Internet & Business, E-Commerce Video Lecture | E-Commerce - B Com

all right welcome everyone to chapter
one of our class welcome from the book
ecommerce um so for today what I want to
do is cover in the basics of what is the
Internet now this might sound like a
really fundamental or really super easy
thing to get you know you're on the
internet probably every day many times
multiple times a day I know I am but
what I have found throughout the years
of teaching this classes even from is
students and much more from the populace
at large there are some fundamental on
misunderstandings of what exactly is the
Internet so I want to make it extremely
clear up front what exactly this so when
you're talking to other people where you
going out on job interviews or you're
helping people to have questions or have
issues with their computers and
connecting to the internet you can speak
with authority as to what exactly is the
internet and how is it different than
everything else that might be out there
now to get to that point I want to do a
brief history of the Internet and I'm
really only getting cover from well it's
kind of a foundations back in the 1960s
until 19 or 2000 basically and then what
we're going to do after today is look at
everything in the last 12 years and 13
years is that last bit from 2000 on
we're also going to look at what is the
fundamentals of business because we want
to really get to how can we create or
how can we use the Internet to really
help business be successful that's that
will kind of summarize what an
Information Systems professional can do
is not just understand the technology
but you also to understand the purpose
of business and how this technology can
help the business so with that being
said let's start what exactly is the
internet now some common interest of
that question might be something to the
fact was the world wide web that's these
web pages we go to every day
that's part of the answer but it's not
completely the answer some people might
say it's a really big network okay so
all these computers connected together
that's getting a little bit closer to
the truth but it still doesn't quite
capture what it is all right so let's be
clear what the world wide web is it is
not just the world wide web WWE and it
shows you see in front of websites
because guess what email doesn't need
the world wide web email goes on the
internet walls which are using the
technology called FTP which stands for
File Transfer Protocol FTP is part of
the Internet but is not the world wide
web and so while today a lot of people
speak of those two as synonymous they
are not the world wide web is part of
the Internet it is not the entirety of
the Internet okay it is also not just a
protocol and we'll talk about the
primary protocol of the Internet and
particularly in the lot of details in
that in chapter 2 although it's
necessary and needs one and uses one
that is not what the internet is let's
also be clear that there is only one
Internet okay with the capital I it only
exists because there are other networks
in other words an Internet essentially
is a definition by definition is a
connection between networks kind of like
the interstate system okay an interstate
is basically something that connects two
states it's the road the connects two
states right so the interstate system
connects all these states together with
our rows the internet connects the
networks together through a protocol
series of protocols that allows you to
connect to these and so what exactly is
the internet what some people like to
describe it as Anna it's getting to the
right point and in this
so makes it somewhat nebulous but they
call it a network of networks based upon
the fundamental protocols of tcp/ip
so yes the protocol is part of the
definition but it's not the summation of
it and the reason why we have that is
because you can still use tcp/ip
and if you don't understand what that
means yet we'll get to it don't worry
that's Chapter two we're going to get
into nuts and bolts of tcp/ip but right
now just know the acronym and know that
it is necessary to have this network of
networks but tcp/ip in and of itself
excuse me it is not the internet because
you can have tcp/ip within an individual
network that doesn't connect anything
else so how did it all begin well I like
to start with Sputnik and you're
probably thinking why Sputnik or if you
you know it's putnik is hopefully enjoy
the picture at the bottom Sputnik it was
the first satellite ever launched into
space it was launched by the Russians
not by us they were the ones first to
launch anything into space a satellite
by the name is fattening now why is this
important to what we're talking about
well if you can imagine what was going
on at the time this was in the 1950s
Sputnik was launched I would say 1957
please correct me if I'm wrong with that
Sputnik was launched by the Russians
during the very beginning of the Cold
War now why is that significant well
because we knew the Russians also had
atomic bombs now this freaked out a lot
of people because we were already
worried that the Russians were going to
try to nuke us and now they had the
ability to launch satellites in the
space and presumably to have those same
satellites come crashing back down on to
us and we had no way of stopping them
and we were really freaked out because
we thought as here in America we were
the most technologically advanced
country in the world and here the
Russians were ahead of us in the space
race so like anything when people get
freaked out what do they do they go to
the government say help protect us and
