End-to-End E-Business

1. End-to-End E-Business Professor Mary J. Cronin Carroll School of Management Boston College June 3, 2004

2. Objectives and Introductions • Seminar objectives • Presentation and discussion of e-business fundamentals, strategy and current impact • Insights that will enable better analysis and management of e-business • My background • Over a decade of e-business research and practice • Publications, teaching, consulting and yes, some dot.com euphoria and post mortem analysis • Participant backgrounds • Experience with e-business

3. 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 seminar, 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

4. Popular E-Biz Perception May 13, 2004 May 10, 2004

5. 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 technologies never came to pass and countless business models failed in the process of mass adoption • Gartner Research has characterized this predictable process as the technology “hype cycle”

6. The e-Business Hype Cycle “e” is Best “Dot.Com” Share Fallout European IPOs 1999 Investor Disillusionment Post-Net Businesses U.S. Christmas 1998 “Dot.Com” Shakeout Optimized e-Business U.S. IPOs 1997/1998 U.S. IPOs 2004 Publicized e-Failures Search for “True” e-Business “Dot.Com” Begins Business Disillusionment Internet Web Technology Trigger Peak of Inflated Expectations Trough of Disillusion Slope of Enlightenment Plateau of Profitability 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1990-1996 Source: The Gartner Group

7. The dot.com Bust Made B2C E-Commerce Synonymous With Bad Business Spilt Milk: WebVan burned through $1.2 billion in two years from launch to shutdown Was e-commerce completely over-hyped or was something else at fault? 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

8. B2C Forecasts from the Early Years • 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

9. Enterprise B2C Drivers Today • Web Presence as a Competitive Necessity • Detailed product information • Majority of customers research online then buy in traditional store or by phone • Additional channel for sales • Customer acquisition through search and advertising • Need to Lower Costs of Customer Support • Supplement traditional support systems • Self service online • Enhance Customer Loyalty • Encourage repeat businesss • Manage relationships with suppliers, vendors and distributors online

10. 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

11. US$ billions The early years The rocky years The next five years $250 $217.8B $200 $148.6B $150 $95.3B $100 $72.1B $42.4B $50 $2.4B $0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Ten Years of E-Commerce Growth Courtesy of Forrester Research

12. What Does It Mean for Today’s Enterprise? • 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 • Customer Expectations • Difficult to attract and retain customers without using the Internet in some way

13. Where Are We Today? • Less focus on new business models and Internet-only spin outs • More focus on integration with existing enterprise solutions and solving new problems • Selected but significant value generated from combining intrinsic Internet capabilities with E-Commerce strategies and best practices • On the other side of the shakeout and likely to see even more value and lasting strategic impact in the next few years

14. Framework for Our Objectives Best Practices Strategic Analysis and Management Competitive Advantage Global Context New Trends Industry Impact E-Commerce History Failures Lessons Learned Current Threats E-Com Infrastructure –Technology and Business (B2B, B2C, B2E)

15. After the Shakeout: Back to Basics • B2C (and C2C) • Interactive marketing • Online sales and distribution • Service and support • B2B • Supply chain transformation • E-marketplaces • B2E • Knowledge management and decentralization • Employee training, tracking and productivity support

16. Ups and Downs in the Internet’s Competitive Landscape Bargaining Power of Buyers Competition Among Leading Players Threat of Substitute Products and Services Each industry sector has a different balance of factors and pace of e-business adoption Bargaining Power of Suppliers Bargaining Power of Channels Barriers to Entry

17. Continuing E-Business 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

18. E-Commerce Reality Check Are we here? Market Hype E-Business Forever Dot-com share fallout E-Tailing Investor disillusionment E-Business subsumed into corporate DNA Optimized E-Business Business disillusionment “True” E-Business emerges Dot-com starts Internet WWW Technology Trigger Peak of Inflated Expectations Trough of Disillusionment Slope of Enlightenment Plateau of Productivity 1990-1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year