Implementing e-Business Solutions: Lessons and Challenges

1. Chapter 6: Implementation

2. GUEST SPEAKER Tuesday, April 17 11:00-12:15 or 12:30-1:45 Room 216 AZUL CASARES Patagon Topic: Her experience starting Patagon

3. TODAY’S CLASS 5:00-6:00 Discussion: Implementation 6:00-6:15 Break 6:15-7:40 Don Hazell, BEA Systems “Practitioners Perspective on Implementing e-Business Solutions”

4. Homework due next session • Prepare Case: Chapter 8 • Prepare Crossfire - Valuation of e-Businesses • Prepare Amazon.com • Supporting articles: “Disciplined Decisions,” “Investment Opportunities as Real Options,” and “A General Manager’s Guide to Valuation,”

5. Ideas are critical… Innovation is the mainspring of the new economy. But as more and more companies compete in ideas, the game changes to competing in the implementation of the ideas. In this next stage of competition: Getting an idea gives way to getting it done!

6. Lessons from HelloAsia.com(Fast Company, June 2000) - Don’t move until you know where you’re going - Strategize globally, but plan locally - Don’t make a move until all your people know their places - Write it down - The best-laid plans need to change

7. Change Without PainHBR, July 2000 - Reward Shameless Borrowing - Appoint a Chief Memory Officer - Tinker and Kludge Internally First - Hire Generalists

8. Marketspace Evolution and Need for Continuous Innovation • Brand Promise • Branding • Marketing communications • Customer interface Implementation • Objectives • Achieve strategic goals • Adjust product offering and delivery system to rapidly changing marketspace environment Delivery System Innovation Process Deliver on the promised experience Renew/innovate the customer experience Source: Monitor Analysis

9. Two Integral Components of Implementation • Objectives • Deliver the promised customer experience • Turn strategic intent/concepts into results Build the infrastructure to deliver on the brand promise • Objectives • Maintain fit between marketspace evolution and the company’s delivery system and product offering Innovate/Renew the customer experience Source: Monitor Analysis

10. What do I like? - Cases and discussions (9) - Relevant topics & Strategy aspect of the material - Talking about controversial issues & unresolved problems - Project “working on real projects with real customers - Analysis of business models that are failing - Textbook and readings - Combining theory and practice - Small size of the class

11. What do I not like? - Projects (too structured, too undefined, too narrow, too controlled, poorly pre-screened, companies not “on board,” better negotiated to run more smoothly, better organized). - Lengthy discussions - Time management of the classes - More speakers - Too many readings

12. Why Does Implementation Matter? Strategy Appropriate Inappropriate • Success • All that can be done to ensure success has been done • Roulette • Good execution can mitigate poor strategy, forcing management to success or • Same good execution can hasten failure Good Implementation • Trouble • Poor execution hampers good strategy -- management may never become aware of strategic soundness because of execution inadequacies • Failure • Difficult to diagnose -- bad strategy masked by poor execution • More difficult to fix -- two things are wrong Poor Source: Modified version of materials in Thomas V. Bonoma, The Marketing Edge, The Free Press, 1985

13. Challenges of Online Implementation Essential Challenges of Online Implementation Organization-Driven Customer-Driven Lower switching barriers = increased importance of good implementation More complex linkages = increased complexity of implementation More visibility of errors = stronger competitive implications of errors More fluid organizational boundaries = increased complexity of implementation More dynamic market environment = increased complexity of implementation Customer-Driven Organization-Driven

14. From Built to Last to Built to Rebuild Sources: Frederick P. Brooks, Built to Last, Harper Business Smart Way to Start, 10 Principles of the New Economy, Business 2.0, March, 2000

15. The Delivery System Needs to Support and Reinforce the Resource System Delivery System Mapping the Resource System People Supply Chains Processes Systems Assets Source: Clayton M. Christensen, Meeting the Challenge of Disruptive Change, Harvard Business Review 78, no. 2, March-April 2000

16. Four Types of Supply Chains Found in Marketspace B2C (Business-to-Consumer) B2B (Business-to-Business) • Stock-It-Yourself • Outsource Warehousing • Drop Ship • Fulfillment Intermediaries • Customer-Centric • Vertical Hubs C2C (Consumer-to-Consumer) C2B (Consumer-to-Business) • Much like a vertical hub, many sites (e.g., eBay) have created customer-to-customer sales • Provides a forum for buyers and sellers to meet • Buyers and sellers trade directly (eliminating an intermediary) • A global marketplace with a large and interested trading company • C2B companies include auction services like Priceline.com. Individual consumers place bids with businesses and businesses decide whether to sell. • Also includes consumer group buying companies like Mercata.com. Mercata.com is a trading community where the more people that purchase a product, the lower the price is. Mercata allows consumers from around the world to achieve group scale economies.

