Compass Points

Economic Commentary

The New Economy: What is it? How will it impact my business?

by Denise A. Harrison

The New Economy - another buzz-word! What does it mean? How big is it? What types of businesses are included in this sector of the economy? A recent study conducted by the University of Texas breaks the new economy into four segments:

  1. Infrastructure; which includes businesses that make or operate Internet essential hardware and equipment such as Cisco, Lucent and Intel.
  2. Applications; companies that develop uses for the Internet or connect users to the Internet including Adobe and Oracle.
  3. Intermediaries; third party businesses that use the Internet to link customers with products and services that are produced by others like E*Trade, PriceLine and EBay.
  4. Commerce; businesses that sell their products and services on the Internet such as Amazon and CompuServe.

The study included all Internet related revenues of companies like Barnes and Noble and Lands End. All of these areas added up to the following:

Size: $525 billion
Growth: 62% 99/98
Jobs: 2.4 billion
Etailing: $171.5 billion

How does that impact small to mid-sized businesses not already playing in this arena?

In developing a strategic plan your team needs to consider these structural shifts in the economy and discuss how they will impact the future. Some strategic issues for your team to wrestle with:

  1. Can we enhance our growth by serving any of these segments?
  2. Can we use the products and services offered by this segment to enhance our product and/or service offerings?
  3. Can we enhance customer service through the use of any of these technologies?

Comparing Clicks Worldwide

Perceiving this change as an opportunity rather than a threat will be key to overcoming the challenge resulting from this structural economic shift. In their recent book, Killer Apps, Larry Downes and Chunka Mui give the example of Brown & Co., a financial printer, as a company who looked at the glass as half full rather than half empty.

The Securities and Exchange Commission announced that in 1996 companies could begin filing the required financial reports electronically. This announcement could have been the death toll for a financial publisher like Brown & Co.. Instead the company looked at the change in filing requirements as an opportunity. They realized that the electronic filing would reduce the need for the actual printed copy, however, the strategic advantage was not the printing presses, but rather the competencies around government filings, the ability to work on tight deadlines, and the reputation for the careful accurate handling of confidential information. By understanding their true strategic advantage the company was able to capitalize on the new SEC electronic filing requirements rather than lose business to new players entering the market with electronic expertise.

Your team should look for ways to take advantage of these structural shifts rather than getting bogged down in discussing more recent economic events. The recent events are important to your strategy, but identifying long-term trends and positioning the company to compete for the future are the real challenges of strategic planning.

Use both the Industry Scenario and Winnerís Profile described in section four of the Simplified Strategic Planning process to evaluate how these structural shifts will affect the business. These assignments will help identify the knowledge and skills that your team will need to compete effectively in the future. Donít be the buggy whip manufacturer who is concerned about the high price of leather rather than assessing the impact of the automotive industry!

© Copyright 2007 Center for Simplified Strategic Planning

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Copyright, Center for Simplified Strategic Planning, Inc., Southport, Connecticut 2000-2007