so the government said our biggest
problem is that we're behind on this
advanced research and so they put
together something called the Advanced
Research Projects Agency also known as
ARPA I'm founded by Eisenhower during
Sputnik era and Congress and continually
funded by every single president since
and as the name might suggest dating
with a lot of advanced research now the
very first gentlemen to run the ARPA was
a guy by the name of a lie detector or
look lighter he envisioned is one of
their birth early projects a network of
such computers connected to one another
by wideband communication lines which
provided the functions of present-day
libraries connected with anticipate
advances in information storage and
retrieval and other symbiotic functions
now this quote actually comes from the
early 60s long before ARPANET actually
came into existence and we'll look at
that in a second but this was the
envisioned way back in the 60s of what
they wanted
now there were networks prior to this
very simple networks okay but what they
wanted something a little more advanced
that provided wideband communication
lines that could store information and
transmit information across different
computers right so with the ARPANET
funding which came out of ARPA they buy
it finally was created in 1969 so when
one of the earlier projects in ARPA the
four nodes the first four computers what
Stanford Research Institute UCLA UC
Sandra named
No yeah my rescrew that but that's
alright and then University of Utah okay
for nose and it quickly started growing
after that but the original idea was
they wanted to have these computers
networked together to help support
research by many scientists at these
institutions okay so it started in the
university system designed to help
support Advanced Research it also
started including very quickly military
institutions with occasional and my
occasional I mean very very few
connections to vendors and suppliers so
commercial businesses but usually only
those that had major research facilities
that were doing research similar to what
the universities and military was
interested in okay so things like Boeing
IBM and a few other very large
institutions now while this was being
done you have to realize that it's like
I said this was not the only network in
existence there were other competing
networks out there like IBM had their
own network that they shared
basically with their mainframe customers
they started connecting them up who
wanted to join the network and so those
are already some several other competing
networks now ARPANET created with a
protocol it wasn't very successful and
they really quickly to other limitations
in 1973 they developed tcp/ip okay now
just because you've developed a protocol
it doesn't mean everyone's going to use
it in fact not many people did until
1981
and what happened in 1981 well again
because this is a government-run
institution the government basically
said if you want to do any contracting
or any work with us through the military
institutions we we cry require you to
have tcp/ip on your computers and to
transmit data that way and that quickly
set the standard in the world
countrywide so now pretty much every
single new mainframe or some even the
many computers that were being created
in the 1970s had to have tcp/ip just
installed on mom's every single vendor
computing vendor starting and putting
that on to meet this requirement so that
way it was not a limitation of their
computers to have to be able to connect
to a network now what was really unique
about tcp/ip and a good comparison is to
look at a commitment and comparison to
the phone system but tcp/ip made the
hosts the person delivering the message
rather than the network itself
responsible for the transmission okay
now if you think about when you pick up
the phone to make a call the telephone
companies spend a fortune on their
actual network itself and the telephone
company is making their responsibility
to keep the network up and running at
all times that they can write that is
their primary objective and that's what
we pay them all this money for is to
have this network available for us to
use to make phone calls now in the very
early days of computing though these
networks were not very reliable and so
they weren't confident that the network
would always be up okay maybe it is
early I mean some of these networks did
run in the phone system some of these
were separate wires created and we also
just didn't know what type of network it
would be running over so tcp/ip by the
very definition was made so that the
hosts when it's
the message includes information about
the messages being sent
so that way at the other end the person
receiving the message can gather up all
the information about these packets that
are being sent to them and can reconnect
and put together and make sure the
entire message was received what was
great about this was it allowed multiple
networks to connect together very easily
because the network itself was not that
important because the host made sure the
message got there and if it didn't it
gave you a message saying we couldn't
get there all right and then again we'll
get more into this in chapter 2 but this
is kind of the fundamental difference
what makes this like different than like
the phone system or other networks okay
now so what what was going on here so
ARPANET you have to think about was all
about our good selves advanced and look
at the name Advanced Research Projects
Agency right they're all about doing
cutting-edge research what they did not
want to have to do is maintain an
