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Digitizing the Business: e-Business Patterns

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1 Digitizing the Business: e-Business Patterns
Chapter Three Digitizing the Business: e-Business Patterns The E-Business material shall at all times remain the property of E-Business Strategies, Inc. No license under any trade secrets, copyrights, or other rights is granted by this Agreement or any disclosure of Confidential Information hereunder. Any such permitted copies will be considered Confidential Information. Confidential Information of E-Business Strategies, Inc. may not be copied or reproduced by the Recipient without E-Business Strategies, Inc. prior written consent.

2 The Structural Foundation Pure-E “Digital Products”
Table of Contents e-Business Patterns: The Structural Foundation e-Channel Click-and-Brick e-Portal e-Market Maker Pure-E “Digital Products”

3 e-Business Patterns: Structural Foundation
In dynamic market environment, manager’s challenge is how to tell forest from trees Are we investing in the right business opportunity? Are these opportunities ever going to be useful? Are we using the right business model to attack these opportunities? The Scoop: New, Web-enabled firms eating into large, old-economy companies’ businesses So: Managers of old-economy companies need right support tools to make strategic moves, allocate scarce resources, and manage risk

4 e-Business Patterns: Structural Foundation
But: Choosing target strategy complex To move online, large brick-and-mortar corporations either swallow a startup or go at it alone. Which is the right approach? Implication: With focus shifting from physical to digital assets, managers must monitor macroeconomic and customer trends To trigger new e-business structural designs Resulting new business models form the basis for next gen corporate strategic planning Sadly: Many companies still not taking the digital world seriously

5 e-Business Patterns: Structural Foundation
Bottom line: We are still in early stages of the e- Business revolution There have been and will be moments of extreme optimism; also moments of extreme pessimism What is certain is that it is creating opportunities for companies willing to adapt For others, it represents a destabilizing threat to the status quo of business-as-usual When all is said and done, we’ll find big corporate winners join ranks of premiere companies in the world Aim of this chapter Help identify winners Discuss characteristics leading to their success Analyze discernible patterns for better understanding

6 Going Digital First step in identifying an e-business leader
Look at companies asking the innovative questions that are transforming the rules of today’s business game When innovative companies change the types of strategic questions that they ask themselves, the result is business revolution In 1970s, the Japanese posed new questions and changed rules of the Auto industry Not gas-guzzlers, how do we create fuel-efficient cars? Not cars that break down, how can we create a high-quality car with few manufacturing defects? Not piles of “just-in-case” inventory, how can we create a “just-in-time” inventory process?

7 Going Digital In mid 1980s, it was Wal-Mart
Not what business are we in, what business should we be in? Wal-Mart turned from retailer into supply chain expert Offered right product mix at right store In mid 1990s, it was new entrants who rose to challenge almost every leading company Questions about customer and business model, not processes, thus challenging sentiment of early 1990s among leading companies AOL vs. CompuServe and Prodigy Dell vs. Compaq and IBM EMC vs. IBM and StorageTek Sun Microsystems vs. HP and Silicon Graphics

8 Going Digital In the 2000s, the questions for today’s business leader will be on the speed with which his/her firm implements e-business solutions powered by recent innovations How fully digital can we make our customers’ experience? Our supply chain? Our internal operations and processes? Intuit transformed from a stand-alone PC-based business model into an online financial services portal when the Internet emerged to threaten it’s business

9 Going Digital Startups continue to shape the direction of today’s business by taking advantage of recent technological innovations E-Business can change the way companies interact with customers, communicates, sells, purchases, manufactures, and develops products Asking a new question not only produces new answers but also reinvents the game Result: a cost advantage that’s not 10 percent better than competitor’s but rather many fold.

10 Analyzing the Environment
e-Business Patterns The structural foundation sets the new rules of the game What is the new opportunity based on certain customer and market trends? What are the macro-economic drivers of the business change? Which digital technologies are going to dominant your industry? What models are better suited to take advantage of new business opportunities? What business processes need to change? How do you move from existing model to an e-model reflecting your firm’s organizational readiness? What are the challenges management must face when executing the new business model? e-Business Models The strategic framework allows you to compete in the game e-Business Designs A specific strategy for what you need to do in the marketplace Who are your target customers? What is your value proposition? How do you make money? How to finance the company? How do you get and retain customers? How to attract and retain talented people?

