Successful E-Business

1. SuccessfulE-Business Prepared for AWC September 19, 2000 James Wong, President & Founder www.focitech.com

2. Agenda • A Little Background • Answer 5 questions: • Why E-Business? • How does E-business Fit with Current Business? • What are the economics of E-Business? • What are the risks? • How do you prepare for E-business • Market Challenges • Why Foci (Of Course) • Question & Answer

3. Backgrounder • Met at Arthur Andersen • Largest bond scandal investigation • Pioneered real-time online extranet • Every business needs this in 1996 • Yeah right • Mom’s banana bread

4. I. Why E-Business • Currently less than 1% of US Economic Activity • Implications: Disrupt the Basic Rules of Competition • Manufacturing and Supply Chain Companies with E-Business • ½ the overhead of median competitors • 40% to 60% lower working capital per unit of sales • 5% - 10% lower costs of goods & services • Corresponding levels of productivity & efficiency

5. E-business a waste of money. Not!!! • IBM and Cisco savings of $500 to $750 Million a year. • Dell Computer, Intel & dozen other leaders are selling well over $1 billion a year. • Enterprises that have implemented e-business solutions saw their client base increase by 8%

6. Financial Services & Securities Trading • Online trading a danger to US economic health • Within a year, it became an online player • 1/3 of all trades now occur online • 70% of all Charles Schwab trade online • World wide explosion of online trading

7. Car Dealer Market • Relatively small numbers of cars directly bought online • > ½ buyers research online before hand • Dealers facing 10% to 15% price cuts as a result

8. II. How does e-business fit with current business? • “Must do” list for companies • Perfect you long-term customer relationships • Harmonize all your channels on behalf of the customer • Perfect your logistics • Position yourself to be a power brand • Seek to become a value-adding intermediary • Why is it important? • Customers, channels, logistics, brands and differentiation

9. 1. Customer Relationships • Death of transaction economy • Cutting price for online and offline enterprises by 10% to 15% • Key to success is repeat business • Amazon 70% repeat business • Spends 20% on customer acquisition • Established business is at an advantage • ~ $200 for services • ~ $30 to $50 for products

10. 2. Channel Harmony • Original premise: “channel conflict” • Channels must complement and mesh with existing channels • Now it’s “clicks and bricks” or “click and mortar” instead of “clicks vs. bricks and mortar” • Compaq having problems trying to bypass distributors

11. 3. Logistics • Critical to the competitive game • Amazon spending millions on infrastructure • Dell and WalMart won through logistics

12. 4. Branding • Erosion of product brand equity to relationship brand equity • Amazon, AOL, Yahoo! • Established brands have advantage • Walmart, Dell, Toys R Us • Create a brand on the Internet – how much? • Took AOL $??? Million to create it’s brand

13. 5. Value-Adding Intermediaries • IT traditionally been disintermidiation • I.e. Touch tone phone and cash machine • B2B supply chain mgmt hubs • Ariba handled $70 B supply chain transaction within 6 weeks, $120 B in a year • Well defined vertical hubs reducing supply chain costs by 20% • Chemdex charges 5% to 10% vs 40% to 80% commissions

14. III. What are the New Economics of E-business • Today’s accounting rules are distorting real economics of e-business • Marketing / Customer acquisition costs should be depreciated. It’s really R&D. • Repeat business generate much higher margins. • Yahoo!, eBay & Amazon generate 70% to 85% margins on digital services

15. IV. What are the Risks? • Business model risks • Many don’t appear to have a real business model just Internet “strategy” and web-site plan • Industry boundary risks • Autobytel – locate, negotiate, arrange financing and insurance, and deliver car • Is it a car dealer? A banker? A shipper? • Economic risks • Many costs – cust. acq, technology, mktg • Organizational risks • How to think like an ebusiness? Speed? Talent?

16. V. How to prepare for E-Business • Spinoff • Mix results thus far for BN.com, P&G (reflect.com) • Spinoff is appropriate if: • Unrelated business • Requires different value discipline • Address new and different market • Will deliver a different product range

17. V. How to prepare for E-Business (continue) • Build an e-business culture within the enterprise – best results mandated by upper mgmt led by marketing department • Schwab, Wells Fargo, Dell & Cisco successful • Speed – must move quickly, tolerance for risks • If e-business team cannot than must move aside

18. B2B Versus B2C • B2C • Consumer focus • Substitute for retail • Low value added • “Wham bam give me your credit card man” • B2B • Business-to-business focus • Extending existing relationships with customers, employees, suppliers and partners • About increasing revenue, and reducing costs

19. Small vs Mid vs Enterprise

20. Enterprise Market Challenge • Complex products • Complex pricing • Legacy systems integration • 1-to-1 relationships • Unified commerce interface

21. Foci Well Positioned as E-business Solutions Provider • Focus on mid market businesses • In business since 1996 • Proven methodology • Established client base • Validated solutions

22. Summary • E-business is about extending business on line • Empowering your customers • E-business is about increasing revenue & reducing costs • It’s about survival!

23. Question & Answer

24. Contact Information • Jamesw@focitech.com • To learn more visit www.focitech.com • Address: 1808 Bellevue Avenue, Suite 200, Seattle, WA 98122 • Phone: 206.320.9868 • Fax: 206.320.9866