Here's how it works: Drug companies, called"Seekers, "put up"Wanted"posters describing problems that need addressing Bounty-hunting scientists, labeled"Solvers, sign confidentiality agreements that gain them admission to a secure project room where they can access data and product specifications related to the problem. If they solve the problem, they get a reward-around $25,$30,000 depending on the problem According to InnoCentive president and chief executive officer(CEO)Darren J. Carroll, what Lilly has done is unusual for two reasons. First, by creating a global community of scientists, We re punching a hole in the side of the laboratory and exposing mission-critical problems to the outside world, " says Carroll, "It's using the Net to communicate, collaborate, and innovate. "Second, it makes it possible for scientists to essentially become freelancers. According to Carroll, "Free agency has never been an option in the hard sciences-until now Eli Lilly &z Company has used the Internet to the cost structures of certain industries, is a form a virtual platform where top scientists key feature of the digital economy. Applica- help drug companies solve complex pro- tions of Internet-based technologies have blems already had an enormous impact Giga Infor- Many products involve both a service mation Group, Inc. estimates that the cost and a product component; therefore, both savings from business use of e-commerce problem solving and evaluation may be will reach $1.25 trillion by the mid-2000 needed. Dell Computers Web site is an There are numerous examples of how the example of a site that has combined the Internet is both lowering the cost of and benefits of both. By creating a Web site that speeding up the transaction process. Auc- allow for customization of individual com- tions of various sorts from raw materials puters, they address the unique concerns of used in manufacturing to collectibles sold customers"one computer at a time. But the on eBay, facilitate the process of arriving at site also features a strong evaluative compo- mutually agreed-on prices. Services such as nent because it allows users to compare the Pa ird-party intermedi costs and features of various options. Shop- that facilitates transactions between parties pers can even compare their customized who have never met. Amazons One-Click selection to refurbished Dell computers that technology, which allows for very rapid pur are available at a substantially lower cost hases, and Amazons overall superiority in managing order fulfillment has made its Transaction activities transactions process rapid and reliable. In fact, Amazon's success today can be attrib. Transaction refers to the process of complet uted to a large extent to the fact they have ing the sale, including negotiating and agree- sold this transaction capability to other com- ing contractually, making payments, and panies such as Target Corp. Toys R"Us taking delivery. Numerous types of Inter- Inc, and Borders books Music net-enabled activities have contributed These four factors are primary ways lowering that organizations go about adding value costs. Managing costs, and even changing Exhibit 2 describes several examples of how Exhibit 2 Value Adding in the Auto Industry The auto industry jumped on the Internet bandwagon in a big way. One of the early successes was Autobytel, and many on-line auto sales Web sites quickly followed. The majority of them have now fizzled away. The big auto makers also made huge investments in the Internet. Ford was especially aggressive and 164 ORGANIZATIONAL DYNAMICSEli Lilly & Company has used the Internet to form a virtual platform where top scientists help drug companies solve complex pro￾blems. Many products involve both a service and a product component; therefore, both problem solving and evaluation may be needed. Dell Computer’s Web site is an example of a site that has combined the benefits of both. By creating a Web site that allow for customization of individual com￾puters, they address the unique concerns of customers ‘‘one computer at a time.’’ But the site also features a strong evaluative compo￾nent because it allows users to compare the costs and features of various options. Shop￾pers can even compare their customized selection to refurbished Dell computers that are available at a substantially lower cost. Transaction Activities Transaction refers to the process of complet￾ing the sale, including negotiating and agree￾ing contractually, making payments, and taking delivery. Numerous types of Inter￾net-enabled activities have contributed to lowering this aspect of overall transaction costs. Managing costs, and even changing the cost structures of certain industries, is a key feature of the digital economy. Applica￾tions of Internet-based technologies have already had an enormous impact. Giga Infor￾mation Group, Inc. estimates that the cost savings from business use of e-commerce will reach $1.25 trillion by the mid-2000s. There are numerous examples of how the Internet is both lowering the cost of and speeding up the transaction process. Auc￾tions of various sorts, from raw materials used in manufacturing to collectibles sold on eBay, facilitate the process of arriving at mutually agreed-on prices. Services such as Paypal provide a third-party intermediary that facilitates transactions between parties who have never met. Amazon’s One-Click technology, which allows for very rapid pur￾chases, and Amazon’s overall superiority in managing order fulfillment has made its transactions process rapid and reliable. In fact, Amazon’s success today can be attrib￾uted to a large extent to the fact they have sold this transaction capability to other com￾panies such as Target Corp., Toys ‘‘R’’ Us Inc., and Borders Books & Music. These four factors are primary ways that organizations go about adding value. Exhibit 2 describes several examples of how Exhibit 2 Value Adding in the Auto Industry The auto industry jumped on the Internet bandwagon in a big way. One of the early successes was Autobytel, and many on-line auto sales Web sites quickly followed. The majority of them have now fizzled away. The big auto makers also made huge investments in the Internet. Ford was especially aggressive and Here’s how it works: Drug companies, called ‘‘Seekers,’’ put up ‘‘Wanted’’ posters describing problems that need addressing. Bounty-hunting scientists, labeled ‘‘Solvers,’’ sign confidentiality agreements that gain them admission to a secure project room where they can access data and product specifications related to the problem. If they solve the problem, they get a reward—around $25,000–$30,000 depending on the problem. According to InnoCentive president and chief executive officer (CEO) Darren J. Carroll, what Lilly has done is unusual for two reasons. First, by creating a global community of scientists, ‘‘We’re punching a hole in the side of the laboratory and exposing mission-critical problems to the outside world,’’ says Carroll, ‘‘It’s using the Net to communicate, collaborate, and innovate.’’ Second, it makes it possible for scientists to essentially become freelancers. According to Carroll, ‘‘Free agency has never been an option in the hard sciences—until now.’’ 164 ORGANIZATIONAL DYNAMICS