1. Information Technology
CUBIC Program
Summer 2001
Professors Ken Kozar and
Ramiro Montealegre
Competing with
Information Technology

2. BACKGROUND - IT and Internet knowledge / experience
Expectations about this course

3. Electronic Commerce Information Systems
Ramiro Montealegre
Electronic Commerce
Effects of
e-business on
strategy and
competition
Managing in the
physical and
virtual worlds
Customer
interface for
e-business
Implementation
issues
Trends to watch
Building web
presence
Linking IS and
business strategy
Information Systems
Ken Kozar
Systems

4. on strategy and competition
CUBIC Program
Summer 2001
Professor Ramiro Montealegre
Effects of e-business
on strategy and competition

5. At least 210 Dot-com companies closed or filed for bankruptcy in 2000
Dot-com misery
At least 210 Dot-com companies closed or filed for bankruptcy in 2000
Company Date
Pets.com 11/07/2000
Living.com 08/15/2000
Data: The Standard.com; Webmergers.com

6. Dot-com layoffs Layoffs hit 40,660 during 1999-2001
Data: The Standard.com

7. Can they make it? The game of cash flow
Data: Business Week, Oct. 23, 2000, p EB 34

8. Business Environment IT Environment EC - Globalization - Competition
- Unique Competitive
position
- Market variability
- Scarce resources
- Restructuration of
industries
- Multiple evolving
technologies
- Technological availability
- Cost Reduction
- Improved functionality
- Digital convergence
- Past Infrastructure EC

9. Building Infrastructure on the Past
Internet/Commerce
(late 1990s)
Client-Server/Enterprise
(early 1990s)
PCs/End-Users LANs/Departmental
(early 1980s) (late 1980s)
Mainframe/BackOffice
(1970s)

10. you’re not paying attention!
If you’re not confused,
you’re not paying attention!

11. History of the Internet
1956
- USSR launches Sputnik (Earth satellite)
- US forms Advance Research Project Agency
1969
- ARPANET commissioned by DOD for research in networking
1971
- 15 nodes (23 hosts) UCLA, SRI, UCSB, U of Utah, BBN, MIT, SDC RAND, Harvard, Lincoln Lab, Stanford, UIU, CWRU, CMU, NASA
1973
- First international connections for ARPANET: England & Norway.
- Bob Metcalfe's Ph.D. dissertation at Harvard: Ethernet
1977
- Electronic Mail to over 100 researchers
1981
- BITNET: electronic mail & listserv servers
1982
- Transmission Control Protocol (TCP) and Internet Protocol (IP) established.

12. History of the Internet (continuation)
1983
- ARPANET split into ARPANET and MILNET.
- Berkeley Unix + TCP/IP for desktop stations. Hosts: 1,000
1986
- NSFNET created (backbone 56 Kbps)
1987
- NSF agreed to manage the backbone with Merit, IBM and MCI
- No. of hosts breaks 10,000
1989
- NSFNET upgraded to Mbps
- Creation of pan-European IP network. Hosts: 100,000
- Tim Berners-Lee paper “Hyper Text and CERN”
1990
- ARPANET ceases to exist
- Initial World-Wide-Web program on NeXT
1991
- Gopher released by University of Minnesota
- WAIS released by Thinking Machines Corporation

13. History of the Internet (continuation)
1992
- NSFNET upgraded to Mbps
- NSF relaxes the “Acceptable Use Policy”. Hosts: 1 million
1993
- White House, United Nations and World Bank come On-Line
- Business and media take notice of the Internet
- MOSAIC is released in Illinois (Mark Andreessen at NCSA)
- Annual growth of traffic was 341,634%
1994
- US Senate and House provide information servers
- Shopping malls arrived on the Internet
- Mass marketing find its way to the Internet
- Andreessen & colleagues form Mosaic Communications Corp. (now Netscape)
1995
- The Web main theme at the European Parliament
- Sun Microsystems launched JAVA

17. Bandwidth Type of Circuit Speed/KBPS Time/Meg. Telephone 14.4 9.3 min
ISDN min
DirectPC min
T , sec
Cable TV Modem , sec
ASDL 6, sec
Adv. Cable TV Mod. 40, sec
T , sec
Optical fiber 80, sec

20. Growth of Internet Users
U.S. Online Population Forecast by Researcher
200
150
100 50
CommerceNet/Nielsen
Cyber Dialogue (Aggressive)
Cyber Dialogue (Conservative)
International Data Corp.
Jupiter/NFO
Population
(Millions)

21. Why the Optimism? - Continuing rapid growth of the Web
- Business are rapidly deploying intranets/extranets
and moving toward browsers as universal frontends