11 Focusing on the Whole Picture
Begins as a Channel, But Extends to Total Transformation of Business E-Portal (B2C) e-Channel Pure E E-Market-Makers (B2B) Click and Brick Basic efficiency, effectiveness enhancements as the selling becomes E-enabled Selling goods/services Payment/settlement enhancements Traditional business transferred to the Net Rise of new intermediaries New forms of supply chain integration Consolidation/ transformation of intermediary industry Customer Expects “E” everywhere Fundamental re-design of business New structures to allow market making, trading and virtual warehousing

12 The Structural Foundation Pure-E “Digital Products”
Table of Contents e-Business Patterns: The Structural Foundation e-Channel Click-and-Brick e-Portal e-Market Maker Pure-E “Digital Products”

13 Table of Contents e-Channel Transaction Enhancement e-Channel
Compression e-Channel e-Channel Expansion e-Channel Innovation

14 Transaction Enhancement
Augments or replaces the old transaction method Home Depot In most cases, does not alter other aspects of the process Sometimes, more technically savvy companies may gain business from other firms, thereby altering the identify of players in the channel Dell Gap Consumer Manufacturer Electronic Transaction

15 E-Channel Compression
Eliminates redundant steps in the channel When value added by channel is less than cost of the channel Cisco partner/reseller “always on” e-channels Southwest eliminated the ticketing agent “link” by moving information sharing and transaction processing online Online stock trading Amazon.com X Consumer Manufacturer Electronic Transaction with Disintermediation

16 Electronic Transaction, Metamediation
E-Channel Expansion Lengthens the legacy channel Counterintuitive? Inefficiencies in the marketplace can make this approach a necessity Infomediaries Carpoint in automotive market Intuit in financial services Vstore.com Consumer Manufacturer Electronic Transaction, Metamediation

17 E-Channel Innovation Pioneering new channels to satisfy and to anticipate unmet and potential customer desires E-Stamp Given the high stakes, companies everywhere want to make it easier and more enjoyable for customers to do business with them In every industry, customer base is fragmented into multiple segments, each with its own behavior and needs Diversity of customer tastes and needs has led to a revolution in where, when and how customers buy the products and services they seek Winner will take all!

18 The Structural Foundation Pure-E “Digital Products”
Table of Contents e-Business Patterns: The Structural Foundation e-Channel Click-and-Brick e-Portal e-Market Maker Pure-E “Digital Products”

19 The Click-and-Brick Pattern
Brick and mortar + Click and order = Click and Brick The C&B pattern allows an existing offline business to profit from partnering with an emerging online presence. Charles Schwab Established retailers are creating new C&B patterns. Land’s End A new variation in C&B strategy Amazon.com and Toys “R” Us Brick & Mortar Localized inventory In-store shopping experience Immediacy (try, buy, take home) Service (returns, repairs, exchanges) Click Infomediation Speed Direct, one-to-one experience Personalized content Automation (assistants, alerts) Click & Brick

20 Why the Click-and-Brick Pattern
Physical stores offer convenience and personal service Order online but return at store for an exchange Established retailer’s clout should procure higher-quality merchandise for its Web sites than a start up Exceptions: commodity items, ex. books Efficient branding of Web sites through store fronts Established retailers’ storefronts are living, 3-D billboards Traditional retailers have serious cost advantages Spend half as much to acquire each new customer as do Web-only retailers

21 Webvan Discuss with Ravi the purpose and nature of this case, now that Webvan is out of this business

22 Management Challenges
Lack of merchandise selection on site Lack of communication and mgmt collaboration between the Web site and store staffs and separate channels for fulfilling orders and resolving customer and process problems Hiring second-tier talent to staff the Web sites Continuing to invest millions of dollars on Web commerce initiatives w/o generating a positive ROI (return on investment)

23 The Structural Foundation Pure-E “Digital Products”
Table of Contents e-Business Patterns: The Structural Foundation e-Channel Click-and-Brick e-Portal e-Market Maker Pure-E “Digital Products”

24 The e-Portal Pattern Portals are “Killer” apps of e-business
An intermediary or middleman offering an aggregated set of services for a specific well-defined group of users Yahoo! Organizes collections of news, search and communication services for consumers E-Bay, E-Loan, and E*Trade for business activities related to auctioning, loan financing, and stock trading, respectively Portals occur when new players succeed in positioning themselves between customers and suppliers Customer focused, enter chain to address specific customer dissatisfaction with current way of doing business Either add value-added services to market channel or decrease transaction costs of customer/supplier relationship

