CCT 100 / 0101

Joyce Tanjuakio

November 29, 2002

Works Cited

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What Is The "New Economy"?

The "new economy" has been a buzzword in the business and has arguably reached its current level of popularity as a result of media hype. Its official definition is still subject to debate but the general consensus is that the "new economy" is an economy based on ideas rather than substance.

"a world in which people work with their brains instead of their hands. A world in which communications technology creates global competition ... A world in which innovation is more important than mass production…A world in which rapid change is a constant. … A world so different its emergence can only be described as a revolution."(Browning and Reiss)

The new economy is ultimately a post-industrial society- the information society - built on convergence or the marriage of information and communication technology. This convergence revolutionizes the way in which businesses are conducted. The constantly changing definition of new economy ensures that any accepted meaning will eventually become insufficient. Old economy and new economy are not separate entities but rather two points in a continuum having different orders or operation while still applying the same basic rules and concepts of economics.

Technology + Economy = The Creation of the New Economy: The Big Picture

Just as the economy evolves over time and is part of a continuum, communications also goes through technological change - mediamorphosis(1) and is also part of an evolutionary continuum. (Fidler, 23) Transformations of the new economy and technology did not occur abruptly; both advanced steadily for decades and did not evolve in parallel. The new economy and technology coexists and coevolves to produce the so-called "new economy". (Moore, 78)

Technological change does not occur in a vacuum. Technology - such as computers and communication networks - would not advance unless an individual initiates it. (De Bresson,13) Taking the first generation computers as an example, they were developed because there was a need for them during World War II. The Z3 and Collosus were two of these machines. The Z3 was used for airplane and missiles design and the Collosus was used to crack German cryptic codes. (LaMorte and Lilly,1994) Increased funding for the development of computers due to increased government demand for them hastened technical progress.

The Z3 and Collosus. Two examples of how technology progressed with demand.

Technology companies create product demand on their own by encouraging customers, home users and businesses, to embrace computer activities and leading edge applications in order to create consumer desire for the product. (Moore, 79) Technology companies may work with and supply agreements to other technology companies. These other companies then provide complementary products and services, which then force companies to co-sequentially adapt technological mediamorphosis. Some companies take risks and devote substantial investments on technological innovations to modify current techniques, which can improve work processes. Demand for innovation can also come from the companies that are driven to adapt new innovations because of the need to reduce and minimize supply chain costs. Computers and communication technologies reduce costs by a considerable amount by tying together suppliers, manufacturers, and distributors in a synergistic network.(2) Communications technology allows firms to overcome geographical restrictions, reducing co-ordination costs, increasing production flexibility while still working in real time and decreasing production time. (Malecki,185) By adapting new technology, companies are not only reducing production costs but also gain advantages over their competitors.

"Technological capability is not fixed or permanent, since both technology and abilities of competitors are constantly changing." (Malecki, 26) One advantage over competitors may be acquired through patents to prevent other companies in using the new process. Another way to gain these advantages without the cost of obtaining patents is to increase volume and speed of production as soon as possible. This gives the company a temporary edge over competition. (De Bresson, 14) Development of new technology contributes to the economy by promoting competition and the opportunity to maximize profits and minimize costs. The economy in turn, contributes to the development of new technology because of the needs to optimize operation efficiency. This dependency of technology and economy with each other causes the coevolution and advancements through time in effect creating the "new economy".

Beyond the Buzz: What the "New Economy" is Made Of.

Knowledge

Companies, by using research techniques like data mining, communication networks and databases can turn information into knowledge. This knowledge can be used to devise new strategies, which can target a specific segment of audience that are qualified prospects rather than large homogeneous unqualified prospects. (Day One Media,1996) This makes advertising more efficient and increases audience targetability for a fraction of the cost.

"Consumers around the globe are becoming increasingly savvy, informed, demanding, cynical, price conscious and empowered, with relentless appetite for quality, service, customization, convenience and speed. Ergo, integrated communications is the stuff that profitable relationships are built on in the Customer Century." (Gronstedt, 81)

Narrowcasting and Mass Customization

This rise of the consumer awareness and the computer resulted in narrowcasting(3) -the option to target audience quality rather than audience quantity or broadcasting. With the knowledge from the information acquired, this enables companies to form new agendas to suit consumer wants and needs, resulting in mass customization instead mass standardization. Unlike the traditional mass communication technologies of the past, the computer is not a mass communication technology; therefore it does not follow the broadcasting model but instead follows narrowcasting. Narrowcasting leverages on the importance of feedback or interactivity from the consumers and how intellectual capital can transform these collected feedbacks into something profitable for the business, making production increasingly come from the minds of the consumers. The ideas and feedback of the consumer becomes part of the products. This shifts the balance of power from the sellers to the buyers and promotes the idea of prosumers and prosumption- the blurring of the separation between consumers and producers. (Davis and Mayer, 51)

Speed

For a company to optimize the use of knowledge, it must use knowledge together with speed. With knowledge and speed working together, the company is able to achieve faster production, increased volume of production, lower costs, and faster responses to consumer needs hence being able to capitalize sooner on new opportunities. (Harreld, 62) The new economy is characterized by constant rapid changes. The speed in which commerce operates is non-stop and new technology obsolesce in months making speed and immediacy a major factor for businesses to stay competitive. Communication networks and increased computer processing capabilities facilitates the speed in which businesses. The combination of speed and knowledge results in efficient narrowcasting through integrated communication(4) and a more direct link with the consumer, which enhances business-consumer relationships.

