New economy: miti e realtà

1. New economy:miti e realtà Lorenzo Pupillo Maggio 2001

2. New Economy • Economically speaking: The Economics of • the New Economy presents conflicting views • (Varian vs J.Stiglitz) • Metaphorically speaking, the New Economy • is a rich and productive image that stimulates • much creative thinking about strategy, business • models, and so on • Strategically speaking, some of the New Economy • phenomena are extremely important and challenging: • Internet as an universal data communications infrastr.

3. The scale of the change is immense • The Internet is a major driver of growth and change in our industries • It gives people access to the information they want - when and where they want • Organisations can integrate computers and communications to create new ways of doing business The Internet is Transforming Society

4. 1998 2003 288 million mobile users c. 300 million PCs c.800 million TV households c.800 million mobile users c.600 million PCs c. 840 million TV households The Internet is moving towards multi-device access... Sources: Ovum, IDC, CIT

5. Multidevice: le tipologie di e-commerce

6. Business Transformation Through Web-Centric Methods Enable Gives greater Incentives to adopt web centric methods Falling Communications and Computing Costs Allows better offers to customers Enable Growing Demand for Internet Access and Other Services The growth of the Internet is being driven by a powerful virtuous circle

7. Internet Time • The digital economy’s primary effect has not • been change in itself, but an increase in the • rate of change • “The InternetEconomy does not pit the big against • the small. It is about the swift against the slow” • (Negroponte)

8. have we entered a new economy ?

9. have we entered a new economy ? • The emergence of a higher overall non-inflationary trend productivity growth; • the increase in the role of ICT as the leading factor behind observed changes in the organization of production and exchange;

10. The ICT revolution • “The ICT revolution is not just the spread of telecoms infrastructure, but the spread of networked computer systems, the internet and the WWW. • . • As Fed Chairman Greenspan noted, “until the mid-1990s, the billions of dollars that businesses had poured into information technology seemed to leave little imprint on the overall economy…The full value of computing power could be realized only after ways had been devised to link computers into large-scale networks. As we all know, that day has arrived.”

11. Some evidence from an OECD Study: • Per capita GDP growth was uneven across the OECD in the 1990s, with continued slowdown in most countries, but with a few notable exceptions, among which, remarkably, the United States; • the growth patterns in the United States include a higher growth of GDP per capita, labourand multifactor productivity in a context of higher labour utilisation. These are rather unusual for a country that is already at the world productivity frontier in many industries. Evidence is accumulating to suggest that a large fraction of the productivity recovery in the US is due to the diffusion of ICT, especially in the most recent years;

12. Is growth an information technology story in Europe too ? • The key finding is that capital accumulation in information technologies significantly accounted for growth in the EU too, though not equally everywhere. Available evidence indicates that the adoption of new technologies and their contribution to growth in Italy, Spain , and, to a lesser extent, France and Germany is substantially smaller than in the US and in other front runners in the EU (the UK, the Netherlands) and outside the EU (Australia, New Zealand). Wherever significant, the contribution of new technologies to growth grew bigger over time, mostly due to the increasing role of computers. This is particularly evident for Finland, Ireland and Denmark, the most rapidly growing EU economies in the last few years. I conclude that the growth gaps between the EU and the US, as well as within Europe, can (also) be associated to the diverse pace of adoption of new technologies across countries.

13. THE NEW ECONOMY: FROM PHYSICAL GOODS TO INTANGIBLES 100 $ US Economic output 1996 1$ US Economic output 1900 Alan Greenspan, 1996

14. The Economics of the New Economy • A fundamental change is taking place: • we are moving from an era of tangible, industrial • goods and services that obey economic laws • of decreasing return to scale (the more you produce, the • more each unit costs) • TO • an era of intangible, information goods and services that • obey the economic laws of increasing return to scale • (the more you produce, the lower your unit costs)

15. Increasing returns business • High up-front costs and low incremental • costs • Network externality (telephone, SW) • Customer lock-in • (Brian Arthur)

16. Varian and Shapiro: “Technology changes, Economics law do not” • Information is costly to produce, but cheap • to reproduce • (Price information according to its • value, not its cost) Differentiation using delay, • quality. • Network effects : nothing new (Similar gauges in the • railroad interconnections, telephones) In the past only • in infrastructures. They are the norm in information • products and services

17. Varian and Shapiro: “Technology changes, Economics law do not” • A wealth of information creates a poverty of attention • (Differentiation ) • Internet makes it easy to personalize information • products, thereby adding value

18. Varian and Shapiro:Technology changes, Economics law do not” • Product DimensionLikely Users/Uses • Delay Patient/impatient user • User Interface Casual/experienced user Convenience Business/home uses • Image Resolution Newsletter/glossy uses • Speed of operation Student/professional user • Format on-screen/printed uses • Capability General/specific uses • Features Occasional/frequent user • Comprehensiveness Lay/professional user • Annoyance High/low time value • Support Casual/intensive user

19. Joseph Stiglitz • La rivoluzione scientifica dell' ultimo secolo ha comportato la • sistematizzazione del cambiamento stesso: il processo di innovazione • è cambiato radicalmente: da inventori isolati ed indipendenti come • Thomas Edison, si è passati ad enormi laboratori di ricerca. • L'Informazione e la conoscenza (Knowledge and information) sono • oggi prodotti come le macchine e l'acciaio erano prodotti cento anni • fa. Quelli, come Bill Gates, che sanno come produrre conoscenza ed • informazioni meglio degli altri, traggono i maggiori benefici, • esattamente come quelli che 100 anni fa, sapendo come produrre • macchine ed acciaio, divennero i magnati di quel periodo.

