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 [Link] 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 vs e-Commerce
E-Business:
Improving business
E-Commerce: performance through low cost and
• marketing open connectivity:
• selling
• buying of products and • New technologies in the value chain
services on the Internet • Connecting value chains across businesses
in order to :
• Improve service/reduce costs
• Open new channels
• Transform competitive landscapes
e-Business is more than selling and marketing online!
e-Business vs Business
Re- Re-
Assess Assess
‘Traditional’: Implement ‘E-Business’: Implement
Implementation Implementation
Planning Planning
Opportunity Opportunity
Analysis Analysis
Understand Business Understand Electronic Business
Traditional business organization Characteristics of an “Electronic Business
‘develop step by step’: journey”:
Definitions are clear Definitions of the future are ‘fuzzy’
No change in the business and technology Permanent and unpredictable change in the
environment business and technology environment
High time pressure Time to market and speed are major competitive factors
Continuous learning Continuous learning & fast adaptation is required
E-Business is not a project - but rather a journey that requires vision and non-linear procedures
Experimentation and Learning
Short Strategy Formulation loops
Product
awareness
development
Being a
Procurement Marketing
Emerging e-Strategy Inbound
Supplier network
logistics Customer network
Connected Enterprise
Outbound
logistics
Production Sales
Customer
service
Continuous experimentation through specific Solutions
Prototyping
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
[Link] start-ups in every field
[Link] multi-millionaires made over night
B2B and B2C - Huge Potential
The Projected Canadian The Projected US
Electronic Commerce Electronic Commerce
Market Market
100 800
Business to Consumer
80 Business to Consumer 600
Business to Business
US $ Billion
Business to Business
Cdn $ Billion
60
400
40
200
20
0 0
1997
1998
1999
2000
2001
2002
2003
1997
1998
1999
2000
2001
2002
2003
Source: IDC Source: IDC
Online Retail Sales - Likewise!
Growth of Online Retail Sales (US)
Books & Music CAGR
$25,000 Travel
Entertainment 42.9%
Ticket Event Sale
$20,000
PC Hardware & Software 53.7%
Apparel & Footware
$ US MM
$15,000 Financial Services 44.9%
124.3%
$10,000
73.5%
83.4%
$5,000
63.0%
$0
1997 2001
Source: Forrestor
2000 - The [Link] 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 Plummet
[Link] - AMZN [Link] - IPET
[Link] - PCLN [Link] - eBay
Same Trend in Canada
1-year trend
Lessons Learned
Fundamentals important, bottom line important
Traditional 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 Pure Web - [Link]
“Bricks and Mortar” “Clicks”
Combines strengths
from traditional and Hybrid
pure Web
approaches “Bricks and Clicks”
Emergence of the Hybrid Strategy
Phases of e-Business Development
Four stage model in E-Business maturity relates business value to e-business leverage
Convergence
Cross-Industry
Supplier/Customer
Just under 15% are in the convergence
integration phase.
Connections to suppliers
and customers are fully E-
Transformation
Over 50% are in the channel Business enabled.
phase of Industry transformation,
E-Business development achieve competitive
Business Value
with a web presence but no advantage
infrastructure tie-in.
Integration
Integrate with
customers
Channel and suppliers
Brochureware
and buying /selling
E-Business Leverage
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
1200 (US)
1000
Other
800 Auto
US $ Homeowners
MM
600
Life
400
200
0
1997 1998 1999 2000 2001
Source: Forrestor
Online Advice
When will you offer financial advice online? Why will you offer financial advice online?
To improve our online
Don't know offering
Customers want online advice
> 3 years
Enhance customer
1 to 2 years
relationships
< 1 year Help customers make
decisions
Now Competitive pressures
0 10 20 30 40 50 60 0 10 20 30 40 50
% %
Source: Forrestor Source: Forrestor
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)
