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Chp03 Patterns
 

Chp03 Patterns

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Chp03 Patterns Chp03 Patterns Presentation Transcript

  • Chapter Three Digitizing the Business: e-Business Patterns
  • Table of Contents e-Channel e-Portal e-Market Maker e-Business Patterns: The Structural Foundation Pure-E “Digital Products” Click-and-Brick
  • 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
  • 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
  • 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
  • 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?
  • 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
  • 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
  • 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.
  • Analyzing the Environment
    • 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?
    • 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?
    e-Business Models The strategic framework allows you to compete in the game e-Business Patterns The structural foundation sets the new rules of the game
    • 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?
    e-Business Designs A specific strategy for what you need to do in the marketplace
  • Focusing on the Whole Picture
    • 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
    Begins as a Channel, But Extends to Total Transformation of Business Pure E E-Portal (B2C) E-Market-Makers (B2B) e-Channel Click and Brick
  • e-Channel e-Portal e-Market Maker e-Business Patterns: The Structural Foundation Pure-E “Digital Products” Click-and-Brick Table of Contents
  • Transaction Enhancement e-Channel Compression e-Channel Expansion e-Channel Innovation e-Channel Table of Contents
  • 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 Electronic Transaction Manufacturer
  • 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
    Consumer Electronic Transaction with Disintermediation Manufacturer X
  • 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
  • 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!
  • Table of Contents e-Channel e-Portal e-Market Maker e-Business Patterns: The Structural Foundation Pure-E “Digital Products” Click-and-Brick
  • 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
  • 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
  • Webvan
    • Discuss with Ravi the purpose and nature of this case, now that Webvan is out of this business
  • 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)
  • Table of Contents e-Channel e-Portal e-Market Maker e-Business Patterns: The Structural Foundation Pure-E “Digital Products” Click-and-Brick
  • 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
  • Eyeball Aggregators Or Superportals Auction Portals Megatransaction Portals e-Portal Table of Contents
  • 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
    Search Engine Sticky Content (GeoCities Acquisition) Commerce Portal Communications Portal Media Network Content Portal
  • 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
  • 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
  • Table of Contents e-Channel e-Portal e-Market Maker e-Business Patterns: The Structural Foundation Pure-E “Digital Products” Click-and-Brick
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • E-Business Strategies, Inc. www.ebstrategy.com [email_address] 678-339-1236 x201 Fax - 678-339-9793