The Impact of Cyber-Business
03/01/2003
 |
It is widely believed that the Web will change our world in ways that so far are hard to predict. History has shown that dramatic changes occur in society not just as a result of inventions such as the printing press, telephone, and television, but even from the rise of developments such as roads, cities, and money. The feudalism of the Middle Ages was replaced by mercantilism and then capitalism as economic systems. When you are right in the middle of these trends as they take shape, it's hard to see exactly where things are headed.
At the Industry Strategy Symposium in Pebble Beach in January, well-known energy guru Jeremy Rifkin gave some insight into revolutionary changes expected over the next few decades. He predicted that the change wrought by the Internet will be as great as the transformation from mercantilism to capitalism over the period from the 1300s to the 1800s, although the transition would be much faster. He then made recommendations about how executives in the semiconductor and process tool industry should reshape their companies to get ahead of the curve for this inevitable change.
The surprising thing about his presentation is that some companies in the semiconductor/process tool sector already appear to be well on the way to making the type of transformation Rifkin suggested. There may be greater foresight in our industry than we realize. Here is a summary of his views on the nature of the economic change that is now happening, and how some of our companies are already reshaping their businesses to get in tune with it.
Time and the pace of business are key factors in transforming economies. The clock appeared in the 1300s, but there wasn't even a minute hand until the 1500s, Rifkin said, and the second hand didn't appear until the 1700s. Over this period there was a transition from what he called "proprietary exchanges on the commons" to property exchanges in markets.
Today's markets are moving from geography to cyberspace, and time is being split into nano- and picoseconds, even below the level of our perception. Currently markets are based on linear, discrete transactions, with a transfer of goods or property and a finality of sale. Networks, by contrast, allow continuous transactions, based on time and access, in Rifkin's view. One reason so many dotcoms failed, he believes, is that they gathered orders in cyberspace and then shifted over to the discrete transaction model. When people want a piece of music, they want it now, he said, rather than a CD in the mail sometime later. Already, margins are shrinking across many industries because of lower transaction costs, and the trend is toward zero transaction cost. He suggested that future business models might be based on networks of experience and shared interests, rather than simple discrete transactions involving goods.
For example, Ford in Europe is considering offering far more than a lease on a car. A customer would also get insurance and a smart card allowing free parking across Europe, plus discounts on fuel. Customers would also get special vacation offers, and a sedan might be swapped for a convertible for a fun weekend. Vendors need to become centers of experience, according to Rifkin; otherwise they will become low-margin outsourcers to those with the primary links to customers.
He suggested that in our industry toolmakers might share the risk of chipmakers, providing tools along with service and maintenance, and then share in the income stream. Long-term strategies should be to set up network streams, he suggested, that are geared to the speed of transactions.
Certainly Applied Materials, for one, has been moving toward a model like this, even adding process integration and making it easier and quicker for chipmakers to install new fab lines. Gas and chemical companies have been merging and linking their resources to set up gas and chemical delivery systems and then guaranteeing delivery of critical gas and chemical supplies as they are needed. This frees the device makers to concentrate on improving the design of their products and the productivity and efficiency of their whole factories, rather than spending a lot of effort on individual tools or parts and pieces of gas or chemical lines, valves and flow controllers. But it also builds continuous relationships between suppliers and users, providing access and instant response to their needs.
Ion implantation services sprang up to provide this tricky part of processing. While starting out as a service at separate facilities where wafers were shipped, it shifted to outside companies running an entire ion implantation section of a fab and buying and installing the tools, as well as operating them.
E-diagnostics has gone beyond trouble-shooting to allowing customers to track their own orders at Texas Instruments, for example. One unforeseen by-product of this system was the discovery that different groups within TI's own facilities could go on line and monitor operations in real-time rather than waiting for reports or having to ask other departments about progress. Shipping companies are offering similar services to allow shipments to be tracked by their customers.
The semiconductor industry may be behind others in areas such as automation of factories and software, but it appears to be pioneering in the kind of cyber-based business models predicted by Rifkin. Our products may have the potential to change the way the world works, but we may have to implement some of the changes ourselves to show everyone else the tremendous advantages of doing business at nano-speeds.
Robert Haavind
Editor in Chief