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Driving bottom line benefit from ICT

Driving bottom line benefit from ICT. IoD Yorkshire Region IT Masterclass 21 March 2006. Prof. Jim Norton Senior Policy Adviser UK Institute of Directors Former Director UK Cabinet Office PIU e-Commerce team www.profjimnorton.com. Issues to be covered. Setting the scene.

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Driving bottom line benefit from ICT

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  1. Driving bottom line benefit from ICT IoD Yorkshire Region IT Masterclass 21 March 2006 Prof. Jim Norton Senior Policy Adviser UK Institute of Directors Former Director UK Cabinet Office PIU e-Commerce team www.profjimnorton.com

  2. Issues to be covered • Setting the scene. • The new business context - 8 Cs. • Customers • Creativity • Co-operation • Commitment • Final thoughts. • Charging • Competition • Culture • Cost

  3. All world trade 1949 All scientific projects 1960 All telephone calls 1983 All emails 1990 … and remember that the world is changing rapidly In 1999 Source: Chatham House Forum

  4. With acknowledgement to the Office of the e-Envoy

  5. Does this remind you of anything? Great Western Railway Source: Bains, Crafts & Leunig - Sunday Times

  6. It was ever thus…the e-Biz trough of disillusion Source: Gartner Group

  7. The e-Business capability ‘hype’ cycle Source: Gartner Group

  8. Roger Beale sums it up beautifully… With acknowledgement to Roger Beale at the FT - 13/3/01

  9. Internet access by top 12 countries (millions of users) 21.9 23.7 25.9 28.8 197.8 28.8 33.9 35.8 46.3 119.5 50.6 86.3 Global total Passed 1Bn in 2005 Source: Computer Industry Almanac 2005 600 M new users added since 2000….

  10. UK Internet usage & penetration statistics UK Internet connections (Millions) Source: UK regulator Ofcom 2005 Market Report (July 2005) data to end Q4 2004 http://www.ofcom.org.uk/research/cm/cm05/comms_mkt_report05.pdf

  11. Issues to be covered • Setting the scene. • The new business context - 8 Cs. • Customers • Creativity • Co-operation • Commitment • Final thoughts. • Charging • Competition • Culture • Cost

  12. The new e-business context..…or how not to get lost in the desert • E-business is evolving at a fearsome rate. • How can we determine the best approach? • Some old business landmarks do remain firm in this shifting landscape. Focus on the ‘business’ and not on the ‘e’

  13. Eight key landmarks to navigate by: • Customers • Creativity • Co-operation • Commitment • Charging • Competition • Culture • Cost The eight ‘C’s of e-business strategy...

  14. Customers - serving them better... • Outsourcing cost to customers yet improving their satisfaction. • Developing ‘one to one’ marketing based on detailed customer profiles.

  15. Outsourcing cost to the customer….Dell Source: http://www1.euro.dell.com/content/default.aspx?c=uk&l=en&s=gen

  16. Outsourcing cost to the customer….Jali Source: http://www.jali.co.uk

  17. Outsourcing cost to the customer….Jali Source: http://www.jali.co.uk

  18. Outsourcing cost to the customer….Jali Source: http://www.jali.co.uk

  19. New types of banking with lower fixed costs... There were estimated to be 11.5 M online banking users in the UK at the end of 2003. This compares to just 5.6M at the height of the “dotcom” boom. Only 2.45M are customers of “branchless” banks (e.g. Cahoot, Smile, First Direct, Intelligent Finance) Some 300,000 customers at HSBC offshoot's First Direct - almost a third of its current account customers - already use its free text messaging service. This alerts them when pay enters their bank account or when they are close to breaching their overdraft limit. Source: Datamonitor Aug 2003 Source: http://www.woolwich.co.uk

  20. Creativity - new value propositions... • Using the transaction information available at marginal cost to generate new value propositions. • Fundamentally transforming business models.