ongoing system make sense right they
want to do advanced stuff and once it's
created is no longer advanced this is
the kind of ohan so our but didn't want
to have to maintain this so the first
hand over to the Department of Defense
the Department of Defense said yeah we
don't want to do this either so they
ended an over control to the National
Science Foundation now the science sort
of Science Foundation also had their own
network like I said there's a lot of
other competing networks there's was
called the CS net and they combined them
together with the ARPANET and created in
a Seth net in 1986 now you have to
understand this time what it's growing
we hope you got everything putting
together all these different computers
throughout the world and they started
having to realize and they needed
backbones now if you can think about the
back bone in the human body right what's
going on inside there you okay you got
all these nerves
are compacted together and then from
this backbone from the your spinal cord
your nerves reach out to the rest of the
body so you're finding your hands and
your feet they have these little side
nerves that go off in all these
different directions and that's kind of
the idea of a backbone the internet
backbone is the same concept it consists
of major major wires that carry loads of
information and they stretch from major
cities major nodes and then from there
you can imagine each one of those major
nodes so we see six in this picture
there is all kinds of like a hand the
fingers digits sticking out to all these
other computing systems that are close
to it now I'm not showing you all those
little fingers but those were in
existence but those smaller fingers had
smaller wires that could carry less
bandwidth these are the big bellies
these are the ones that carry the most
amount of bandwidth and we'll talk more
about that in a minute because these
backbones grew over time all right so
we're going through the 80s it's still
growing by 1990 ARPANET it's completely
shut down there's no more ARPANET in
existence and this F net is completely
totally in charge they have completed
their merger the number of computer
hopes exceeds 200,000 and we're already
starting to connect overseas okay so
it's not just a u.s. phenomenon anymore
but 200,000 computer now if you think
today to 1,000 computers oh that's now I
mean all the computers in the
raleigh-durham area here at the time in
1990 well that's probably almost every
single mainframe and a lot of mini
computers at everything the university
in the u.s. right network backbone has
been upgraded to something called a t3
line which carries 45 megabits per
second now that sounds pretty big but
when you think about what you might have
in your own home
okay so the either next in our own home
those cables can carry more than 45
megabits per second so within your own
home you have that capability but at the
time in 1990 this is what tell me you
gloat over 20 years ago this was the
backbone of the Internet
that's all it needed to carry okay
email was probably the most popular tool
at the time okay and there was no World
Wide Web yet there was FTP which stands
for File Transfer Protocol
there was tail net which is kind of a a
an application sharing program there's
something called Usenet which was a best
way to describe it is kind of like a
very early version of a message board
well another those four were kind of the
most common tools at the time but in
1990 hypertext linking was created and
there was two cases where I was created
and will really focus on one of those
that's Mullen Das and there were a lot
of other commercial networks in
existence like I told you briefly about
the IBM Network and there was a number
of other ones so then but they were all
competitors and they didn't necessarily
use tcp/ip on those networks and they
did not connect together they were all
independent so there was no connection
between these networks so if you wanted
to have your computer hooked up to both
networks essentially you needed to have
two wires coming in to that same
computer
one for each network and then if you
wanted to try to jump between one that
work at another oh don't get me started
about a complex that guided so it was
not not easy at the time was kind of a
crazy world at that point
1991 major changes happened we'll talk
about three big things okay first NSFNET
officially let's commercial traffic last
backbone
and by commercial traffic I'm not just
talking about some of those select
vendors and suppliers I had mentioned
earlier now we're saying if you're
willing to pay NSF money any business
could connect to the backbone now that's
huge and Wilson you'll probably see why
very shortly but this is what really
started the dot-com boom started in 1991
number two World Wide Web was released
ok so hyper leaked we said was invented
back in 1990 but the entire worldwide
web protocol HTML which we're going to
get into it's been you know a good
portion of our class talking about was
not even great until 1981 right long
after the internet had already been in
existence so we had the World Wide Web
and then Congress passes the gourville
know I'm money of you probably have
heard the UCI and from the story of the
alb or when you said he created the
internet more invented the internet
whatever the terminology he used now it
was a very very poorly worded
what he was referring to was the bill
that he sponsored the gore bill which
financed lots of research and including
a lot of money for network capacity
expansion of the internet right so and
for one one of his research projects
