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The late 1990’s were a time when people thought the internet would eventually cook their meals for them. I’m exaggerating, but you get the point. This irrational exuberance (to coin a phrase from Federal Reserve Chair Allen Greenspan) led to what would be called the new economy. Ten driving principles of the new economy were proposed by DR. Pierre Balthazard. We will contrast each one to the modern day economy.

1. Matter
2. Space
3. Time
4. People
5. Growth
6. Value
7. Efficiency
8. Markets
9. Transactions
10. Impulse

Matter, the claim was that just processing information was more powerful and cost effective than moving physical products. This is true as the cost of oil and transport has gone up moving products around can weigh heavily on a company, for example the now debunked Furniture.com. The cost this company incurred in delivering their product took them to bankruptcy. However, the claim that value of a company is in the intangibles as opposed to the tangibles has not completely played out to be true. Many companies with great ideas but no tangibles such as cash flow have gone by the wayside.

Space, is correctly identified as distanced vanished. The world can be your customer, but also a competitor. This principle has played out accurately since e-commerce has taken off. Dr. Pierre Balthazard, got this one right.

Time, it’s more important than ever. It has been referred to in other writings as “mcdonaldization.” We want it now and we want it good, this seems to be the case for most markets and products. Also companies that are willing to move with the times, benefit from that culture of change. This formula rings true in any economy, new or old.

A person, the most important aspect in any business, in the new economy people’s idea’s trumped sound business practices. Ignoring many of the fundamentals of business was what eventually led to the technology bubble burst in the year 2000. In the years leading up to this time, many people thought that a good idea and investor money was all that was needed to make something work. However, we now realize that there has to be a solid foundation to the business plan of any company.

Growth, to be fueled by the internet. The internet has become a very important aspect of the economy. The internet is used in different capacities for different companies. Not all companies can sell their products or services on the internet. Many companies simply use the internet as an extension of their public relations and advertising campaign. However, there are also many businesses which are exclusively on the internet. Many of the names we regard as household today are in fact business that operate strictly from the internet. Ebay.com and Amazon.com are just two examples of companies that have been very successful using the internet as their sole platform.

Value is in the trendsetters of the internet and such companies reap bigger rewards because of this. Contrary to the old economy, value in the new economy is not strictly in the product for sale. For many companies, true value and market share domination has risen from the services linked to the product, after the product has been given away. For example, many software companies give away their software; however when it comes time for technical support that is where they make their money.

Efficiency, many middle men have gone by the wayside in the new economy and it still holds true today. Many of the traditional sectors have had serious hurdles to overcome in their ability to stay competitive in the new economy and even now. A major industry that comes to mind is the travel industry, specifically the traditional brick and mortar travel agencies. This industry has had to adjust to the influx of online discounters, which are more convenient and usually better priced for customers.

Markets, buyers have new power and sellers have new opportunities. As the internet expands these words remain true. No where else are competitors so close and bargain shopping made so easy. The internet has become the place to find deals and also the place for many startups that want to offer unique or super discount services to be seen. With the new economy have come new markets and widening sectors which are to this still growing.

Transactions for the most part have become easier. Information is easily customizable and a few companies have really used it to their advantage. For example, Amazon.com customizes your page and welcomes you back every time you visit. They even have a “gold box” with special offers tailored to your likes. In essence, transactions have become a very personal experience as well as convenient.

Impulse, the need to encourage it has made transactions easier and easier. Again, I will use Amazon.com as an example. They offer their registered customers what’s called one click purchase. In this, all you have to do is click once to buy and you are done. Nothing else fosters impulse purchasing like this. Not long ago, venues like home shopping network were capitalizing big on impulse buyers. They would offer the products and all you had to do was pick up the phone and order. The internet and the new economy continue to be very impulse-purchasing oriented. Companies that can offer a simple, convenient, and effective way for customers to purchase on impulse, will continue to do well and maintain an advantage over their competitors. An excellent example of this would be for xyz.com to accept credit card payments, very convenient. On the other hand abc.com only accepts checks; not very convenient. Looking at these two, xyz.com would have a serious advantage over abc.com?

We have looked into each of the 10 driving principles of the new economy and have made comparisons as to their viability in today’s economy. Many of the principles talked about here have not changed from the 10 traditional principles of the old economy that still apply. Really, what has happened is that many of the old principles have evolved to accommodate the new economy. Going forward, companies that will survive and flourish will be companies that stay competitive by being effective in their technology, creative or practical in their products, and most importantly, provide excellent customer service.

This paper was turned in 6-11-04
***DO NOT COPY, Use this only for ideas or reference***

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