22. What is e-Business Technology-mediated exchanges between parties
(individuals, organizations, or both) as well as the
electronically based intra- or interoganizational
activities that facilitate such exchanges.
Rayport and Jaworski, 2000

23. How is e-Business Different from Traditional Commerce
- Core strategic decisions are technology-based
- A real-time competitive responsiveness
- The store is always open
- A technology-based customer interface
- The customer controls the interaction
- knowledge of customer behavior
- Network economics

24. Other Interesting References
Internet Online Atlas:
History of the Internet:

25. Lessons from Dot-coms (Fortune 10/30/2000)
- Internet isn’t as “disruptive” as we thought
- If it doesn’t make cents, it doesn’t make sense
- Time favors incumbents
- Making a market is harder that it looks
- There is no such thing as “Internet time”
- “Branding” is not a strategy
- Investors are not your customers
- The Internet still changes everything
- Entrepreneurship cannot be systematized
- The Internet changes your job
- Distinction between Internet/non-Internet firms fading
- The real wealth of creation is yet to come

26. e-Business - It is a strategy, not an application, technology,
or suite of products
- It is not a grassroots initiative
- It includes B2B and B2C
- No one vendor provides all needed applications

27. Key elements for success
- Lasting relationship with customers
- Owning the customer-base
- Cross-selling opportunities / multiple sources of revenue
- Strong branding
- Large number of offerings to reach/capture consumers
- Superior virtual customer service
- A value proposition that is better and more enticing than
the off-line world (not just an additional distribution arm).

28. A great e-Business strategy includes:
- Realign / reinvent business processes
- Use the full range of technology
- Sell the company as well your wares
- Use technology to maximize customer contacts
- Put current application to strategic use

29. What if YOU are in charge of a new e-Business initiative
- Which customer groups should I serve?
- How do I provide a compelling “value proposition”
- How do I communicate with customers?
- What is the content, “look-and-feel,” community,
and degree of personalization?
- How should I structure my organization?
- What are my potential partners?
- How will this business provide value to shareholders
- What metrics should I use to judge progress?

30. Managing in the physical
CUBIC Program
Summer 2001
Professor Ramiro Montealegre
Managing in the physical
and virtual worlds

31. Five Forces Determine Industry Profitability
New Entrants
Threat of
New Entrants
Industry
Competitors
Rivalry Among
Existing Firms
Bargaining Power
of Suppliers
Suppliers
Buyers
Bargaining Power
of Buyers
Threat of
Substitute Products
or Services
Substitutes

32. The Value Chain Firm Infrastructure M Human Resources Management A R
Technology Development
Procurement M A R G I N N I G R A M
Marketing
and
Sales
Inbound
Logistics
Outbound
Logistics
Operations
Service

33. Internet Value Chain: Customer Relations
Capability
Benefits to
Company
Opportunities
for
Advantage
Marketing and Sales and Support and
Product Research Distribution Customer Feedback
Data for market Research new Access to customer
research customers comments on-line
Establishes Low cost More staff in contact
consumer response distribution with the customer
to new products method
Environmental Multiple contact Immediate response
Scanning points at no to customer problems
incremental cost
Incremental market Lower cost Enhanced customer
share margins satisfaction
Source: Cronin 1994

34. The Customer Continuum
CUSTOMER NEEDS INTERNET RESOURCES
company material home page
new products, announcements MARKETING gopher server
specific information newsgroups
direct
product description commercial platforms
ordering options SALES privacy enhancements
remittance on-line electronic catalogs
individual problem resolution help desk
changes & updates SUPPORT fixes & updates
general product support user discussion groups
Source: Cronin 1994

35. LOW TOUCH PRODUCTS WINS US online transactions in 2000, ($bn)
Computer h/s
Travel
Financial brokerages
Collectibles
Music/video
Books
Clothes/sporting
Flowers/cards/gifts
Department store
Event tickets
Consumer electronics
Automotive
Home/garden
Toys
Food/wine
Source: Boston Consulting Group

36. Internet Value Chain: Inputs from Suppliers
Capability
Benefits to
Company
Opportunities
for
Advantage
Pricing and Delivery/Order/Tracking Product
Ordering On-line Inventory Support
Easy, efficient Faster turnaround Direct access to
access expertise
Information Improved Interactive
constantly updated planning
Not locked in to Less inventory Faster problem
proprietary system stockpiled resolution
Lower cost of Faster, more flexible Improved reliability
obtaining materials delivery and performance
Source: Cronin 1994

