Industry

1. Industry INTENDCHANGE Architecting Enterprises of Tomorrow

2. The Evolution ofa New Economy Intend Change Joe Firmage, Chairman, & Toby Corey, CEO

3. A Blast From The Past

4. Internet Client/Server Mainframe Our Slide from 1995: Transformation Automate Front-office Automate Back-office Automate Value Chain 1960 1970 1980 1990 2000

5. Publication Application Conversation Broadcast HTML/ HTTP Intranet Extranet >100 Kbps >1 Mbps Our Slide From 1996: Convergence Prior Medium Primary Enabler The New Medium Internet

6. Our Slide from 1997: Success Strategies Acceleration Along Two Dimensions Risking Leading Differentiation Higher Revenue/Unit Competing Failing Efficiency Lower Cost/Unit

7. Our Slide from 1998: E-Services/ASPs The E-Service/ASP Architecture Mainframe Client/Server Internet Any user device Self-service access Self-teaching, rich content Single client in user device Standard protocol Any type of server Multi-tier logic Standard administration Time

8. Our Slide from 1999: It’s Just the Beginning

9. Our Slide from 1999: A New Economy Old Economy New Economy • Manufacturing dominant • Physical distribution is barrier to entry • Lack of capital reinforced barriers • 1st mover advantage = years • Brands were caricatures • Innovative ideas contained internally • Entrepreneurism was in its infancy • Communication and transportation favored the establishment • Relationships constrained by human capital • Technology investments yielded spotty value • Knowledge and relationships dominant • Electronic distribution is the new barrier • Capital is now a commodity • 1st mover advantage = months • Brands = emotion with integrity • Innovation is in the public domain • VC creates science of entrepreneur • Communication and transportation are now available for hire • Relationships can now be established electronically • The Internet has realized the productivity promise of computing technology

10. The Landscape at 2000

11. The Landscape at 2000 Systems and Platforms Resources,People andExperiences Labor, Machines,and Logistics Electronic and Physical Portals

12. Systems and Platforms Resources,People andExperiences Labor, Machines,and Logistics Electronic and Physical Portals The Landscape at 2000 • Each domain is dependent upon those surrounding it • Innovations in any domain can restructure the dynamics within all of the domains • Horizontal business models must span entire domains, and be strategically required by the downstream domain and must aggregate capabilities of the upstream domain • Vertical business models must add value beyond horizontal alternatives • The enterprise’s strategy and tactics must reflect a plan that integrates a vision across the domains

13. “Swiss Army Sites” Experience Portals Retail, Support Vertical Seller Portals Vertical Buyer Portals Trading Portals Specialized Portals Utility Portals Knowledge Portals Systems and Platforms Resources,People andExperiences Labor, Machines,and Logistics Electronic and Physical Portals Horizontal Service Portals Electronic and Physical Portals • Business-to-Consumer portal enterprises seem unable to define a coherent basis for sustained profitability • Storefronts are proliferating and perpetuating price wars • The efficacy of existing advertising models is in question • Consumers are experiencing increased marketing fatigue • Logistics infrastructure is more expensive than expected • Purpose-built front-ends will be preferred by consumers, to be embedded in clothing, homes, offices, and vehicles • Integrated convenience, unique experiences and content will drive the gross margin • Human experience – entertainment, learning, exploration, satisfaction will be the ultimate drivers • Physical centers of interaction (retail, return, support) must be integrated into value proposition

14. Experience Portals Vertical Seller Portals Vertical Buyer Portals Trading Portals Specialized Portals Utility Portals Knowledge Portals Systems and Platforms Resources,People andExperiences Labor, Machines,and Logistics Electronic and Physical Portals Electronic and Physical Portals “Swiss Army Sites” • Business-to-Business portal enterprises are exploding on the scene • The important question is how the foundations of these business models are fundamentally different than those in B-to-C • Switching costs support B-to-B profit models, since changing value chain partners is more complex than changing bookstores • But transaction and exchange standards and buyer preference for auction pricing models are establishing transparency • Businesses at scale are more price-sensitive than consumers, so there is no magical profit formula • Portals surfacing tough-to-match value-chain-wide integrated business models will likely be most profitable • Physical centers of interaction must be integrated into value proposition Retail, Support Horizontal Service Portals

