Chapter 1 THE NETWORKED ECONOMY Information Technology the

Chapter 1 THE NETWORKED ECONOMY Information Technology & the Networked Economy, 2 nd Edition, 2002 by: Patrick Mc. Keon Lecture Slides by: Dr. Nidjo Sandjojo, M. Sc Asian Banking Finance and Informatics Institute Perbanas Jakarta Dr. Nidjo Sandjojo, M. Sc

LEARNING OBJECTIVES After reading this chapter, you will be able to answer the following questions: 1. 2. 3. 4. 5. How has the networked economy evolved? What are the key elements of the networked economy? What is the role of information systems in organizations? What is the IS cycle, and what are three IS functions? How do the IS functions relate to business risks? Dr. Nidjo Sandjojo, M. Sc 2

Introduction to Information Technology and the Networked Economy (1) The dramatic growth of the Internet and the World Wide Web are changing the way we live, work, and play in many ways. One important change has been the transition from the industrial economy to the networked economy. Dr. Nidjo Sandjojo, M. Sc 3

Introduction to Information Technology and the Networked Economy (2) The networked economy is based on computers, connectivity, and human knowledge and will involve changes in the way goods and services are created, produced, sold, and distributed. Like the industrial and agricultural economies, the networked economy must have an underlying infrastructure. Its infrastructure is known as information technology (IT), and the primary components of IT are the computer and computer networks, which make connectivity possible. Dr. Nidjo Sandjojo, M. Sc 4

A Connected World The end of the twentieth century and the first years of the twenty first century have been exciting times. The rise of networked technology as an important form of communications and commerce has profoundly influenced the way people communicate and the way companies and organizations do business. High speed communication links connect technology and people. Dr. Nidjo Sandjojo, M. Sc 5

The Impact of Computer Networks on Business A widely used form of networked technology is the computer network, which consists of two or more connected computers. Such computer networks form the nervous system of modern companies and organizations by enabling stakeholders managers, employees, suppliers, and customers to interact electronically. Dr. Nidjo Sandjojo, M. Sc 6

In fact, all networked technologies are at their heart computer networks because they are run by computers. The largest and most widely used computer network is the Internet, which connects thousands of smaller computer networks, thereby linking together millions of computers around the world. Dr. Nidjo Sandjojo, M. Sc 7

In addition to electronic commerce the activity of carrying out business transactions over computer networks companies are using the Internet to communicate with other companies or to extend their existing business models instead of trying to create entirely new ones. Dr. Nidjo Sandjojo, M. Sc 8

Movement to the Networked Economy Computer networks are not just a new way of handling business transactions or searching for information; they also provide a better way of doing business. Computer networks are the basis of a new type of economy a networked economy. Dr. Nidjo Sandjojo, M. Sc 9

For 200 years, people have lived and worked in the industrial economy, which was built on the existence of capital, in the form of factories and machines, and labor, in the form of employees. In contrast, the networked economy combines enhanced, transformed, or new economic relationships based on computers, con nectivity, and human knowledge. Dr. Nidjo Sandjojo, M. Sc 10

Impact on Businesses Although the economic rules of supply and demand remain valid, the networked economy's use of computers, connectivity, and human knowledge has resulted in a better way of doing business. Because these computer networks enable humans to use their unique intelligence to share ideas, workers can find more efficient ways of carrying out business operations as well as find totally new ways of doing things. In fact, this innovation is much more important than efficiency, because it leads to competitive advantages that seldom come from efficiency alone. Dr. Nidjo Sandjojo, M. Sc 11

Creative Destruction The speed of change in the networked economy means that organizations must constantly reinvent themselves if they are to survive. Termed creative destruction by the European born U. S. economist Joseph Schumpeter (1883 1950), this concept emphasizes that the most important part of the change process for a business is not what remains after the change but rather what has been destroyed. Dr. Nidjo Sandjojo, M. Sc 12

Without the destruction of the old ways of carrying out business, organizations cannot create the new ones. Creative destruction often requires an entirely new way of thinking about the problems facing a business. Executives may need to redefine the problems or reframe the questions; simply doing business as usual will not suffice. Dr. Nidjo Sandjojo, M. Sc 13