Cisco Systems, NetFlix, and Office Depot: The Business Value of Real-Time Web Decision Support

1. Cisco Systems, NetFlix, and Office Depot: The Business Value of Real-Time Web Decision Support Chapter 8: Real World Case 3

2. Team Members • Elisabeth Cates • Yvonne Hildebrand • Jesse Janis • Mary Napier • Nina Wolf • Eric Young

3. Cisco Systems

4. Cisco Systems - CEO • John Chambers is president and CEO of Cisco Systems, the worldwide leader in networking for the Internet. Since January 1995, when he assumed this position, Chambers has grown the company from $1.2 billion in annual revenues to its current run-rate of approximately $18.9 billion. • Chambers joined Cisco in 1991 as senior vice president, Worldwide Sales and Operations. Prior to joining Cisco, Chambers spent eight years at Wang Laboratories and six years with IBM. Chambers holds a law degree and a bachelor of science/bachelor of arts degree in business from West Virginia University. He later received a masters of business administration degree in finance and management from Indiana University. He is married and has two adult children. Yvonne Hildebrand

5. John T. Chambers - Awards • Number 2 CEO in America, Worth Magazine • The Most Powerful Person in Networking, Network World • The Most Influential CEO, Institutional Investor Magazine • Vice Chairman, President George W. Bush National Infrastructure Advisory Council (NIAC) • Member, President George W. Bush Transition Team, Education Committee • Best Boss in America, 20/20 • CEO of the Year, Chief Executive Magazine • Internet Industry Leader Award, U.S. Internet Council • Mr. Internet, Top 25 Executives Worldwide, Business Week • Member, President Bill Clinton Trade Policy Committee Yvonne Hildebrand

6. About Cisco Systems • Cisco was founded in 1984 by a small group of computer scientists from Stanford University • Since inception, Cisco engineers have been prominent in the development of Internet Protocol (IP)-based technologies • This traditition continues with industry leading products in the core areas of routing and switching, along with advanced technologies in areas such as optical, network security, IP telephony, wireless LAN, storage and home networking. • Broad range of service offerings, including technical support services and advanced services. Yvonne Hildebrand

7. About Cisco Systems Cisco sells ist products and services: • Directly: through its own sales force • Indirectly: through channel partners to large enterprises, commercial businesses, service providers, and consumers. • Cisco is the worldwide leader in networking for the Internet. Cisco hardware, software, and service offerings are used to create internet solutions so that individuals, companies, and countries have easy access to information – regardless of differences in time and place. Yvonne Hildebrand

8. Financial Highlights Nina Wolf

9. Accenture Bearingpoint Callisma Cap Gemini Ernst & Young EDS HP Microsoft Motorola Sony Sun Thru Point IBM Itattel Alliances - Enable customer success by driving business and technology change through strategic alliances with industry leaders. Nina Wolf

10. Competitors • Cisco's market cap is now five times that of its competitors. • Cisco's goal is to grow 10 percent faster than its competitors, and revenue increased 9 percent year over year for the most recently reported quarter, while competitors' revenue shrunk. • goal of growing 10 percent faster than the competitors Nina Wolf

11. Competitors Some competitors from different market segments: • Foundry Networks • Riverstone Networks • Juniper Networks • Nortel Networks • Lucent Technologies • 3Com • Extreme Networks Nina Wolf

12. NetFlix

13. Reed Hastings – Founder and CEO • Reed founded his first company, Pure Software, in 1991. He led Pure Software to go public in 1995, completed several acquisitions and made it one of the 50 largest public software companies in the world by 1997. Pure was acquired in 1997 by Rational Software. • Reed and colleagues formed Netflix in 1997 and launched the subscription service in 1999. Reed has since led Netflix to reach 1m subscribers in just three and a half years. Netflix is now a free-cash-flow positive public company on Nasdaq. • Reed also serves as President of the California State Board of Education, and has led successful campaigns for more charter public schools and easier passage of local school bonds. He served for a year as CEO of TechNet and was a co-founder of Aspire Public Schools, NewSchools, and EdVoice. • Reed received an MSCS degree from Stanford University in 1988 and a BA from Bowdoin College in 1983, and holds several patents. Eric Young

14. About NetFlix • Netflix (Nasdaq: NFLX) is the world's largest online movie rental service, providing more than one million subscribers access to more than 15,000 DVD titles. • Netflix is the largest online entertainment subscription service in the United States, providing more than 1,487,000 subscribers access to a comprehensive library of more than 15,000 movie, television and other filmed entertainment. • For $20 a month subscribers can rent as many DVDs as they want with no due dates or late fees. • In addition to offering a subscription movie rental service, NetFlix helps members expand their movie interests. Their proprietary Cinematch technology personalizes recommendations based on a member's tastes and preferences and allows them to promote smaller, high-quality films to customers who otherwise might miss them. Eric Young

15. About NetFlix • Netflix has more than 15,000 titles and more than 5 million DVDs total. A typical neighborhood video store generally has less than 3,000 titles, with multiple copies available only for a fraction of these titles. • Netflix has more than 150 million movie ratings from customers. The average subscriber has rated about 50 movies. • Netflix's members rent on a monthly basis approximately 97 percent of all titles in the Netflix library. • Netflix members select approximately 60 percent of their movies based on movie recommendations tailored to their individual tastes. Eric Young

