Chapter 6 Network effects Metcalfe s Law or Network Externalities The value of a product or service increases as the number of users grow o More users more value o When present it is among the most important reasons why you choose a product or service The value derived from network effects comes from 3 sources exchange staying power and complementary benefits o Exchange every product or service subject to network effects fosters some kind of exchange o Staying power long term viability people don t want to invest time money in a product if it not going to be supported anymore Switching costs can strengthen the value of network effects as a strategic asset Also known as sticky friction lock in Directly related to the fear of being stranded in an unsupported product or service The higher the value of the users investment the more they re likely to consider the staying power of any offering before choosing to adopt it Barnacles customers tightly anchored to the firm butterflies flutter away to rivals o Complementary benefits products or services that add additional value to the network How to books software add ons etc Platforms products and services that encourage others to offer complementary goods Brands make speakers for IPOD cars are IPOD ready TCO Total cost of ownership an economic measure of the full cost of owning a product includes direct costs and indirect costs One sided market a market that derives most of its value from a single class of users Technological Leap Frogging competing by offering a new technology that is so superior to existing offerings Same side exchange benefits benefits derived by interaction among members of a single class of participant Two sided market a network market comprised of two distinct categories of participant both of which that are needed to deliver value for the network to work Cross side exchange benefit when an increase in the number of users on one side of the market creates a rise in the other side Console owner s software developers When network effects play a roll competition in an industry can be different than in conventional nonnetwork industries o Network markets experience early fierce competition o Markets are often winner take all or winner take most exhibiting monopolistic tendencies where one firm dominates all rivals o The best product or service doesn t always win Chapter 7 Social media provides Four M of engagement o Megaphone to sound out messages o Magnet to attract inbound communication o Monitor and Mediation paying attention to what s happening online and selectively engage conversations when appropriate Web 2 0 Internet services that foster collaboration and information sharing It is often applied to Web sites and Internet services that foster social media or other sorts of peer production Blogs online journal entries usually made in a reverse chronological order they provide comment mechanisms where users can post feedback for authors and other readers Crowdsourcing A phenomenon where initially undefined a group of users band together to solve problems create code and develop services is a type of peer production The act of taking a job traditionally performed by a designated agent and outsourcing it to an undefined generally large group of people in the form of an open call Microblogging This is a service that allows users to post 140 character messages via the Web SMS or a variety of third party desktop and smartphone applications o Twitter a type of short message blogging often made via mobile device Wiki This is a Web site that can be modified by anyone from directly within a Web browser provided that user is granted edit access It supports what you see is what you get WYSIWYG editing Wisdom of the crowd The idea that a group of individuals often consisting of untrained amateurs will collectively have more insight than a single or small group of trained professionals Mash ups Combinations of two or more technologies or data feeds into a single integrated tool Folksonomies Keyword based classification systems created by user communities as they generate and review content Chapter 9 10 IT infrastructure provides platform for supporting all information systems in the business o Computer hardware the physical attributes the computer o Computer software set of codes that makes a system work o Data management technology organizes manages and processes business data concerned with inventory customers and vendors Technology drivers o Moore s law and micro processing power says computing power doubles every 18 months o Law of mass digital storage the amount of data being stored each yeah doubles The world produces as much as 5 exabytes of unique information per year o Metcalfe s law and network economies value or power of a network grows exponentially o Declining communication costs and the internet as communication costs fall toward a very small number utilization of communications and computing facilities explodes o Technology standards specifications that establish the compatibility of products and the ability to communicate in a network As manufacturers focus on the products built to a single standard it unleashes powerful economies of scale Computer Hardware can be illustrated as a layer cake User Application Microsoft Office Oracle Operating system Windows Linux Hardware IT Infrastructure has 7 main components o Computer Hardware platforms Client machines desktops PCS mobile devises labtops Support computer network sharing files and resources Provide hardware platform for ecommerce Primary secondary storage technologies magnetic disk hardrive USB Optical Disks CD ROM DVD Input devices gather data and convert them into electronic form keyboard mouse touch screen scanner Output devices display data after they have been processed Information systems collect and process information in one of two ways Batch processing transactions stored for predefined amount of time then processed as group and Online processing transactions processed immediately Trends Emerging mobile digital platform based on new handheld hardware like cell phones and tablet computers This is a new platform Wireless communications through 3G cell networks and Wi Fi New software apps Nanotechnology creating computer chips and other devices thousands of times smaller through manipulating individual atoms molecules Grid Computing connects geographically remote computers into a single network to combine processing power and create virtual
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