E-Commerce853-05

Professor Mary Cronin

October 22, 2005

Agenda for Today• Overview of course structure and objectives• E-Commerce: Past, Present, Future• Class introductions and personal objectives• Syllabus, assignments and group projects

– Group formation and lunch (at last…) with group discussion• Best Practices preview

• Best Practices Preliminary Summary• Case Study Companies

– CSN Stores– Body1--Guest Speaker: Kerri Lis– Group assignments

• E-Business Hype Cycle Discussion– Drivers and barriers to growth– Balancing technology and strategy

• Wrap up, questions and preview of coming attractions

Course Structure• Intensive interaction and multi-mode learning

– Each session will include lectures, guest speakers, small group interactions and discussion of readings

– Real time case studies are linked to local companies with challenging issues in e-commerce

– Individual assignments include one case analysis and an end of term research paper on a student-selected company

– Small group assignment is one real time case project and presentation

– Details of assignments and chance for questions coming before lunch!

Framework for Course Discussions and Readings

E-Commerce Evolution

Success/Failures

Lessons Learned

Current Threats

Strategic Context

New Trends

Industry Impact

E-Com Infrastructure and Business Models

(B2B, B2C, B2E)

Best Practices

“Real Time” Cases

Competitive Advantage

E-Commerce Is Back in the Headlines

Defining E-Commerce and E-Business

• E-Commerce– The use of the Internet and the web to transact business

– Digitally enabled commercial transactions between and among organizations and individuals

• The exchange of value on the Internet or the web

• How about E-Business?– Strategic use of the Internet for all processes and transactions within a

firm

– The entire world of internal and external electronic and Internet-based activities related to an enterprise or organization, including E-Commerce

For this course, we will accept the broadest definitions and focus on the impact of using the Internet and the web to transact business in different types of companies and different industry sectors

E-Commerce Expectations in the 1990s

• Interactive, One-to-One Marketing as Driver– Personalized and customized design and delivery would drive

profitable traffic to sticky web sites• “Me-Business” and “The Experience Economy”

• Disintermediation of bricks and mortar and online aggregation into a few online Megastores – Malls and brand-name storefronts would be “Amazoned”– Manufacturers would sell direct to consumers bypassing stores and

traditional channels

• Frictionless transactions and fulfillment– Online interactive support systems, bolstered by virtual

communities, would transform the sales process– Proactive supply chains would enable dynamic pricing options– The web would become a transparent global E-marketplace– Traditional business models were doomed to failure

The dot.com Bust Made E-Commerce Synonymous With Bad Business

Spilt Milk: WebVan burned through $1.2 billion in two years

from launch to shutdown

Scary: Boo.com spent over $1 million per week in burning up $135 million VC investment

Dead Dog: Pets.com had $82 million IPO then shut down

Was e-commerce completely over-

hyped or was something else at

fault?

Some Perspective on E-Commerce Past and Future

• New and revolutionary technologies typically go through a cycle of rapid growth and adoption (with many competing business models and providers) followed by shake out and consolidation

• Think about electricity, telephone, automobile and computer adoption cycles– The strongest impact and the lasting value emerge AFTER the

shake out phase– Many early predictions about these once-emerging technologies

never came to pass and countless business models failed in the process of mass adoption in the late 19th and early 20th century

• Gartner Research has characterized this predictable process as the technology “hype cycle”

The e-Business Hype Cycle

1990

-199

619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

10

TechnologyTrigger

Peak of InflatedExpectations

Trough ofDisillusion

Slope ofEnlightenment

Plateau ofProfitability

InternetWeb

“Dot.Com”Begins

U.S. IPOs1997/1998

U.S. Christmas1998

European IPOs1999

“e” is Best“Dot.Com”

Share Fallout

InvestorDisillusionment

“Dot.Com”Shakeout

Publicizede-Failures

BusinessDisillusionment

Search for “True”e-Business

Optimizede-Business

Post-NetBusinesses

Source: The Gartner Group

U.S. IPOs2004

The More Pervasive the Technology Becomes, the Higher the Final Plateau

Why Did The Internet as a “Trigger Technology” Have Such a Huge Impact?