20. Joseph Stiglitz • In che modo le leggi che governano la nuova economia differiscono • da quelle che governano l'old economy? Ma, esattamente come • l'importanza della terra nella produzione cambiò drasticamente nel • passaggio dall'economia agricola a quella industriale, così il passaggio • alla knowledge economy necessita di un ripensamento delle leggi • fondamentali dell'economia. • La conoscenza è differente dagli altri beni: ha molte delle caratteristiche di fondo dei public goods, • E nella knowledge economy, i pericoli di monopolio sono forse ancora più grandi che nelle economieindustriali.

21. Joseph Stiglitz • Secondo, nella knowledge Economy, la concorrenza è meglio descritta • dalla competizione Schumpeteriana piuttosto che dall' Arrow-Debreu • model. In quest'ultimo, i prezzi tendono ai costi marginali. Nella • knowledge economy, le imprese estraggono tranquillamente le loro • rendite, con prezzi nettamente superiori ai costi marginali. • la teoria economica standard, ha poco da dire sull'efficienza della knowledge based economy. • Anche piccoli costi di ingresso si possono tradurre in grande potere monopolistico, con non solo prezzi più alti, ma anche con un grado di innovazione molto più lento che nel caso competitivo. Se poi ci spostiamo nella knowledge economy, proprio perché le nuove tecnologie offrono maggiori strumenti per limitare la concorrenza, le conseguenze possono essere ancora più negative. • .

22. Joseph Stiglitz • Il fatto che knowledge è , in molti modi, un public good e che esistono importanti esternalità significa che l'affidarsi esclusivamente o eccessivamente sulle forze del mercato può essere economicamente non efficiente. Per quelli che credono nelle forze del mercato, la sfida è quella di trovare la giusta "partnership" tra il settore privato e pubblico , un'attribuzione delle responsabilità e dei ruoli non dettati da paradigmi del passato che non sono adatti all knowledge economy del futuro. Sfortunatamente, nella ricerca di questo nuovo framework semplici slogan come "picking winners” non ci porterà lontano. Noi ci troviamo tutti in territori inesplorati, e ad abbiamo tutti tanto da imparare dagli esperimenti di ognuno. • .

23. Public Policy implications • We are creating the foundation of the • Electronic Capitalism • Don’t expect the government’s role to diminish • Every companies needs to know the rule of • competition • If you are fortunate enough to gain a leading • share of the market, conduct an audit of • your practice • Mergers and acquisition involving • direct competitors area subject to careful • review

24. HOW BIG IS THE NEW ECONOMY ? • 1) It’s all the new economy (Industrial Revolution) • 2) High Technology is the new Economy • (knowledge based) (OECD) • 3) The new Economy is just Computers and • Communications (The Economist ;Robert • Gordon ) • 4) The new Economy is the Internet Economy • (rapid growth of Internet) (CREC At University of Texas)

25. THE NEW ECONOMY Rest of Economy Networked Economy New Economy

26. HOW BIG IS THE NEW ECONOMY ? • 1)The New Economy include quelle parti dell’economia • che creano piattaforme su cui altri possono creare applicazioni o business • (Non solo internet layer 1 e 2, ma anche aziende e agenzie che lavorano • sul genoma umano : creano le basi condivise perché altri possano costruire • i loro business. • 2)The Networked Economy: tutti i settori che usano • infrastrutture elettroniche o di altro genere per migliorare l’efficienza, • la velocità e qualità dei loro prodotti. • 3)The rest of the Economy

27. HOW BIG IS THE NEW ECONOMY IN ITALY ? • Il settore della Net Economy in Italia Utenti di ICT Fornitori di contenuti e servizi di Comunicazione Net Companies Fornitori di tecnologie e infrastrutture ICT Fonte Federcomin /Net Consulting

28. HOW BIG IS THE NEW ECONOMY IN ITALY ? • L’Occupazione nella Net Economy in Italia Addetti ICT tradizionali presso utenti Addetti dei fornitori di contenuti e servizi di comunicazione Addetti presso le Net Companies Addetti presso i fornitori di tecnologie e infrastrutture ICT Altri addetti “ Internet” presso utenti Fonte Federcomin /Net Consulting

29. HOW BIG IS THE NEW ECONOMY IN ITALY ? • L’Occupazione nella Net Economy in Italia 2000 1.313.000 occupati 1999 1.280.000 occupati Dal 1997 +95.000 unità 1999 +3145 nuove imprese Fonte Federcomin /Net Consulting

30. New economy Market Shakeout • “It was like very other shakeout, we studied, just a lot faster, magnified by free-flowing capital, incubators and a tendency for everyone to converge in the same business model “ • (Shakeouts in the new economy - George Day -Wharton School)

31. Market mis-identifycation • “Breakthrought vs. Reformed market • Breakthrough applications create new products and services that would be impossible without the new technology - totally new industries • Re-formed applications, while they might enable reductions or other improvements, don’t change the basic functioning and purpose of the existing market

32. Misdiagnosing the market • “ Misdiagnosing the market , has led to three persistent myths about the sources of competitive advantage in online markets • Myth # 1: First movers will dominate • Myth # 2: Behavior will change quickly • Myth # 3: Non -traditional pricing structures • will be readily accepted