which we'll look at was something called
mosaic which was the first browser very
popular browser for actually viewing the
World Wide Web
so in a sense yes he helped create what
the World Wide Web is today because the
funding and it's and why I say a sense
he helped get Congress to pay basically
by Congress I mean us with our taxes
were paying for it so but we got our
money was used to fund the research to
create the browsers that allowed us to
get on the World Wide Web
total traffic exceeds over 1 trillion
bytes for the year 1991
now we're talking here okay now it's an
over a hundred different countries over
sixty thousand six hundred thousand
sorry six hundred thousand hosts and
nearly five thousand separate networks
have been connected so like I said the
Internet is a network of networks
meaning it's it's the foundation that
connects many different networks
together okay and at this point there
are already five thousand separate
networks that now can connect then the
host and usually by the mean hosts are
talking about either a computer or a
router or some point in the connections
between other computers all right so
with the funding from the gore bill we
have a new backbones created in 1992 and
you can see it's a new t3 network
connecting together all these major
cities from Greensboro was the closest
and you can see from this graphic some
of the fingers that let off and they
pointed to a lot of different nearby
cities that were connected together okay
and that's essentially what it started
to look like at this point and then
there was major wires that ran between
these cities the t3 connections
all right let's move forward in 1995
another banner year so the mosaic
browser the founder of that browser
decided to create a company called
Netscape and created a browser that he
could sell in the marketplace it became
so popular that they decided to take an
initial public offering and they took
the putter company public in Netscape in
1995 went public now what was so
interesting about this IPO it was the
first major Internet company to have an
IPO that simply exploded when it got
onto the stock exchange when gangbusters
and and everyone noticed this in the
business world
everyone said wow dude this internet
thing is going to be huge for money
making okay so it only took four years
from when traffic was allowed to when
everyone started realizing holy son of a
gun we can make some money here all
right so within five years every single
major business out there and many
smaller businesses had websites and even
some little mom-and-pop shops who put up
a website but did it before everyone
else did made a fortune selling things
that people just like well why I want
this little knick-knack that I didn't
think I could get it was actually really
really incredible crazy time it kind of
created the dot-com boom at that point
now in a staff decided at this point
that they wanted to complete that vest
all the backbone so they started selling
it off to various different companies
okay so and if you look today there's
actually I would say about 30 different
companies in the US that have backbone
networks it's not a single companies not
just 18t it's not just Verizon but a
number of different companies and some
of them then only do any phone systems
they do just internet back home okay
which today no a lot of a turning over
and
not the phone systems running over
Internet Protocol so you might as well
call them phone companies out so at any
rate 95 we see things really start being
noticed just how huge it is how in the
earlier those 90s with the explosion of
websites being created there was really
really inadequate ways of finding
information on the web search engines
technology was really really bad and
Google was founded on a new search
principle and such we'll spend a little
time talking with this principle later
in the semester I really kind of want to
bring this out at least has kind of an
introduction because Google there one
idea the one really unique idea they
gave them so much popularity as a search
engine was that how we rank our websites
is going to be based not only on what
they put on their own website but based
upon what other people linked to that
website and we'll talk about that a lot
more depth later but that is a sentiment
of the fundamentals of what Google and
Google did and what they did really
really well also significant years
because that's when I started doing web
development so yeah yeah I've been at it
for a few years now so but uh Android
gear that I'm right in 1988
so by 2000 and this is kind of where
we'll end our history lesson then what's
called the internet bubble pops and
there's tons and tons and tons of
bankruptcies in fact I was in a company
that went bankrupt in 2000 it was a fun
fun experience so in 1999 2000 I worked
at this small this small sports
broadcasting company and I had some
great content and absolutely zero cash
flow so it did it bottomed out quick all
right
um now when we say this that there was a
lot of bankruptcies a lot of dot-com
companies who simply didn't make money a
lot of people think that this meant the
end of e-commerce well and that in fact
did not happen and if you actually look
at the numbers and there's actually a
recession during 2000 and 2001 and with
internet bubble pop and everyone was
talking about how horrible it is look at
the numbers of an amount of sales in
e-commerce and then actually increased
throughout 2000 and 2001 what happened
was not a complete destruction of the
environment what happened with people
finally stopped speculating on