16. Shipping Centers • Twenty shipping centers nationwide. • Shipping centers serving metropolitan areas in Atlanta, Boston, Chicago, Dallas, Denver, Detroit, Fort Lauderdale, Houston, Los Angeles, Minneapolis, New York, Newark, Philadelphia, Phoenix, Portland, San Jose, Seattle, St. Louis, Stamford, and Washington, D.C. • Netflix reaches more than half of its subscribers with generally next-day delivery. By year-end 2003, Netflix expects to reach more than 70 percent of its subscribers with generally next-day delivery. • The efficiency of these shipping centers - most are no more than 8,000 square feet - is driven by proprietary software that enables a lean crew to process and ship a daily average volume of between 5,000 and 30,000 discs a day. Eric Young

17. Office Depot

18. Bruce NelsonChairman & CEO • Bruce Nelson was named Office Depot's Chief Executive Officer in July 2000 and in December 2001 was named as the Chairman of the Board. • Prior to this, Mr. Nelson was President of Office Depot International and President & CEO of Viking Office Products after Viking was acquired by Office Depot in 1998. • Nelson began his office products career in 1968 when he joined Boise Cascade. • Over the next 22 years, he held a number of senior management positions in both the wholesale and contract business segments. • From 1990 to 1994, Nelson was President & CEO of BT Office Products USA. He joined Viking in 1995 and was named President & COO within a year. Jessi Janis

19. About Office Depot • Office Depot, Inc. Founded in 1986, is one of the world's largest sellers of office products and an industry leader in every distribution channel, including stores, direct mail, contract delivery, the Internet and business-to-business electronic commerce. • Office Depot sells more office products to more customers in more countries than anyone else. • Their distribution channels include stores, direct mail, contract delivery, the Internet and business-to-business electronic commerce. • Viking Office Products, Their wholly owned subsidiary, currently operates one of the industry's leading direct mail marketers of office products worldwide. Jessi Janis

20. About Office Depot • Distribution channels: • Shop Online 24 Hours a day: ww.officedepot.com • AOL Keyword: office depot • Call 24 Hours a day • Fax 24 Hours a day • Locate a Store: 1-888-GO-DEPOT • North America: There were 1,068 Office Depot stores operating in 13 countries. • International Division encompasses our direct mail, contract, Internet and retail operations in 20 countries outside of the United States and Canada. • In addition they sell office supplies and services through joint venture operations and licensing agreements in 8 countries. Jessi Janis

21. Case Summary • Cisco Systems couples received data from there partners with real-time web-based inventory information, and uses analytic software to find causes of distribution problems • NetFlix.com developed its own movie ranking system, because the software they used before was ill-suited • Office Depot wants to develop a real-time alert system for its sales and customer data Mary Napier

22. Question 1: What are the business benefits and limitations of Cisco’s Web-based system for it’s channel managers? • Cisco Systems wants everyone in the company to have access to real-time information. • They use a graphical user interface-based view from OneChannel Inc. that gives them real-time views of their account and other activities. • Cisco receives point-of-sale data via the internet or through electronic data interchange from their partners. • Cisco couples it with real-time Web-based inventory information and processes it using analytical software from Hyperion Solutions Corp. • Channel managers then analyse to find the underlying causes of any distribution problem. • Limitation: Most of the data is batched. They always suffer a time lack in analysing the data they receive. Result: Insufficient problem solving process and no optimal solution for their distribution. Yvonne Hildebrand

23. Question 2) Visit the NetFlix website. Do you agree with them that their real-time personalization system is critical to their business success? Real-time as a competitive advantage: • This industry is very competitive and the fact that NetFlix uses real-time allows them to stay competitive in the market in the way that if batch time was used it would be inefficient in getting the product to the consumer because of the time lapse between the order being placed, processed and shipped to the customer • Their website is available 24 hours so orders can be placed and shipped immediately • They can ship to 70% of their customers in one day Elizabeth Cates

24. Question 2) Visit the NetFlix website. Do you agree with them that their real-time personalization system is critical to their business success? Competitive Market cont. • Because this is a real-time service NetFlix can stay competitive and also have the competitive advantage in the way of having the product delivered right to your door with no late fees when they are returned Elizabeth Cates

25. Question 3) Do you think salespeople will appreciate and benefit from the real-time alert system envisioned for Office Depot? Why or why not? • Advantage: Salespeople can react immediately after they received the sales alert report about one of their customer in their territory can visit customer faster and make special offers • Disadvantage: Salespeople can transmit to fast an offer for their customer, which will be not ideal and will not help to solve the problem Nina Wolf

26. Question 3) Do you think salespeople will appreciate and benefit from the real-time alert system envisioned for Office Depot? Why or why not? • If the salespeople appreciate the new system depends on their attitude to the system • The system will carry out benefits for the salespeople, if they analyze the situation before they react Nina Wolf

27. Questions?