By ways to reduce time spent on common transactions is worth many a fortune, which helps to explain the high valuations of Internet stocks. These companies do not make anything, except that they make time. With the click of a mouse, people can travel around the world, communicate with friends and family, find information on practically anything, and shop almost instantly. Time to spend with those near and dear, contemplate nature, relax and recreate, perchance to dream, that is a discovery indeed.

Creating convenience

Economic transactions take time. No matter what is being purchased-clothing, food, entertainment, or gifts-the shopper usually needs to search for the best store. Visiting merchants takes even more time, to find out prices, product features, and what is in stock.

"Time is money" goes the old saying. The social contrivance of money saves time for everyone because it solves the problem of the double coincidence of wants. If we were to rely on barter, a person who desired apples and had only bananas to trade for them would have to find another person who desired bananas and had apples available to trade. Such a search would be time-consuming. By using money, people can buy and sell without looking for the perfect trading partner. But money and its modern equivalents, such as checks, credit cards, debit cards, and even electronic cash, do not solve high time costs of shopping for goods and services.

Going online dramatically cuts the costs of searching for merchants and service providers in ways that were never possible before. Consider the time costs of contacting several dozen insurance companies to find the policy that best suits your needs and budget. Companies that deliver products with the greatest convenience are those that will prosper in the New Economy. Whereas traditional merchants are open during so-called business hours, limited hours of operation will soon be an anachronism for many types of businesses. The online store stands ready to provide sales and service 24 hours a day, seven days a week. The Gap advertises that its online store is "always open." Banks once ran on what was called the 3-6-3 system: Borrow at 3 percent, lend at 6 percent, and make it to the golf course by 3 o'clock, giving rise to the expression "banker's hours." Electronic banking has changed that forever. Now Citibank tells us "the Citi never sleeps." This does not mean that people will stop sleeping, only that advanced computer and communications systems on the Internet can provide services to fit the many and varied needs of customers around the clock. The vast set of online directories and search engines significantly reduces the time costs of collecting information. Portals offer quick access to news, weather, business, and sports information, as well as directories.

Where do you want to go today?

Even in the Jet Age, people complain about travel times. While there will always be the need for human contact, many kinds of travel can be left to the virtual world that can be traversed in nanoseconds. Online stores can be visited instantly, no matter how distant in geographic space. Travel to museum Websites abroad or gather tourist information about other countries in just a couple of clicks. As the Internet becomes more international, the electronic traveler can go around the world at speeds defying science fiction.

Closer to home, cutting commuting time to and from work would greatly enhance productivity and improve the quality of life. Although the full promise of telecommuting has yet to be realized, the time savings appear to be substantial. According to a 1997 study by business consulting company Find/SVP, there were more than 11 million telecommuters in 1997, about three-quarters of them regular employees and the remainder contract employees. "Growth of email, voicemail, and the Internet, combined with a renewed emphasis on work results rather than workplace appearances, have encouraged managers to recognize that employees working part-time down the road are no more distant than employees working down the hall," according to Thomas E. Miller, Find/SVP vice president. The International Telework Association and Council has announced Telework America Day for Oct. 27, when millions of persons will work from home or a remote work center to illustrate the time savings and productivity gains. Telecommuting is a rapidly growing feature of work in the New Economy.

Whether at work, at home, or on the road, electronic communications promise substantial time savings. Email avoids the endless games of telephone tag that result when communications are out of sync. Email also saves the considerable time needed to prepare traditional paper-based correspondence. More advanced Internet and intranet communication using shared documents and other methods allow workers to contribute to a common document without time-consuming meetings. Just like videocassette recorders let people adjust television viewing to fit their schedules, shared documents give employees much greater flexibility in workplace scheduling, saving time at work. Companies such as Xerox advertise the time-saving benefits of document management.

These examples illustrate the tremendous returns to time saving in the New Economy. The rush is on to capitalize on the time frontier. Those businesses that offer the greatest convenience will reap huge rewards. The potential returns equal the value of the time saved.

Building electronic bridges

The successful companies in the New Economy are not simply providers of traditional goods and services. Outsourcing and electronically linked networks of manufacturers and distributors are rendering the vertically integrated manufacturer obsolete. As e-retailers and e-wholesalers replace some of the services provided by traditional alternatives, management strategies must change as well. Winning companies are those that create innovative transactions, connecting their suppliers and their customers in new ways. How can companies seize the day?