businesses that had no business model
the ones that had good business models
kept doing it and kept doing it well and
they kept growing companies like Amazon
is the probably the primary example here
they rocked it they figured it out the
formula and dated it extremely well
they kept growing and growing
significantly throughout 2000 2001 ok
and so when we get into the rest of this
semester that's a lot of what we're
going to be talking about is what's been
going on since then ok we're also going
to talk about kind of the second phase
of e-commerce some people call it web
2.0 and and we'll get into more details
of that later in the semester as well
but in that we want to focus kind of on
that area so in the really the past you
know 12 to 13 years it's what we're
going to spend our time focusing on
because that's really worth in magic
cents trying to happen now and when we
can get really really cool stuff so
here's the interesting thing we look at
the internet and realize that the enter
was created when we only had mainframes
there were no pcs back in the 1960s ok
or 9 even 1970s they were just starting
to come up with what was called mini
computers at the time or small basically
servers but they were popular even
throughout the 80s and 90s when we had a
lot of the PCs coming in and now today
we look at we have the growth of
smartphones and
and now information appliances you know
we have the internet connected to
washers and dryers and refrigerators and
whatnot if you want you can buy those
why the been so successful throughout to
use all these transitions okay so the
computer in computing systems have
changed our network that connects them
together
let's stay the same now granted there's
been some changes to these such as now
everyone has a PC and some might say
well that's why the world wide web was
so successful because we had these nice
graphical you know screens that we can
use to see everything with it would be
that as it may it's still applicable to
things like information appliances like
I said we can have a refrigerator that
connects to the Internet and it can send
information back and forth between the
fridge and the manufacturer okay and
doesn't need a screen for that it just
does it behind us behind the scenes so
here's a question why why has it been so
successful okay number one is that that
they have open standards the Internet is
based upon an open standards framework
essentially meaning that no one
individual controls what the standards
are they're not proprietary they're open
to change and there's a means for
sharing changes in standards over time
and that's kind of number two not only
isn't mean to do it but the way it's
developed is that you the changes in
standards are very quickly communicated
to route the entire network number three
is that the network was actually built
for high flexibility and high
reliability okay it was not and this is
very important it was not built for
speed so if you ever go to those web
pages and you click on a link and it
takes you know days for something to
show up okay not days it takes you know
10 seconds or 15 seconds for a page to
show up just keep this in mind the web
the internet was not designed to be fast
what it is designed to be is very
reliable and very flexible to deal with
changes
it's been designed to deal with changes
and it's designed to be reliable getting
information from one point to another
because then depend on the network
itself depends on the host so as long as
the host can send them from send an
internet message it can work and as long
as it's connected to those other
computers it can work so that is why the
Internet has been such a success success
ok that's open standards so no one
person controls in they actually have
some committees that he'll make
recommendations and those
recommendations go out to all the
manufacturers and the manufacturers can
choose to use them or not use them or to
collaborate with other manufacturers and
come up with day one if you look at the
browser Wars from Netscape to Internet
Explorer to Google Chrome to Firefox to
opera or to Apple Safari ok there's all
these different browsers out there for
viewing information on the web well they
all have a different set of way of
viewing web pages they the standard
there's no standard way across now they
do come up with some standards but each
manufacturer can choose to implement
those standards or not and we can talk
more about that too is how does that
mixture of web standards affect or
impact the way pages are viewed in fact
and that was one of the biggest
headaches as a web developer and a fair
especially brewing early days was the
differences between the different
browsers made it very difficult to
create web pages that look the same
regardless of the page or the type of
browser that the user was using all
right so let's move on we talked about
the internet it's got the history why it
was so successful now before I really
show how the Internet can be successful
in business I want to take a quick step
back and say all right what is the
purpose of business why do we have this
is why it was all what's the whole point
of it
and I wish more business professors were
talking about this because it's kind of
a fundamental concept and oftentimes
assumed but that assumption can kind of
lead to problems later okay so what is
the purpose of business and you probably
have some ideas when I ask that question
already formulated in your mind the
purpose of business might be to create
products or to create goods a purpose of
business might be to make money the
purpose of business might be to to give