15. Systems and Platforms Resources,People andExperiences Labor, Machines,and Logistics Electronic and Physical Portals Systems and Platforms Purpose-built Applications Visualization Content Aggreg Data Mining Config Mgmt Catalog Mgmt Financial Services • Purpose-built tools, applications, and information services will remain as valuable as ever, but not necessarily monetizable through standalone businesses -- M&A will be as strong an influence as ever • Success of horizontal tools, application services, and systems will depend upon crossing critical mass of adoption before the technology protocol is commoditized • Infrastructure is commodity (quality and price rule) except when differentiated capability or industry standard protocol is uniquely leverageable Operating Systems Transaction Mgmt Systems Development Tools Infrastructure

16. Systems and Platforms Resources,People andExperiences Labor, Machines,and Logistics Electronic and Physical Portals Labor, Machines, and Logistics Service Interfaces • Human resources • HR methodologies and service business models need to be purpose-built for the service interface they support • Skills development is a more transparent unmet need than ever • Enjoyment of work is being stressed due to increasing demands of communications, and competition with the efficiency of machines • Stock option hunting is shortening employee commitment and reducing retention of intellectual property by enterprises Consulting Outsourcing Skilled Labor Skills Development Unskilled Labor Computers & Comm. Logistics & Distribution Manufacturing & Prod.

17. Systems and Platforms Resources,People andExperiences Labor, Machines,and Logistics Electronic and Physical Portals Labor, Machines, and Logistics Service Interfaces • Automation resources • Computing and communications systems are being purpose-built and embedded into everything • Visibility into manufacturing lifecycles is reaching total transparency • High-quality automation infrastructure is increasingly available for hire on a per-use basis • Logistics is becoming increasingly like a utility • Logistics industry is now willing to interface with B-to-B-to-C electronic commerce standards • Successful e-commerce demands integration with offline physical distribution and point-of-sale networks • As service interfaces are adopted with critical mass, a platform is formed that enables new efficiencies and differentiation on layers above and below Consulting Outsourcing Skilled Labor Skills Development Unskilled Labor Computers & Comm. Logistics & Distribution Manufacturing & Prod.

18. Aggregation Editing Systems and Platforms Resources,People andExperiences Labor, Machines,and Logistics Electronic and Physical Portals Resources, People and Experiences • The reserves of knowledge and experience capital yet to be tapped by the New Economy are staggering • People have always been willing to pay for experience, and always will • Business opportunity explodes as interactivity and bandwidth expand • The education system will be completely overhauled within the next 10 years and replaced by lifetime learning tools placed in every human’s hand • Governance will be reinvented though transparency of information and direct democracy • Scientific innovations are still very early in their golden era • Scalability of consumption has dramatically risen in only 5 years • Natural resources of Earth are subject to increasing shortages, driving greater need for dependence on sustainable experience Content Libraries Science, Art, Play, Education Communities & Governance Subsistence Individual Experience Natural Resources

19. Current Focus of the Markets

20. Markets are Focused on Efficiency • Increasing speed • Increasing transparency • Increasing automation • Decreasing barriers to entry • Decreasing complexity Supply Demand Efficiency

21. Qualitative Competition Leadership Differentiation Higher Revenue/Unit Quantitative Competition Failure Efficiency Lower Cost/Unit But Efficiency is Only One Dimension… • Increasing speed • Increasing transparency • Increasing automation • Decreasing barriers to entry • Decreasing complexity Supply Demand

22. Systems and Platforms Resources,People andExperiences Labor, Machines,and Logistics Electronic and Physical Portals … So Assume Total Efficiency… Then What? • Assume total availability • Assume total transparency • Assume total automation • Assume transaction standards • Assume auction pricing Supply Demand

