created and value is added through social networks operating on large or global scales.

• This is in sharp contrast to industrial-era economies, in which ownership of physical or intellectual property stems from its development by a single enterprise.

• Business models for capturing ownership rights for value embedded in products and services created by social networks are being explored.


It was predicted long time ago …• “The Third Wave” is a book published in 1980 by Alvin Toffler.

• Toffler's book describes the transitions from industrial age society, which he calls the “second wave", to information age named “third wave" society.

• In summary :

– the first wave is settled agricultural society,

– the second wave is industrial age society,

– the third wave is post-industrial society or information society.


Waves of Economy Paradigm

First wave :AGRICULTURE

ECONOMY

Second wave :INDUSTRIALECONOMY

Third wave :DIGITAL /

NETWORK / KNOWLEDGE

ECONOMY

Fourth wave :CREATIVEECONOMY

NEW ECONOMY


Other Names to Network Economy

• Digital economy• Knowledge economy• Relationships economy


The Internet

SOCIAL INTERACTIONS

INFORMATION SOCIETY

THE INTERNET


How do internet change business model?

• Cut-off the business• Improve the business• Redefine the business• Create new model


Cut-off the Business

What happened to postcards?


Improve the Business

The basic concept of the business is still the same, but

the process is improved.


Redefine the Business

The basic concept of the business is changed, and the process is improved as well.


Create New Model

New business model, never exist before.


New Trend : Social Media• Social media includes web- and mobile-based technologies which are

used to turn communication into interactive dialogue among organizations, communities, and individuals.

• A group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of user-generated content.

• A type of online media where information is uploaded primarily through user submission. Web surfers are no longer simply consumers of content, but active content publishers.

• A broad term used to define website and web applications where you have social interactions around a media form (text, images, audio, video, or any combination of them). Examples of social media include blogs, online forums, social networks, Wikipedia and so on.


The Basic Principle of Social Media

SOCIAL INTERACTIONS

SOCIAL NETWORK

SOCIAL CAPITAL


Business Transactions using Social Media

SOCIAL CAPITAL

BUSINESS TRANSACTIONS

BUSINESS PERFORMANCE


The Generic Model of Internet / Social Media and Business Performance

BUSINESS PERFORMANCE

THE USE OF INTERNET

1. CONSTRUCT INFORMATION SOCIETY2. MANAGE SOCIAL INTERACTIONS3. GENERATE SOCIAL NETWORK4. GENERATE SOCIAL CAPITAL5. DO BUSINESS TRANSACTIONS

Research by Riri Satria in 2010 - 2011


New Paradigm : The Long Tail

Sales by title often follow the Pareto distribution (or power law) – highly skewed with around 80% of the sales coming from the top 20% of the titles (the “hits”).

The 80/20 rule says concentrate on the hits – ignore the long tail.


The New Paradigm : FREE-mium Strategy

Old paradigm :Do business transactions first, the give something free to the market or society

New paradigm :Give something free to the market or society first, then the business transactions will come to you.


New Paradigm : the Social Organization

• Organization should manage the network through high interactions and create social capital.

• The social capital is the key for business transactions


New Paradigm : Marketing 3.0• Marketing 1.0 :– Make and sell (push marketing)

• Marketing 2.0 :– Analyze, make, and sell (pull)

• Marketing 3.0 :– Collaborate, make, sell, feedback


The current(?) and next customer / employee

• They want freedom of choice and freedom of expression

• They love to customize, personalize

• They are the new scrutinizers

• They look for corporate integrity and openness when deciding what to buy and where to work

• They wants entertainment and play in their work, education, and social life

• They are collaboration and relationship generation

• They has a need for speed

• They are the innovators


Business Model Canvas


Value Provided• Collaborative value creation• Define specific value for specific groups• Could be generic products, but specific value• Listen to your (potential) customer


Customers

• Redefine the “segments”.• Local Regional Global• Customers could be anywhere• Clear Unknown


Customer Relationships• Hear them, know their preferences• Maintain social interactions• Quick response to their complaints• One-to-one relationships• Never underestimate• Loyal is result of openness


Channels• Internet is the marketing channels• Your customers are marketing channels• Amplify word of mouth• Use cross-channel• Social-marketing strategy


Key Resources• Internet is also key resource• Employee empowerment engaged• Loyal is result of openness and integrity• Knowledge sharing / collaboration facilities• Competition in finding talents• Work-life balanced for employee


Key Activities• Integrated enterprise architecture• Maintain external value chain• More collaborative human process


Key Partners• Searching for suppliers, and expertise• More collaborative• Social capital• Openness and integrity


Financial Issues• Free is the investment• The long tail


the Impact to Business Model(as summary)

• VALUE PROVIDED generate value by collaboration with stakeholders• CUSTOMERS from more local to more global and unknown• CUSTOMER RELATIONSHIPS use internet to maintain customers• CHANNELS use internet to inform the world about your product• KEY RESOURCES internet is also your key resources now (empowerment)• KEY ACTIVITIES spread around players, use internet to manage them• KEY PARTNERS use internet to manage your key partners • FINANCIAL ISSUES free is investment, manage the cash flow


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