people jobs the purpose of business
might be to satisfy people's whims or
whatever you and some of those I'll hit
on certain truths but the way at least
the way I like to envision is the
purpose of business is to create an
organization that creates things of
value it is an organization and
organized system of creating values and
I like the music is nice and generic
enough to cover almost every type of
business out there alright so by an
organizational system so it's some
system it's a way that's been designed
to repeatedly create value so when you
create something right you create
something that you want that you need
that you want to be able to use if it's
not something of value
who the hell is going to buy it right so
it's got to be something of value that
people want if you're going to sell it
if you're gonna make money and it has to
be systematized so that you can
continually create this money else it's
just a one-off creation like an artist
creates something or a carpenter might
build a thing once well that's not quite
a business until they're continually
creating things with wood and Wright or
computer manufacturer if you just create
one computer once that's not a business
you've created something of value
absolutely but it isn't until you start
creating computers on a regular basis or
create something of value in a regular
basis that
comes what is a business right so what
is needed for business is staying in
existence and there you can get into
several different things but most
importantly is that it needs to have a
cash flow right well first off you have
to have something to sell some item or
service to sell and you have to sell it
for more than what it costs to create it
okay now this is speaking in general
terms now you can have sometimes create
multiple projects products and one of
those you lose money on but the rest of
them make enough money to cover it be
that as it may
overall you have to sell things from
more than one it cost to create you also
have to create more value for the
customer than the sale price what do I
mean by that well what I mean is people
are wanting to buy something if there's
enough value in the price that they're
willing to pay for it okay so they have
to they have to do the customers has to
decide this is something that not only
that I want but I can afford and me
parting with my money to get this is
worth it to me because what I get out of
it is freaking awesome okay so they have
to want that product more than the money
that they already have and it's better
than all the other alternatives so the
customer could say well I could buy your
product and yes it's it is a value at
this price but I can get the same thing
from your competitor for half the price
so I'm gonna go with the competitor
right so now you have to be comparable
to what other people are selling things
okay
and I'll say those big three things are
what are needed for businesses say in
existence so what types of things do
businesses do then to help you get to
that point well one you have to know who
your customer
are okay you have to know what they need
you have to know be able to design a
product or service service to satisfy
that need you need to purchase you know
your supplies and your raw materials to
create your product or your service you
need to be able to manufacture so to
create that system of actually creating
the product or currying that service in
a repeatable format then you need to
market and sell your product or service
back to those customers you've
identified deliver that product or
service so after you've created it your
market of it you've sold it and you have
to deliver and lastly get to support
okay and make sure that yes then it
really satisfy their needs if the
product we sold defective let's fix it
okay that is those types of things these
are the very basic business activities
and you can go through most business
books entry-level business books and
they talk about these different
activities that need to be done and some
might list one or two others or take one
or two off but this is essentially the
main things that need to get done right
now there's also a series of other
things that a business needs to do to
keep the business going okay and these
are kind of the internal support
services including finance accounting
administration human resources and
information technology and these are
things that help all the above
activities okay now where does the
internet fit in okay well there's two
areas so we can add value to the
customers and we can add value to the
internal support services all right so
how can we add value to the customers
well one we can communicate much faster
with our customers you know and a lot of
you probably a lot of experience with
this you know you email
someone asking some questions about a
product you want to buy it right you can
reduce your transaction costs all right
so you don't need as much overhead
especially if you're doing an e-commerce
role look at a lot of where it can
reduce a lot of costs and how you should
make your sale it brings it down
significantly so now especially for me I
love my I'm buying from Amazon because
the transaction costs are so low right
and so I can buy something heaven
shipped to my house
cheaper than a would for me to drive to
Target or Walmart to go buy it but also
much creator time availability but if
you have significant reduced you know
you're working a lot or you're going to
school and your work hard time and you
hardly have time to get to the store you
get home and you know midnight and you
realize oh shoot I'm low on you know