17. Where to Play Online and Offline Online Offline CustomerInterface Yahoo! McDonald’s BN.com Egghead Fulfillment Systems Amazon.com

18. Innovation Used to be Slow and Gradual in the Offline World 3M’s Research Paradigm Key Takeaways • Traditional offline innovation took years and emphasized sustainable/gradual innovation • Marketspace still offers room for incremental innovation, but emphasis shifts to more drastic innovations • High information content of innovation objects increases speed of innovation from years to months or even shorter • Short history of marketspace means new collaborators/complementors become available frequently Source: Ernest Gundling, The 3M Way to Innovation, Kodansha America, Inc., 2000

19. The Offline Innovation Process Was Internal to the Firm Innovation by Doodling Innovation by Design Innovation by Direction

20. Offline Innovation Process vs. Online Innovation Process Offline Trade-Offs/Principles Supporting Funnel Approach Online Principles • Investments required to launch new innovation very high • Limited resources force tradeoffs/choices about which innovations to pursue or not • Tradeoffs/choices are made inside the organization before product hits the market • Time-to-market/first-mover imperative needs to be traded off with extensive time required to gather customer input • Launching early increases risk of flops and flops need to be avoided at all times: • Costs of flow very high • Significant damage to brand equity • Investments required to launch new products and services very moderate • Choices about future of new innovations can easily be made by markets, no need to make these choices internally • First-mover imperative can be aligned with gathering (more) customer input • Launching beta versions allows for revisioning/customization, actually benefiting innovator • Keys drivers determining success of innovation/implementation are: • Customer base • Customer data analysis • Knowledge management

21. New Innovation Frameworks Addressing Co-Evolution Have Emerged Performance Demanded at the High End of the Market Progress Due to Sustaining Technology Product Performance Performance Demanded at the Low End of the Market Progress Due to Sustaining Technology Disruptive Technological Innovation Time Source: Clayton M. Christensen, The Innovator’s Dilemma, Harvard Business School Press, 1997

22. New Innovation Frameworks Addressing Co-Evolution Have Emerged Low 2 5 Developer-Driven Development Technology/Market Coevolution 3 Maturity of Technology Design User-Context Development New Application or Combination of Technologies User-Driven Enhancement 1 4 High High Low Alignment of Product Line With Current Customer Base Source: Dorothy Leonard-Barton, Wellsprings of Knowledge, Harvard Business School Press, 1996

23. Beta 1 Integrating New Technology with Customer Preferences Evolution of Technical Possibilities Initial Input Product Release Beta 2 Beta 3 Evolution of Customer Preferences Source: Marco Iansiti and Alan McCormack, New product development on the Internet, Sense & Respond, Harvard Business School Press, 1998

24. The Development of Navigator 3.0 SpecificationsComplete FullRelease Start Input from User Feedback Objectives Feature Design and Coding Integration Stabilize Beta 2 Beta 0 Internal Beta 6 Beta 4 Beta 3 Beta 1 Beta 5 Jan Feb Mar Apr May Jun Jul Aug Source: Marco Iansiti and Alan McCormack, Sense & Respond, Harvard Business School Press, 1998

25. Distributed Innovation Customers Collaborators Company = Boundaries of the firm = Feedback loop Competitors Suppliers Enablers

26. Schwab IT Infrastructure Source: Nicole Tempest and Warren McFarlan, Charles Schwab Corporation (A), Case no. 9-300-024, Harvard Business School Publishing, September 9, 1999

27. November 9, 1999 • Paperless trading with eConfirms October 7, 1997 • SchwabLink available on the Web May 7, 2000 • Stock Analyzer launched, offering third-party equity analyst recommendations and earnings projections October 20, 1999 • After Hours trading • OneSource: Mutual fund program allowing investors to purchase Schwab and non-Schwab funds free of charge October 1, 1997 • First speech-recognition service for investors October 1995 • eSchwab: Electronics software package dialing into Schwab system May 14, 1998 • First US website enabling order placement in Chinese • Telebroker: 24/7 quote and order placement by telephone • Entire trade clearing system brought in-house August 19, 1999 • Plans for cross-platform wireless trading February 3, 2000 • Learning Center: Interactive education tool for online learning April 16, 1999 • New site based on user input May 24, 1999 • MySchwab launches September 1997 • Customized asset allocation tool available online January 27, 1998 • MoneyLink: Electronic funds transfer service March 7, 2000 • Schwab and Barclays announce Internet-based foreign exchange service January15, 1998 • Schwab.com launches April 27, 1999 • Retirement Planner online • Equalizer: DOS-based product enabling PC users to trade stocks online • SchwabLink: Service for fee-based financial advisors • Streetsmart: Windows-based software allowing online trading of equities, bonds and mutual funds March 1996 • Upgraded eSchwab: First major brokerage firm to offer trading via the Internet August 14, 1999 • Velocity software trading system for active investors January 20, 1998 • IRA Analyzer launches March 15, 2000 • Schwab expands advice offering with Portfolio consultation September 8, 1999 • New Web tools for investment advisor offering September 21, 1998 • CD ROM tool for retirement setup and monitoring March 31, 2000 • Schwab and Dow Jones unveil online Chinese news and research service November 23, 1998 • Web tool to track and benchmark investor performance November 23, 1999 • Velocity 2.0 launch June 1995 • Advisor Source: Referral service for fee-based advisors December 1, 1999 • Enhanced Analyst Center December 22, 1999 • New online mutual fund tools Timeline for Schwab Innovations