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AGENDA 8:00- 9:10 e -business: Introduction and key concepts 9:10- 9:25 Break

AGENDA 8:00- 9:10 e -business: Introduction and key concepts 9:10- 9:25 Break 9:25-10:35 e -business frameworks 10:35-10:50 Break 10:50-12:00 Resources to support e -business teaching (and learning). Dynamic Classroom Spring 2001.

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AGENDA 8:00- 9:10 e -business: Introduction and key concepts 9:10- 9:25 Break

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  1. AGENDA 8:00- 9:10 e-business: Introduction and key concepts 9:10- 9:25 Break 9:25-10:35 e-business frameworks 10:35-10:50 Break 10:50-12:00 Resources to support e-business teaching (and learning)

  2. Dynamic Classroom Spring 2001 Teaching e-business in Entrepreneurship Classes Ramiro Montealegre University of Colorado

  3. Business Environment IT Environment - 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 Role of IS

  4. Pressures Changing Management Practice - Globalization - Increased emphasis on quality - Increased emphasis on customer satisfaction - Shorter time cycles - More volatile markets - Fast and unpredictable technological innovations - Multiple-company careers - Increased work-force diversity - Changing capital markets - Regulatory/government policy

  5. 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)

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

  7. 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.

  8. 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 1.544 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

  9. History of the Internet (continuation) • 1992 - NSFNET upgraded to 44.736 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

  10. Bandwidth Type of Circuit Speed/KBPS Time/Meg. Telephone 14.4 9.3 min Telephone 28.8 4.6 min ISDN 128 1 min DirectPC 128 1 min T1 1,440 5.5 sec Cable TV Modem 4,000 2.0 sec ASDL 6,000 1.5 sec Adv. Cable TV Mod. 40,000 0.2 sec T3 45,000 0.2 sec Optical fiber 80,000 0.1 sec

  11. 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) 1999 2000 20001 20002 2003

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

  13. 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

  14. “To manage a business well is to manage its future; and to manage the future is to manage information” Marion Harper

  15. The History ofEncyclopedia Britannica - Founded in Scotland in 1768, but the world’s most prestigious and comprehensive encyclopedia since 1941. - Its content was revised every 4/5 years. - 1990 an all-time peak of about $650 million. With generous margins, and a compelling and stable brand. - CD-ROM came from nowhere, and then the Internet, sales decreased over 80%. - Since 1995, investment bankers tried to find a buyer. In 1996, Jacob Safra paid less than half of the firm’s book value.

  16. Dilemma of Institutions Going Online They have been penalized for not doing enough fast enough, as well as for doing too much too quickly.

  17. The Challenge - The value chain is being deconstructed - No longer functions but new businesses - Evolve beyond its physically defined origins - Break down the current business into components. - Compete against the old, buy from/ally with competitors. - The organization, incentive, and operating style will change. - Existing competencies, procedures and power structures stand in the way.

  18. 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

  19. 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

  20. 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?

  21. e-Business Is a technology-enabled business strategy whereby companies leverage increased customer knowledge to build profitable relationships, based on optimizing value delivered to and realized from their customers.

  22. 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

  23. 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).

  24. 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

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

  26. Framework for Market Opportunity Seed Opportunity in Existing/New Value Systems Uncover Opportunity Nucleus Identify Target Segment(s) Resource-Based Opportunity for Advantage Assess Opportunity Attractiveness Make “Go/No Go” Assessment Source: Rayport & Jaworski, 2000

  27. Internet Value Chain: Customer Relations Internet 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

  28. The Customer Continuum CUSTOMER NEEDS INTERNET RESOURCES company material home page new products, announcements MARKETING gopher server specific information newsgroups direct e-mail 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

  29. LOW TOUCH PRODUCTS WINS US online transactions in 2000, ($bn) 0 2 4 6 8 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

  30. Internet Value Chain: Inputs from Suppliers Internet 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

  31. B2B E-Commerce Projections 1,200 1,000 800 600 400 200 0 $ Billions 1999 2003 U.S. World Source: IDC

  32. Sawhney and Kaplan — B2B Models Paper Logistics Management Chemicals Media Buying Plastics Advertising Steel Energy Management Vertical Hubs Functional Hubs Source: Adopted from Business 2.0, September 1999, page 88

  33. Internet Value Chain: Internal Operations Internet 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

  34. Options for Evolving an E-Business Extend Launch a new business or add a new model Enhance Add functionality or improve product /service that is currently offered Extend Enhance Expand Expand Add products/services in existing line or enter a new market Exit Exit Drop a product/service or exit a business

  35. Alternative Views of Strategy Past DecadeToday - One ideal competitive position - Unique competitive position - Benchmarking and achieving best - Activities tailored to strategy practices - Aggressive outsourcing and - Clear trade-offs partnering - Advantages rest on a few key - Advantage arrives from fit across success factors, resources, competencies activities - Flexibility and rapid responses - Operational effectiveness a given

  36. Other Interesting References Internet Online Atlas: http://www.cybergeography.org/atlas/atlas.html History of the Internet: http://www.isoc.org/guest/zakon/Internet/

  37. e-Business Frameworks

  38. 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

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

  40. How Value is Created Customer Customer EXCHANGE EXCHANGE Content Context Infrastructure Content Context Infrastructure Brand Brand Marketplace Marketspace

  41. The Virtual Value Chain C u s t o m e r Content Place Space Context Infrastructure Value Chain Interface Demand

  42. Competitive 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

  43. 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

  44. Stages of Entrepreneurial Evolution Phase 1 Phase 2 Phase 3 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

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