  21. New value in pharmaceutical retailing….routing all purchases through a single site and gaining automatic warning of adverse drug interactions Source: http://www.drugstore.com

  22. How can you create value from an online pharmacy? • Drugstore.com offers superior customer service and a host of value-added features, including: • eMedAlert™, which alerts members about drug warnings, updates, and recalls; • the Drug Price Index, which shows consumers the price savings from purchasing larger quantities of a drug or choosing a generic version of the drug; • the Drug Information Database, which lists all relevant data about the drugs stocked by the drugstore.com™ pharmacy; • the Drug Interaction Checker, which provides information on drug interactions, including drug-drug, drug-food, drug-vitamin, drug-herb, and drug-alcohol interactions; and • the Generic Insider, which notifies customers if a branded drug they are taking becomes available in a generic form. Source: http://www.drugstore.com

  23. Co-operation - new types of intermediary • Customers’ agents for collective purchasing or to manage risk. • Suppliers’ agents to generate critical mass from a large number of small companies

  24. Co-operatives acting for small businesses... Source: http://www.agriculture.com

  25. We are seeing a wave of new intermediaries… Whilst existing intermediaries (physical realtors, travel agents, financial advisers,…) may see their traditional roles severely threatened, many new opportunities are created. ‘Infomediaries’ are an example. They: • can resolve the privacy dilemma between the consumer’s desire for privacy and the industries need for information...; • support confidence building services such as holding payments in escrow against fulfilment; • give new opportunities for the resolution of taxation challenges; • add real value for the consumer.

  26. Commitment - ensuring fulfilment works... • “In a gold rush those who are really smart get there fast and sell shovels”. • Enhanced safety and stability in the fulfilment backend rather than the ‘dot com’ front end.

  27. Charging - linking directly to value created • Many business are threatened not because they no longer add value but because e-commerce undermines their existing ways of charging for that value.

  28. Travel Agents’ inherent cross-subsidy is lost It is now very difficult to book seats on ‘budget’ airlines other than on the Internet… Even traditional carriers offer “e-ticket” discounts… Source: http://www.thomascook.com

  29. Competition - leveraging brand into new markets • Using brand to transfer trust into adjacent market segments without building new businesses

  30. WAL*MART carries ten times more lines on its Website than in its largest store... Online sales via Walmart.com reached $1.17Bn in 2005, a 50% increase on 2004… Source: http://www.walmart.com

  31. Culture - keeping the team onside • Valuing creativity • Giving people genuine authority • Developing the best blend of systems and people • Avoiding attrition

  32. Cost - driving it down through new approaches • Pushing stock holding elsewhere in the supply chain. • Increasing competition among sub-contractors • Enhancing logistics • Gaining cash flow at the expense of suppliers

  33. The chemicals sector as an example... • Chem-etrade.comSpeciality chemicals marketplace • ChemSource.comIndex site… • GlobalBA.comSite that includes distributors • Lotsofplastics.comTrades surplus raw plastics • Chemmerce.comChinese chemicals marketplace • Bulknet.comBulk chemicals distribution logistics centre. • CheMatch.comCommodity chemicals exchange • ChemConnect.comAuction site • Chemdeals.comTrades off excess inventory • Chemdex.comTrades laboratory chemicals A darwinian process - all these sites were operating six years ago. Those in red italic are now gone or merged….

  34. Evolution in B2B exchanges (1) In the B2B space, infomediaries – in the guise of the next generation of trade exchanges – will: • change the balance of power in entire sectors by aggregating the purchasing and selling power of large numbers of small companies; • foster (rather than destroy) supply chain relationships for collaborative development, innovation and the creation of ‘competitive edge’; • offer options to manage the risk associated with ‘just in time’ approaches to inventory management;

  35. “Covisint” represented a key test case E-business is not about incremental improvement; e-business is a fundamental redesign of the enterprise. Web sites that offer incremental solutions for isolated aspects of your business do not enable you to reap the full benefits. Covisint will address your entire business, link you to the entire industry, and provide a foundation to accelerate you into operating at Internet speed. Source: www.covisint.com

  36. Evolution in B2B exchanges (2) In the B2B space, infomediaries – in the guise of the next generation of trade exchanges – will also: • maintain online registers for the location of scarce resources or high value spare parts; • support escrow accounts as part of a payment offer in order to transfer payment upon agreed fulfilment; • develop anonymised and accurate market intelligence based on aggregated actual purchasing behaviour; • help to manage exchange rate risks; and • provide real-time on-line credit search for accreditation of third parties;

  37. Issues to be covered • Setting the scene. • The new business context - 8 Cs. • Customers • Creativity • Co-operation • Commitment • Final thoughts. • Charging • Competition • Culture • Cost

  38. Some final thoughts…. • E-business is about new opportunities to improve your business model… • Implementation is usually incremental: adoption; adaption; and finally absorption. • Normal ‘Darwinian’ processes have removed from the market those who had wacky business plans and little common sense… • E-business is now being integrated into ‘traditional’ business, bringing major cost savings, service enhancements and new business opportunities.

  39. A step too far…

  40. Questions & Answers Slides available to download from: http://www.profjimnorton.com/iodyorkshire1.ppt

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