37. Internet Value Chain: Internal Operations
Capability
Benefits to
Company
Opportunities
for
Advantage
Global R&D/ Collaboration Location-independent
connectivity sharing/distributed resources Work
Savings in Facilitates business Flexible work
telecommunications partnerships and arrangements
joint ventures
Improves connec Shortens develop Telecommuting and
tions to business ment time contract employees
partners/customers
Promotes global Disseminates Virtually teams based
awareness resources more on expertise, not
broadly location
International Flexibility & effectiveness Increased
reach in information-based activities productivity
Source: Cronin 1994

38. Building the Virtual Value Chain
Inbound Production Outbound Marketing Sales
Physical Value Chain
Virtual Value Chain

39. Exploiting the Virtual Value Chain
Inbound Production Outbound Marketing Sales
Physical Value Chain
Virtual Value Chain
Inbound Production Outbound Marketing Sales

40. Value Matrix: Building Relationships
Physical Value Chain
Gather
Organize
Select
Synthesize
Distribute
Virtual Value Chain
New Markets
New Markets
New Markets

41. Implications for Managers
The Law of Digital Assets
New Economies of Scale
New Economies of Scope
Transaction-Cost Compression
Rebalancing Supply and Demand

42. Generic “Value Types” Trapped Value - More efficient markets
- More efficient value
systems
- Ease of Access
- Disrupt pricing power
New-to-the World Value
- Customize offerings
- Extend reach and access
- Build community
- Collaboration of multiple
people across locations/time
- New functionality/experience

43. B2B E-Commerce Projections
1,200
1,000
800
600
400
200
$ Billions
1999
2003
U.S.
World
Source: IDC

44. interface for e-business
CUBIC Program
Summer 2001
Professor Ramiro Montealegre
The customer
interface for e-business

45. The 7Cs of the Customer Interface
Context
Site’s layout and design
Content
Text, pictures, sound and video that web pages contain
Commerce
Site’s capabilities to enable commercial transactions
Community
The ways sites enable user-to-user communication
Connection
Degree site is linked to other sites
Customization
Site’s ability to self-tailor to different users or to allow users to personalize the site
Communication
The ways sites enable site-to-user communication or two-way communication

46. Fit and Reinforcement of Cs
Business Model
Individually Supporting Fit
Context
Content
Community
Customization
Communication
Connection
Commerce
Consistent Reinforcement

47. Performance of Lands’ End Site

48. Form vs. Function: The Design Context Frontier
Integrated
High
Aesthetically Dominant
AESTHETIC/
FORM
Frontier is gradually moving outward as technology advances
Low
Functionally- Dominant
Low
High
FUNCTION

49. Aesthetic Example — KMGI.com

50. Functional Dominant — Brint.com

51. Integrated Approach Example — Patagonia.com

52. A Framework to Understand Offering-Dominating Archetypes
Multiple
Superstore
NUMBER OF PRODUCT CATEGORIES
Specialty Store
Category Killer
Single
Narrow
Broad
DEPTH OF PRODUCT LINE

53. Superstore Example — Amazon.com

54. Category Killer Example — Petsmart.com

55. Specialty Store Example — Frontgate.com

56. Information Dominant — Business 2.0 (www.business2.com)

57. Market Dominant Example — PlasticsNet.com

58. Form vs. Function

59. Content Archetypes vs Offering Types

60. Is Content King?

61. Communities: Elements, Types, and Benefits
Elements of
Community
Types of
Communities
Member Outcomes:
Participation and Benefits
Just Friends
Degree of
Participation
Cohesion
Effectiveness
Help
Relationships
Language
Self-regulation
Enthusiasts
Need Fulfillment
Inclusion
Mutual Influence
Shared Emotional
Experiences
Friends in
Need
Players
Traders

62. Implementation Issues
CUBIC Program
Summer 2001
Professor Ramiro Montealegre
Implementation Issues

63. Why Does Implementation Matter?
Strategy
Appropriate
Inappropriate
Success
All that can be done to ensure success has been done
Roulette
Good execution can mitigate poor strategy, forcing management to success or
Same good execution can hasten failure
Good
Implementation
Trouble
Poor execution hampers good strategy -- management may never become aware of strategic soundness because of execution inadequacies
Failure
Difficult to diagnose -- bad strategy masked by poor execution
More difficult to fix -- two things are wrong
Poor
Source: Modified version of materials in Thomas V. Bonoma, The Marketing Edge, The Free Press, 1985

64. The Delivery System Needs to Support and Reinforce the Resource System
Mapping the Resource System
People
Supply
Chains
Processes
Systems
Assets
Source: Clayton M. Christensen, Meeting the Challenge of Disruptive Change, Harvard Business Review 78, no. 2, March-April 2000

65. Two Integral Components of Implementation
Objectives
Deliver the promised customer experience
Turn strategic intent/concepts into results
Build the
infrastructure to deliver on the brand promise
Objectives
Maintain fit between marketspace evolution and the company’s delivery system and product offering
Innovate/Renew the customer experience
Source: Monitor Analysis

66. Innovation is the mainspring of the new economy.
Ideas are critical…
Innovation is the mainspring of the
new economy.
But as more and more companies compete in
ideas, the game changes to competing in the
implementation of the ideas.
In this next stage of competition:
Getting an idea gives way to getting it done!