paper towels well I can run the Amazon
order it have it shipped overnight to my
address and have those paper towels the
next day all right super sweet and easy
okay
you also have greater distance
availability so you know I used to be
that 50 years ago you you wanted
something what you can only get things
that are local that was it there was no
long distance there was long distance
rate but not much long distance trade
now there's so much more trade that goes
on and long across the world and it's so
easy to do it because you can easily
jump on the internet and then that
connects people together almost
seamlessly across great great great
distances and you hardly even know that
you might be dealing with the company
has India or that's in Europe or
wherever right and also another
wonderful thing about the internet is
you can do kind of one-stop shopping so
instead of going to you know five
different places to buy everything you
need and again I love my Amazon example
because amazon.com does a phenomenal job
at this but I can buy everything I need
have one place you know I can even buy
groceries I can buy CDs books clothing
what else I don't know where else to go
I mean
I can get that all from one stop okay or
maybe you're dealing with you know
Google and they have a series of their
own shopping cart where you can get all
kinds of things all together in one
place okay you don't have to go all
these different stores and then there's
a concept called disintermediation so if
you think of what is an intermediary
right an intermediary intermediary it's
someone who is between the manufacturer
and the final seller and we've always
had these throughout the throughout time
okay someone who has to take something
that the manufacturer is creating and
sell it to the customers because
oftentimes the customers don't know
about all the different manufacturers or
the manufacturers far away so the
intermediary will bring those things to
you but what we found was that with the
internet the manufacturer can now skip
this intermediary okay they can now
directly sell to the customer and so
there was one example of this it really
brought it home to me was a story one of
my neighbors told me about when he
bought an engagement ring for his wife
and at the time you know he the internet
was getting going I mean it was probably
in early 2000s when he when the story
took place but he went online first to
do his research he found a diamond he
really liked I thought this is the
perfect diamond but he wasn't
comfortable buying online because he
didn't know enough about this company
and so he what what he did do was he
printed out the specifications of this
diamond and he took it to a nearby
jeweler and said I'm looking to buy this
ring for my wife I want a diamond that
looks a lot like this one and so the
jeweler said let me go look at the time
in rehab
back to see if we can have something
that comes close to these specifications
they went in back and said oh we don't
have anything quite like this but one of
our our distributor has it okay so then
why don't we have this trigger send the
diamond to us and then you can take a
look at so next day need to get a phone
call the diamonds in he comes takes a
look at it and the diamond is exactly
like the one you saw in specifications
exact same special accent specs okay got
in the wonder wow that's pretty
impressive but the price was much higher
than he found online so he's like all
right um I like the diamonds I don't
like the price I'm going to look at
another jeweler so he goes to the next
jeweler does the same thing yes I'm
looking for this kind of diamond with
these specifications
they're just jour did the same thing you
went in back so no no we don't have a
diamond just like this but our
distributor has a diamond just like what
you're looking for let me give them a
call and we'll send it here and you can
take a look at it so a day later they
get a phone call saying hey we got the
diamond in it's exactly what you want
the guy goes to the jeweler looks at the
diamond and yes the specification for
this done exactly matched what he found
online
he started wondering what's going on
here and then you put two and two
together these two jewelers were using
the same distributor the distributor
where he had found online the
specifications and he said wait a minute
my jurors are using the distributor and
they trust the distributor
why don't I trust the distributor I can
get the same diamond at a significantly
reduced price by going directly with the
distributor and so he bought from a
company called Blue Nile Lou now calm
which was a distributor of diamonds and
he saved himself a ton of money that is
disintermediation in action
all right and another one is something
called the network effect now this is a
really kinda a little bit harder concept
to get and we'll spend an entire class
talking about that but basically it's
the concept that adds more and more and
more people start getting and using the
same network the value goes up not just
literally but geometrically and even
exponentially to the point where as
people start interacting on these
networks the more people that join the
networks the better the network becomes
for everyone all right so that's how I
can help your customers now how can it
help your internal business all right
it's a lot of exact same things yeah
quicker communication extremely fast now
yes you could have picked up a phone and
called people but not everyone without
their desks all the time so you sent an
email which is great because people can
get back to it whenever they're