25 Table of Contents e-Portal Eyeball Aggregators Or Superportals
Auction Portals e-Portal Megatransaction Portals

26 Eyeball Aggregators or Superportals
Attract and direct consumer traffic with free content and service offerings Deliver customers to retailers for a fee (advertisement based or % of transaction) Retailers leery of superportals Disintermediation, especially of repeat buyers Yet the mass buying power of superportals considerable Forcing online retailers to bid for a superportal’s business Media Network Commerce Portal Communications Portal Sticky Content (GeoCities Acquisition) Content Portal Search Engine

27 Auction Portals Enable buyers and sellers to engage in transactions across geographic and demographic boundaries More than just marketplaces Unique community of collectors and hobbyists Similarity with traditional auctions Highest bidder wins What is different Online auction does not have the physical merchandise eBay

28 Megatransaction Portals
Category killers Lock up portal real estate and create a critical mass of customers Travelocity in online travel and Hoovers for financial news Online travel services portals Killing traditional agencies Reduced agent commissions; Consumers’ acceptance of paperless transactions; Ease of use of completing online transactions Expect to see consolidation and integration in online travel Expedia offers airline tickets, hotel rooms, air/hotel packages Travel services portals to consolidate along two segments Full-service and off-price discount Keys to success Automation of the look-to-book process Channel synchronization

29 The Structural Foundation Pure-E “Digital Products”
Table of Contents e-Business Patterns: The Structural Foundation e-Channel Click-and-Brick e-Portal e-Market Maker Pure-E “Digital Products”

30 The e-Market Maker Pattern
Online intermediary, connects disparate buyers and sellers within a common vertical industry Eliminates channel inefficiencies; aggregates offerings from many sellers or matches buyers and sellers Buyers: lower purchasing costs; reach new suppliers Suppliers: lower sales cost; reach new customers Revenue models: % of transaction, subscription, mark-up

31 The e-Market Maker Pattern
Major role for e-Market makers in industries with these characteristics: Large market size Fragmented supply chain Unrecognized vendor or product differentiation High information-search costs High product-comparison costs High workflow costs

32 The Pure E-Digital Products Pattern
New innovations in s/w, h/w and communications placing digital content at center of business software, music, video, news digital goods produced, delivered, consumed and licensed electronically delivery of digital goods already changing; delivery as a service Growth of digital products due to proliferation of Internet devices cheap and abundant availability of bandwidth inexpensive PCs, more free PC programs industry standardization of APIs XML permitting interface between data and speech and other systems

33 The Pure E-Digital Products Pattern
3 types of entrepreneurial activity characterize digital-goods market high-quality end user technologies, services and products s/w and h/w platforms distribution infrastructure

34 High-Quality, High Speed Content to Consumers: Digital Music
Internet altered how music will be distributed “Collapse of the middle” pattern Artists bypassing major labels to reach audience directly Business as usual will soon mean no business at all for many of the industry’s middlemen New companies and peer-to-peer technologies emerging to meet needs of the digital music download business: MP3.com, Napster, Gnutella, Pointera

35 New Platforms for Digital-Media Delivery
Market for delivery of Internet services through handheld devices new and evolving rapidly PDAs and mobile phones WAP standard emerging for delivery of Internet- based services to mass-market wireless phones WML for Internet apps and content for wireless phones Next gen mobile delivery systems include voice browsers and speech-recognition systems TellMe and HearMe

36 New Infrastructure Services for Digital Content Delivery
New infrastructure services required to support faster content distribution Content delivery or congestion mgmt services Digital Island and Akamai Techologies Caching services Inktomi and CacheFlow Outsourcing services Exodus or Level 3 Supported by different business models Content delivery vendors paid by Web site owners but

37 E-Business Strategies, Inc.
x201 Fax The E-Business material shall at all times remain the property of E-Business Strategies, Inc. No license under any trade secrets, copyrights, or other rights is granted by this Agreement or any disclosure of Confidential Information hereunder. Any such permitted copies will be considered Confidential Information. Confidential Information of E-Business Strategies, Inc. may not be copied or reproduced by the Recipient without E-Business Strategies, Inc. prior written consent. The E-Business material may not be re-sold. It is intended to be used solely for the purpose of accompaniment of the E-Business 2.0 Roadmap for Success book in an instructional manner.


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