67. Where to Play: Online / Offline
McDonnald’s
Customer
Interface
Fulfillment
Systems
Yahoo!
Bn.com
Egghead
Amazon.com
Source: Rayport & Jaworski 2000

68. Stages of Entrepreneurial Evolution
Phase Phase Phase Phase 4
Bureaucracy
Complex
Complexity
Simple
Coordination
Achieving
liquidity
Control
Growing the
business
Expertise
Launching the
product/service
Building the
business concept
Young Organizational Age Mature

69. Competitive Positioning ECONOMIC POSITIONING
What business are we in?
Product/Service
Market What is our position?
Competition
Value Are we creating value for
all stakeholders
ECONOMIC POSITIONING
How will we make money?
Revenue model Cost of designing, developing
Cost model delivering, and maintaining
Asset Model each product/service?
Are we building and
safeguarding assets?
Business Performance
Operating margins
Operating Performance Budget performance
Process performance
Goals accomplishment
Corporate Performance Financial performance
Market share
Attract qualified employees,
Stakeholder loyalty partners, and investors
Image, and reputation
Enterprise Design
Structure Is the extended enterprise
Processes designed for:
People & Culture efficiency in decision making/action
Technology successful execution of strategy
Resources quick response to change

70. The Virtual Value Chains t o m e r
Content
Place
Space
Context
Infrastructure
Value Chain
Interface
Demand

71. Economic Positioning Revenue Model
How does (or will) the company achieve revenues from its products and services?
Product sales Advertising Subscription fee
Membership fee Commission Transaction fee
Service/consulting fee
Cost Model
How much does it cost to operate the company and execute its strategy?
People Advertising/Marketing/Sales Fees
IT infrastructure Materials and supplies Physical infrastructure
Asset Model
Are we building and safeguarding assets?
Financial assets
Physical assets
Intangible assets: Relationships Knowledge and expertise
Agility Strength of brand

72. Lessons from HelloAsia.com (Fast Company, June 2000)
- Don’t move until you know where you’re going
- Strategize globally, but plan locally
- Don’t make a move until all your people know
their places
- Write it down
- The best-laid plans need to change

73. CUBIC Program
Summer 2001
Professor Ramiro Montealegre
THANK YOU!!!

74. Change Without Pain HBR, July 2000
- Reward Shameless Borrowing
- Appoint a Chief Memory Officer
- Tinker and Kludge Internally First
- Hire Generalists

75. Marketspace Evolution and Need for Continuous Innovation
Brand Promise
Branding
Marketing communications
Customer interface
Implementation
Objectives
Achieve strategic goals
Adjust product offering and delivery system to rapidly changing marketspace environment
Delivery
System
Innovation
Process
Deliver on the promised experience
Renew/innovate the
customer experience
Source: Monitor Analysis

76. Challenges of Online Implementation
Essential Challenges of Online Implementation
Customer-Driven
Organization-Driven
Lower switching barriers = increased importance of good implementation
More complex linkages = increased complexity of implementation
More visibility of errors = stronger competitive implications of errors
More fluid organizational boundaries = increased complexity of implementation
More dynamic market environment = increased complexity of implementation
Organization-Driven
Customer-Driven

77. From Built to Last to Built to Rebuild
Sources: Frederick P. Brooks, Built to Last, Harper Business
Smart Way to Start, 10 Principles of the New Economy, Business 2.0, March, 2000

78. Four Types of Supply Chains Found in Marketspace
B2C (Business-to-Consumer)
B2B (Business-to-Business)
Stock-It-Yourself
Outsource Warehousing
Drop Ship
Fulfillment Intermediaries
Customer-Centric
Vertical Hubs
C2C (Consumer-to-Consumer)
C2B (Consumer-to-Business)
Much like a vertical hub, many sites (e.g., eBay) have created customer-to-customer sales
Provides a forum for buyers and sellers to meet
Buyers and sellers trade directly (eliminating an intermediary)
A global marketplace with a large and interested trading company
C2B companies include auction services like Priceline.com. Individual consumers place bids with businesses and businesses decide whether to sell.
Also includes consumer group buying companies like Mercata.com. Mercata.com is a trading community where the more people that purchase a product, the lower the price is. Mercata allows consumers from around the world to achieve group scale economies.