available or sometimes even away from
their desk they can get back to you you
see a lot of reduced internal costs so
you can really greatly create efficiency
through internal cost reductions by
transferring information electronically
rather than having you know if you'd
like it some of the old you know message
systems that have like big tubes that
they would shoot messages through or
sometimes they would have that higher
couriers to carry things from one
building to the next getting you don't
need all this anymore right have greater
time availability and greater distance
availability so now your business can
keep running 24/7 very very easily and
in fact we've seen this like with
customer support it used to be that
custom customer support only lasted from
9:00 to 5:00 and now businesses are
finding it easy what they do is they
hire some people in India sometimes they
have some accent problems yes but
they're also training these Indians to
have much cleaner accents that are
easier to understand
so that way while we're sleeping over
here these Indians can answer the phone
or handle customer service problems they
like on over the Internet just as easily
as it could here and get back to you
anytime of the day okay so while we're
sleeping they're working while they're
sleeping we're working we also have the
greater distance availability for
example working with clients in India or
China or Europe or wherever it's really
really easy to do we also have much more
centralized access to business services
so for example Human Resources now we
can put a lot of these resources like
you have a change of address and I just
did this recently I went to our HR
department website and I can
electronically update it for the
University and it gets propagated
throughout the university system I only
have to go to one place I don't have to
call anybody I can do it anytime I want
but it's senseless centralized we can do
those business services very easily it
was easy for me to find to do and this
can lead to a very flattened
organizational structure so that way you
don't need as many lines of hierarchy
one manager can work with more people
because of the availability of
information flow greatly increasing his
capacity to deal with more people so you
get less fewer managers more efficient
organization you save yourself money
that way as well and then again you also
get a network effect even within the
business now the last thing I really
want to talk about is one of the major
issues when getting on to the Internet
okay so one of the things that may stop
the growth of this value being created
is phenomenal value but Trust really
depends on three major things ok you
have to be competent capable and have a
good character to develop trust ma'am so
people are judging and especially
getting on the internet there's a lot of
people out there
how do you know that these people are
who they say they are that they have the
systems available if they're capable of
doing what they say they can do and that
they have the moral character you know
can are they honest do they have
integrity and on the Internet
unfortunately at times this the
anonymizing nature of the Internet makes
it difficult to measure these things
accurately and there's so many more
businesses now that are getting on the
internet it how do you know who is who
and you can trust a new yen okay so
lacking the face-to-face interaction
that you used to be able to get trust
issues and have grown tremendously today
this is probably the main limiting
factor for why people either don't get
on the internet or don't buy and sell
things on the Internet it's because the
trust is not there and so we're going to
spend some time to talking about how can
we overcome this how can we create
websites and how can we help people
understand that we're here to help them
that we are competent that we are
capable and that we're honest and
trustworthy people okay
and so reasons why people even granted
there's this huge amounts of value that
can be created from the internet but if
you don't address these issues that's
all for naught okay so that's kind of
the last thing I want to leave you with
today that pretty much covers the
summation of chapter one right and
actually I go little beyond what the
book talks about but the big thing okay
the Internet is a network of networks
that runs using tcp/ip grown from four
connected sites in 1969 to billions of
connections today it's success is based
upon these three big things okay it has
it was based upon it is designed to be
highly flexible highly reliable open
connectivity with quick standard option
okay
four things on three things we also
found the businesses have to take
advantage of it by reducing their costs
increasing connectivity increasing
options and increasing ability to share
information and by doing this not only
with your customers but also with your
internal networks you can greatly
increase your ability to sound these
problems that people have to make the
costs lower to to meet the needs that
your customers have and your employees
have and your suppliers have and all of
your other business partners and do it
very much more efficiently okay but you
have to keep in mind that if Trust has
not developed forget about it and it's
extremely extremely important so with
that in mind we're going to dig into
some of these more deeper internet
technologies and really look at more
than nuts and bolts of how this network
works and then in the next lecture so
stay tuned and we'll get to that and
then you can be on your way for creating
some really rock-solid websites