e-Business
Discussion with UW Students
Agenda (from Abstract)
e-Business vs e-Commerce vs Internet What makes e-Business different from business? The rise and fall of the dot.com economy Successful models for e-Business The drivers of benefit for e-Business applications The value of Brand with e-Businesses The potential for e-Business in Insurance and high
quality on-line Financial Advice
E-Business:E-Business:
Improving businessImproving businessperformance through low cost and performance through low cost and open connectivity:open connectivity:
• New technologies in the value chainNew technologies in the value chain• Connecting value chains across businessesConnecting value chains across businesses
in order to :in order to :
• Improve service/reduce costsImprove service/reduce costs• Open new channelsOpen new channels• Transform competitive landscapesTransform competitive landscapes
E-CommerceE-Commerce:• marketing• selling• buying of products and
services on the Internet
E-CommerceE-Commerce:• marketing• selling• buying of products and
services on the Internet
e-Business vs e-Commerce
e-Business is more than selling and marketing online!
ImplementImplement
Opportunity Opportunity AnalysisAnalysis
Re-Re-AssessAssess
Understand BusinessUnderstand Business
ImplementationImplementationPlanningPlanning
‘‘Traditional’:Traditional’: ImplementImplement
Opportunity Opportunity AnalysisAnalysis
Re-Re-AssessAssess
Understand Electronic BusinessUnderstand Electronic Business
ImplementationImplementationPlanningPlanning
‘‘E-Business’:E-Business’:
Definitions of the future are ‘fuzzy’Permanent and unpredictable change in the
business and technology environmentTime to market and speed are major competitive factorsContinuous learning & fast adaptation is required
Characteristics of an “Electronic Business journey”:
Definitions are clearNo change in the business and technology
environmentHigh time pressureContinuous learning
Traditional business organization‘develop step by step’:
e-Business vs Business
E-Business is not a project - but rather a journey that requires vision and non-linear procedures
Experimentation and Learning
Supplier network Customer network
Customer service
Outboundlogistics
Sales
Marketing
Productdevelopment
Inboundlogistics
Production
Procurement
Being a Connected Enterprise
Being a Connected EnterpriseEmerging e-StrategyEmerging e-Strategy
Short Strategy Formulation loopsShort Strategy Formulation loops
Continuous experimentation through specific Solutions PrototypingContinuous experimentation through specific Solutions Prototyping
awar
enes
saw
aren
ess
lear
ning
lear
ning
lear
ning
lear
ning
1997-1999 - e-Business Mania Strikes!
E-Business becomes a major economic force NASDAQ hits 5,000
Venture capital in abundance Focus on new economy, new business models, growth
potential no attention to traditional fundamentals bricks and mortar viewed as liability
Traditional businesses shake in their boots at the threat of new non-traditional nimble bold competitors
Dot.Com start-ups in every field Dot.Com multi-millionaires made over night
B2B and B2C - Huge Potential
The Projected Canadian Electronic Commerce
Market
0
20
40
60
80
100
1997
1998
1999
2000
2001
2002
2003
Source: IDC
Cdn
$ B
illi
on
Business to Consumer
Business to Business
The Projected US Electronic Commerce
Market
0
200
400
600
800
1997
1998
1999
2000
2001
2002
2003
Source: IDC
US
$ B
illi
on
Business to Consumer
Business to Business
Online Retail Sales - Likewise!
Growth of Online Retail Sales (US)
$0
$5,000
$10,000
$15,000
$20,000
$25,000
1997 2001
Source: Forrestor
$ U
S M
M
Books & Music
Travel
Entertainment
Ticket Event Sale
PC Hardware & Software
Apparel & Footware
Financial Services
CAGR
42.9%
53.7%
44.9%
124.3%
73.5%83.4%
63.0%
2000 - The Dot.Com Bubble Bursts!
The Demise of Dot Com Retailers. Weak financials, intense competition, and investor flight will drive many of today's online retailers out of business in 2000. Those that survive must refocus funding on building hard assets to achieve scale, service, and speed.
Wall Street will run out of patience. Financial markets exasperated with non-existent online profits will turn a deaf ear to persistent "investment mode" rhetoric and soundly punish merchants who bleed red ink. Recent stock disasters like Value America and eToys -- whose market caps as of January 11, 2000, are down $3.1 billion and $7.7 billion respectively from 1999 highs -- serve as bad omens for online stores that lack a unique approach or technology.