Disintermediaries

With the rise of the prosumer comes the notion of disintermediaries in the new economy. This involves the elimination of the middle man- anything that stands between the consumer and the producer. In the old economy, there were separate sectors such as financial services, education, manufacturing but these sectors break down in the new economy. (Tapscott, 56) Individuals can directly connect to organizations they want to have a transaction with such as individuals who can directly connect with their banks either through telephone banking or online banking. Individuals become their own financial service companies with the help of the computer and communication networks. There is a shift from multilevel, hierarchical computing architectures to new peer-to-peer network computing models. (Tapscott, 69)

Globalization

Communication networks are not only restricted to regional connection; it also includes global connections. Networks of businesses and are able to cooperate globally and achieve business objective. Global networks are the foundation of the rise of globalization(5) - also a major factor in the new economy. Global networks make accessing collective information about consumers worldwide possible while also enabling communications in real time. Distance between regions and countries are virtually reduced. "Globalization is both chicken and egg. It is driven by and driving the new technology that enables global action." (Tapscott, 65)

Digitization

In the old economy, the flow of information was physical. In the new economy, information flow is digital. There is a shift from analog to digital. As mentioned before, for a business to gain advantage over its competitors, it must produce large volumes of the product fast to capitalize in new opportunities. In the new economy, information becomes digitized and communicated through digital networks. Larger amounts of information can be transmitted through packet switching.(6) (Straubhaar and LaRose, 329) The quality of digital information and the speed in which it is transmitted is also far superior in quality than analog. Information can be stored and retrieved instantly from around the world - with the help of global networks. The digitization of information in the new economy makes vast volume and speed of production possible.

Convergence

Conclusion

Technology - specifically computers and communication networks make the major contributions in the creation of new economy since both need each other in order to achieve progress and change. New economy phenomenon was created from the coevolution of economy and technology and will continue to coevolve and so will the factors that define it, making the definition for it different every year. For instance, the "baby boom" echo - the generation first to come of age in the digital era - will have a different culture, psychology, approach to learning, consuming behavior and will change the face of the new economy when they enter the work force. (Tapscott, 2) The new economy and computers and communication technologies will continue to coevolve and change together as long as there is incentive and the demand to do so.

Footnotes

1. Mediamorphosis - "By studying the communication system as a whole, we will see that new media do not arise spontaneously and independently - they emerge gradually from the metamorphosis of old media. And that when never forms of communications media emerge, the older forms usually do not die - they continue to evolve and adapt." (Fidler, 23)
2. Synergistic network - a network of Synergy - "The combination of two convergent factors which result, in interaction, in a greater effect than the addition of the two." (De Bresson, 258)
3. narrowcasting - "targets direct media channels to specific segments, or niches, of the audience. (Straubhaar and LaRose, 563)
4. integrated communication - "Communication which is the process that people engage in to share understanding and meaning.. integration, which is commonly defined as the process of achieving a unit of effort in various organizational subsystems." (Gronstedt, 81)
5. globalization - "refers to the spread worldwide of major media companies and to their serving as models for other countries' media" (Straubhaar and LaRose, 561)
6. packet switching - "breaks up digital information into individually addressed chunks, or packets, so that many users can share a single channel." (Straubhaar and LaRose, 563)

Works Cited

BROWNING, John and Spencer, REISS. (1994). Encyclopedia of the New Economy.
Online at: <http://hotwired.lycos.com/special/ene/index.html?word=intro_two> , consulted on: November 18, 2002.

DAVIS, Stan and Christopher MEYER (1998).
Blur: The Speed of Change in the Connected Economy. United States, Ernst & Young LLP

Day One Media(1996) Playing the Numbers. Online at <http://www.dayone.com/media.html>, consulted on November 20,2002.

DeBRESSON, Chris. (1987).
Understanding Technological Change. Quebec, Black Rose Books.

FIDLER, Roger (1997) "Mediamorphosis and Understanding New Media."
Pine Forge Press, Thousand Oaks.

GRONSTEDT, Anders (2001). "An Age of Connections: Integrated Messages", in Information Anxiety. Edited by: Richard Saul Wurman. Indiana: QUE, p.81.

HARRELD, J. Bruce (1998). "Building Smarter, Faster Organizations", in Blueprint to the Digital Economy.
Edited by:Don Tapscott, Alex Lowy and David Ticoll. New York: McGraw-Hill, p.62-79.

LaMORTE, Christopher and John LILLY(1994). Computers: History and Development. Online at <http://www.digitalcentury.com/encyclo/update/comp_hd.html>, consulted on November 18,2002.

MOORE, James (1998). "The New Corporate Form", in Blueprint to the Digital Economy. Edited by:Don Tapscott, Alex Lowy and David Ticoll. New York: McGraw-Hill, p.78-79.

MALECKI, Edward J. (1991)
Technology and Economic Development. Malaysia, Vinlin Press Sdn. Bhd.

Joseph STRAUBHAAR and Robert LaROSE(2001).
Media Now. Communications Media in the Information Age. 3rd Edition. Belmont, Wadsworth/Thompson Learning.

TAPSCOTT, Don. (1996)
The Digital Economy. New York: McGraw-Hill.

TAPSCOTT, Don (1998). "Introduction", in Blueprint to the Digital Economy.
Edited by: Don Tapscott, Alex Lowy and David Ticoll. New York: McGraw-Hill, p.2.