For customers, buying products and services has two costs: the price paid directly and the indirect time costs of finding the product, making the purchase, using the product, and obtaining related services. It's the total cost to the customer that counts, the purchase price plus the transaction cost. Companies that deliver the best total package of price and convenience will prosper.

Companies succeed by creating and operating their own markets. This means creating innovative institutions of exchange. Electronic commerce provides the technological means to create new institutions, but is not a substitute for creativity. Markets that employ new technologies will be organized differently, even though they inevitably share common features with more traditional markets.

Take eBay, for example, which bills itself as "the world's personal trading community." Sharing many features of the traditional swap meet, eBay is far more than an electronic flea market. In its three years of operation, more than 35 million items have been put up for sale, and more than 130 million bids have been received. With nearly 1 million items for sale at any one time, the site receives more than 600 million hits per month. There are 1 million registered users, each of whom can create a personal Web page for free.

What distinguishes eBay from the flea market is not its sheer scale, although that is certainly impressive. It is the fact that eBay is an online community. It brings buyers and sellers together not only to transact, but to interact with each other and share common interests. Visitors to chat rooms are urged to converse with other collectors about their favorite area, but "No business please!" Category-specific chat rooms are devoted to such areas as antiques, Beanie Babies, coins, computers, dolls, glass, jewelry, photo equipment, pottery, stamps, toys, and trading cards.

Focuses on convenience. The system is designed to allow buyers and sellers to search easily across categories and to participate in auctions with as little friction as possible. Within any category, such as computer hardware, auctions in any subcategory can easily be identified along with featured auctions. Online tutorials lead newbies through a simple four-step process: register, find stuff, bid, and sell. Users can customize the service, keeping track of bids made, offers received, and their account status. Buyers and sellers can connect to TradeSafe or i-Escrow to obtain escrow services. Because eBay does not certify the sellers or the quality of their products, it operates on the principle of caveat emptor-let the buyer beware-but offers online tutorials and extensive tips on safe transactions. After an auction is completed, the seller and the high bidder exchange email addresses and deal directly with each other.

Bringing buyers and sellers together is transparent in the case of eBay. But that is what most successful Internet companies are doing. Amazon.com, barnesandnoble.com, and Borders.com bring readers and publishers together. Ameritrade and E*Trade connect investors to markets for financial assets. By adding convenience, companies engaged in electronic commerce stand to earn returns from speeding up transactions.

Accelerating competition

Speeding up transactions to save time for customers and suppliers has an inevitable byproduct: the process of competition speeds up as well. Ease of searching the Internet means that competitors are only a mouse click away. Quick comparison shopping implies that companies cannot hope to attract and retain customers on the assumption that information about competing alternatives is limited.

Old strategic advice urging companies to erect entry barriers no longer applies-the moat around the castle is easily crossed. Companies have to continually move faster than competitors to attract customers. Services must be more readily accessible than those of competitors. Companies must provide immediacy; goods and services must be available when customers need them.

At the same time, ecommerce dramatically reduces costs of adjustment for companies. Menus of products and services and prices are easily altered online. This slashes "menu costs," which are the costs restaurants face every time they want to offer new dishes or change their prices. Price changes are more frequent and product cycles can be shortened. Markets for all sorts of goods and services begin to resemble markets for financial assets. Companies can respond quickly to changing traffic patterns on their Websites. Traditional retailers and catalog merchants have slower response times because of the costs of changing inventories and posting new prices. Because online merchants can easily change offerings and prices, the speed of competitive interaction changes accordingly.

As online competition speeds up, overall competitive strategies go through more rapid transformations as well. While companies undergo strategy makeovers from time to time, the cycle of change is much faster in electronic commerce.

Within the space of a few years, for example, Microsoft has shifted strategy a number of times: from a proprietary content service, Microsoft Network (MSN); to development of separate Internet services such as its CarPoint car-buying service and Expedia travel services; to creating a multimedia Website or portal known as MSN.com that doubles as the homepage for Microsoft's Internet Explorer. Moreover, Microsoft purchased Hotmail, adding free email services to its ecommerce offerings.

Competitors are not standing still. America Online bought Netscape Communications and made a deal with Sun Microsystems in November to co-develop start-to-finish ecommerce solutions and explore access technologies allowing users to "access America Online brands from anywhere, anytime.