• Open, dynamic standards– Global, decentralized, scalable– Continual innovation and evolution (http, ssl, xml, etc.)

• Worldwide deployment of each wave of functionality into new business as well as existing systems and platforms

• Low barriers to entry– Users also became developers and e-commerce entrepreneurs– Proliferation of start ups and spin offs in all sectors– Low costs of implementation and distribution for enterprise and

individuals combined with a large and rapidly growing market

• Abundant opportunities for increasing productivity and reducing cost of doing business across all sectors

Framework for E-Commerce Today

• B2C (and C2C)– Interactive marketing using search as a driver– Online sales and efficiencies in distribution– Customized service, self-service and support via the web– Online user community and peer-to-peer communication recognized as

a powerful force• B2B

– Online supply chain management is a given• Online procurement in place in the majority of companies

– E-marketplaces survivors are well established and (mostly) profitable– Radically distributed organizations are common

• B2E– E-knowledge management and decentralized, online communications

are the norm– E-Learning is pervasive

• Employee training, simulations, regulatory compliance and productivity support

Enterprise B2C and B2B Drivers Have Evolved Along With the Net

• Web Presence Is Now a Competitive Necessity– Where the Customer Is

• Majority of customers (both consumer and enterprise) research online then buy through traditional channels

– Intrinsic to a multi-channel sales and marketing strategy• Supports new customer acquisition through search terms and

online advertising

• All Companies Are Striving to Lower Costs of Customer Support and Procurement– E-Commerce supplements or substitutes for traditional support

systems• Self service online

– eCRM to enhance customer loyalty• Encourage repeat business

– eProcurement and Supply Chain Management• More efficient and cost-effective relationships with suppliers,

vendors and distributors online

What Does It Mean for Today’s Enterprise?

• Customer Expectations– Impossible to attract and retain customers without using the

Internet in some way• Channel Ubiquity

– Creates new marketing, sales, support and distribution channels and alters structure of market by adding transparency across borders and organizations; increases market size but requires new differentiation strategies

• Cycle Compression– Constant innovation and improvements in core products with

outsourcing of non-core areas; shorter learning curves, development and product cycles

• Cost and Pricing Pressures– Must squeeze costs out of supply chain and internal processes to

compete in more open markets

E-Commerce Evolution: What’s Next?

• Short term:– New round of consolidation at the top driving industry

convergence and more start ups leveraging community, peer interactions and e-marketplaces

– Enterprise focus on integration with existing IT solutions and increasing ROI

– More attention to applying best practices and analytics to gain customer loyalty and competitive advantage

– Migration to online-only options

Ups and Downs in the Internet’s Competitive Landscape

Bargaining Power

of Suppliers

Bargaining Power

of Buyers

Barriers to Entry

Number of Players

Competition

Threat of Substitute

Products and Services

Bargaining Power of Channels

Each industry sector has a different balance of factors and pace of e-business adoption

Continuing E-Commerce Challenges

• Security• Trust and privacy• Stability and robustness under attack (virus,

spam)• Internal enterprise integration of Internet and E-

Commerce implementation• Channel conflict and fear of cannibalization• Sorting out the truly valuable from the easily

possible

Peak of Inflated Peak of Inflated ExpectationsExpectations

Trough of Trough of DisillusionmentDisillusionment

Slope of Slope of EnlightenmentEnlightenment

Plateau of Plateau of ProductivityProductivity

TechnologyTechnologyTriggerTrigger

Market HypeMarket Hype E-Business Rules

E-Commerce Reality CheckE-Commerce Reality Check

YearYear

E-Tailing

Dot-com starts

InternetWWW

Dot-com failures &share fallout

Investor disillusionment

Business disillusionment

“True” E-Business emerges

Optimized E-Business

E-Business subsumed into corporate DNA

1990-1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Are we here?