The revenge of the brick-and-mortars will begin. The narrowing of the playing field in 2000 will rationalize but not resolve online retail competition. It will usher in a new era characterized by a few large players that exploit deep customer relationships and a presence across multiple channels to entrench themselves. To measure their success, these firms will ditch new economy platitudes in favor of unfashionable old metrics like margins, profits, and customer retention costs.
Forrester Research, 1999/2000
Valuations PlummetAmazon.com - AMZN
Priceline.com - PCLN
Pets.com - IPET
eBay.com - eBay
Same Trend in Canada
1-year trend
Lessons Learned
Fundamentals important, bottom line importantTraditional bricks and mortar assets can represent
significant competitive strengths logistics, inventory, distribution choice in terms of customer access strength and brand
e-Business becomes an element of overall business strategy - not the total business strategy
e-Business still widely seen as a way of transforming business operations and thinking
‘Bricks and Clicks’ - A Hybrid Model
Traditional
“Bricks and Mortar”
Pure Web - Dot.com
“Clicks”
Hybrid
“Bricks and Clicks”
Combines strengths from traditional and
pure Web approaches
Emergence of the Hybrid Strategy
Phases of e-Business Development
Four stage model in E-Business maturity relates business value to e-business leverage
E-Business Leverage
Bu
sin
ess
Val
ue
Enabler
Driver
Convergence
Transformation
Channel
Over 50% are in the channel phase of
E-Business development with a web presence but no
infrastructure tie-in.
Over 50% are in the channel phase of
E-Business development with a web presence but no
infrastructure tie-in.
Just under 15% are in the integration phase.
Connections to suppliers and customers are fully E-
Business enabled.
Just under 15% are in the integration phase.
Connections to suppliers and customers are fully E-
Business enabled.
Brochurewareand buying /selling
Integrate with customers
and suppliers
Industry transformation, achieve competitive
advantage
Cross-Industry Supplier/Customer
convergence
Integration
Source: PricewaterhouseCoopers
Phases of e-Business Development
The Journey Requires Investment
Significant multi-year investment predicted
The Journey Requires Investment
Significant multi-year investment predicted
The Benefits of e-Business
Generate additional Revenues New markets New products New customers
Reduce Costs (Integration and ‘Collaboration’) Process efficiency Reduce IT variety and -complexity Synergies with other initiatives
Customer Retention (‘Added Services’ and ‘Virtual Community’) Know more about your customers Integrated channel management Proactive and personalized offerings
Improve Image / Position Brand Applying innovative technologies Leadership enterprise Address younger customer segments
Not to miss the boat Keeping options open Acquire know-how Focused investments
e-Business and Brand
Research from Mainspring… Online financial services customers are initially
motivated by price sensitivity, but that influence declines as they realize the benefits of convenience
Brand is more important online than offline When researching insurance purchases online, 56% of
customers went straight to name-brand sites as compared with 32% for aggregation sites.
When initiating a purchase online, 60% went to name-brand sites as compared to 32% for aggregation sites.
Online Insurance
Growth of Internet-Enabled Insurance (US)
0
200
400
600
800
1000
1200
1997 1998 1999 2000 2001
Source: Forrestor
US $ MM
OtherAutoHomeownersLife
When will you offer financial advice online?
0 10 20 30 40 50 60
Now
< 1 year
1 to 2 years
> 3 years
Don't know
%Source: Forrestor
Why will you offer financial advice online?
0 10 20 30 40 50
Competitive pressures
Help customers makedecisions
Enhance customerrelationships
Customers want online advice
To improve our onlineoffering
%Source: Forrestor
Online Advice
Online Advice vs Face to Face
Forrester: Few financial companies believe that online advice will replace the human advisor. Except for a small group of low-end, self-directed customers, consumers are expected to continue to seek advice from financial advisors. More than half of our respondents believe that online advice solutions will never be a compelling alternative to working with one of their advisors, even as the technology improves.
Almost half of financial institutions believe that online advice will enable advisors to deliver additional value to their customers.
As automated advice vendors piece together the elements of the new advice creation process,we believe that use of online advice will surge.“
Customers don ’t care about the data-entry and number-crunching aspect of advising -- they pay for the conversation they have after the analysis is done. These online solutions will enable our advisors to spend more time with their customers.” (Insurer)