Most large organizations are in the throes of embracing the Internet as a core element of business strategy. At the same time, hundreds of Internet start-up companies are attracting attention for their innovative business approaches. Once the stock market favourites, many of these dot.com firms have fallen out of favour with investors. Some have already ceased trading and many more are expected to do so. Which of the many hopefuls have the right capabilities and business models to succeed over the long haul? What impacts will developments in the Internet and e-business have on every organization? How should knowledge-based businesses exploit the opportunities that are emerging in this fast-changing environment? These are the themes examined in this chapter.

First, the evolution of e-business is analysed, from its origins in private virtual networks to its ubiquitous and open nature on the Internet today. The advantages of e-business are then assessed, with special consideration given to those for a knowledge business. Next, a five-layer model of the Internet is introduced. This is used as a basis for analysing trends and likely future developments. Innovation is occurring in all layers, and especially the enabling and application layers that deliver services to end-users. For knowledge-based products and services, these innovations have far reaching effects, many of...