23. Systems and Platforms Resources,People andExperiences Labor, Machines,and Logistics Electronic and Physical Portals Unlike Efficiency, Differentiation Is Unbounded • Create new kinds of emotional and intellectual experiences • Reintermediate industries • Invent new models and technologies • Simplify the usability • Expand the bandwidth • Expand the population of customers • Listen to the shifts in social attitudes and intentions • Solve unsolved problems • “Turn up the potential” Demand Supply

24. Implications for Venture Organizations

25. Implications for Venture Organizations • Supply and demand are experiencing punctuated integration • Past integrations have made extinct some previous systems of value and made room for new systems and new values • The efficiencies of integration have been proliferating first in B-to-C, but they will follow in B-to-B • B-to-B “efficiency exchanges” will ultimately enable perfect transparency of every trade • The gross profit margins of trading exchanges will fall lower than they are today across the B-to-B-to-C landscape • Great opportunity for strategic consolidations

26. Implications for Venture Organizations • Efficiency exchanges will be most profitable when their participants are exclusive, de jure or de facto • Global 2000 spinouts with guaranteed revenue are good short term bets • Highly specialized vertical networks will be good short term bets • Long term profit models should be held under careful scrutiny, since no one will be exclusive for long • Horizontal transaction systems with capability for verticalization and specialization through business rule plug-ins (like Electron Economy’s Internet TONE) will ultimately prevail • Most B-to-B enterprises should focus on specialization and integration of service and leverage third party horizontal platform technology

27. Implications for Venture Organizations • Profit will grow disproportionately from differentiation business models rather than efficiency business models – uniqueness more than speed • The greatest opportunity for differentiation is found in intellectual-property-rich enterprises • Content business models – we’ve only begun to see what is possible in this category • Breakthrough software, hardware, and business model innovations • World-class consulting • World-class idea origination: the world’s best incubation • Human capital is absolutely the most valuable asset • Ultimately, this transformation can bear very positively on the concern of sustainability of consumption within Earth’s natural resources

28. Systems and Platforms Resources,People andExperiences Labor, Machines,and Logistics Electronic and Physical Portals Key Areas Deserving Focus • Breakthrough business models and human interfaces -- there are many yet to emerge • Consolidation of fragmented areas • Expanding the dimensions of the domains • Domain-wide innovations • Multi-domain assets organized within a total enterprise strategy • Standards in upstream domains that offer new functionality in or consolidate downstream domains • Intellectual Resources: human talent and one-of-a-kind content • VISION !

29. Intend Change Ventures UNIVERSE CITY

30. Intend Change Ventures • Electron Economy: • The A-Team from logistics and e-commerce • A horizontal transaction operations network constructed so as to enable verticalization and other specializations through business rule plug-ins, all based upon XML • Enabling the ultimate horizontal efficiency: connecting electronic transactions with physical logistics • Enabling the ultimate differentiation: any-to-any value chains • Consulting team is ready to tackle large projects • THE INTERNET TONE!

31. Intend Change Ventures • Invesmart: • Reintermediating the value chain of retirement financial services • Efficiency-enhancing consolidation of an industry and automation through employee and administrator portals • $3 billion in assets under management • Differentiation-enhancing service model delivered through physical points of face-to-face consultation • Launches this summer, already going strong

32. Intend Change Ventures • iGeneration: • Addressing the new economy skills gap • Completing development of an Internet Talent Network, bringing certified Internet professionals to enterprises that need them • The portal for 18-24 year olds into the Internet Economy, launching in July • Has developed the “SAT” tests for 10 Internet Economy career tracks • 100 real-world education partners and 1200 test centers • Revolutionizing the economics of skills certification

33. Intend Change Ventures • Universe City • 21st century media enterprise – an “integrated experience network” • Online category: “integrated experience portal” • Offline category: “integrated experience studio” • 25-year-in-the-making intellectual property and one-of-a-kind worldwide leading brand: Cosmos • Breakthrough “portal of portals” navigational, learning, game, and e-commerce paradigm • Not science, but learning, discovery, entertainment, and commerce informed by science UNIVERSE CITY

34. Industry INTENDCHANGE Architecting Enterprises of Tomorrow