LEADING YOUR COMPANY TO THE WEB

1. LEADING YOUR COMPANY TO THE WEB Ned C. Hill, Dean Marriott School Brigham Young University

2. Electronic Commerce: A Quick Overview • What’s wrong with the old paradigm? • What is e-Commerce? • How large is the market? • How is e-commerce (and the Web) changing business? • Should my company enter Web-space? • What we are doing in the Marriott School and at BYU

3. What’s Wrong with the Old Paradigm?

4. The Paper-based Commercial Transaction Seller Mail Mail Check Check and Remittance Advice Request for Quote Purchase Order Banking System Carrier Quote Invoice Bill of Lading Mail Mail Mail Buyer

5. Keying in the Paper World Seller’s Computer System Keying Keying Keying Keying Postal System Keying Keying Keying Keying Buyer’s Computer System

6. What’s Wrong with this Picture? • Labor intensive • Slow • Error prone • Uncertain • Excessive inventory (and cash) • Bottom Line: IT’S EXPENSIVE

7. What Can We Do? • Option 1: Make paper work harder • Option 2: Get rid of the paper altogether

8. Definitions of e-Commerce Simple: “The selling of products and services using the Internet.” More General: The use of computer and communication technology to facilitate the information exchange between two parties in a commercial transaction.

9. Primary Types of e-Commerce • Paperless: • Application to application • Electronic data interchange (EDI) • Financial EDI (firm to bank) • File transfer • Manual to application • Web applications • Electronic order entry • E-mail

10. Additional Types of e-Commerce • Physical media assisted by computers: • Facsimile transmission • MICR, OCR, ICR • Bar coding • RF • Voice recognition

11. Map of e-Commerce EDI, FEDI, FTP All Electronic Internet, E-mail, E-trade MICR, OCR, ICR, Bar Coding FAX All Paper Traditional Paper Transactions

12. An e-Commerce Transaction Seller Bill of Lading Request for Quote Banking System Quote Payment and Remittance Advice Invoice Carrier Purchase Order Goods Buyer

13. Manual Processes in an e-Commerce World Seller’s Computer System Keying Translation Translation Translation F.A. F.A. F.A. Computer Network (VAN, Internet) Invoice P.O. RA Keying Translation Translation Translation Buyer’s Computer System

14. Benefits of e-Commerce • Lower personnel costs • Reduced error rates • Faster cycle time • Improved customer service • Reduced inventory • Fewer stock-outs • Reduced paper handling costs • Faster payments • Better control over information

15. What is the Size of the U.S. e-Commerce Market? • Accurate data is hard to find • Three measures • Number of online households • Revenues from Web advertising • Dollar volume of transactions through the Web • This is NOT the entire e-commerce market • EDI market is even higher than Web market

16. Online Households Million From Net Profit by Peter S. Cohan

17. Web Ad Revenues $ Million From Net Profit by Peter S. Cohan

18. Business Through the Web $ Billion Est. from the U.S. Department of Commerce

19. Cost Curves • Labor costs • Paper costs • Building costs vs. • Computer costs • Telecommunication costs

20. Faster and Faster!Time Required to Transmit the 32 VolumeNew Encyclopedia Britannica • 1200 bps modem……………………..…28 days • 28.8 Kb modem………………………..28 hours • Basic Rate ISDN…………..……….…6.3 hours • T-1 line………………….……….….31 minutes • T-3 line………………………………..1 minute • ATM-SONET (OC-3)……………....17 seconds • ATM-SONET (OC-12)………….....4.7 seconds • Newly proposed technology…… .005 second

21. How the Web Changes Business Traditional Web Broadcast: 1 to N Network: N to N Sellers more powerful Buyers gain more power Customer loyalty Less customer loyalty High barriers to entry Low barriers to entry Speed: slow Speed: very fast Charge for each product Often give away products Transactions costs: high Transaction costs: low

22. Should My Company Enter Web-Space? • Do we have $100,000 to $200,000 to invest in launching a Web site? (And are we willing to invest in maintaining it?) • Are our competitors involved in the Web? • Do our customers demand Web services? • Do we have customer service opportunities that could be improved via the Web? • Is a significant portion of our customer base under the age of 30? • Do we want to be in business 2-5 years in the future?

23. Three Stages of Web Involvement • Stage 1: “Brochure” • One-way information broadcast • Lowest cost, easiest to maintain • A holder for your place in e-commerce • Stage 2: “Basic Transactions” • Offer basic transactions: orders, payment • Requires significant maintenance, real-time processing • May compete with existing business avenues

24. Three Stages of Web Involvement • Stage 3: “Complete Business Partnership” • Multiple transactions with customers • Integrated functionality • Builds customer loyalty, long-term relationships • Involves major funding commitments

25. Three Stages of Web Involvement Stage 1 Stage 2 Stage 3 Cisco: Product Info. Design Orders Status Customer service Delivery Payment LandsEnd: Catalog Orders WSJ: News

26. Suggestions on Entering Web Space • Keep your focus on your customer--don’t get lost in the technology • Use EC to improve processes and information flow--don’t pave over old cow paths • Develop customer loyalty by providing multiple connections that add value • Partner when necessary to widen your ability to provide services

27. Can We Sell Through the Web? Web Applications Difficult/Impossible Web Applications OK but Must Be Sophisticated Simple Complex Product Web Applications OK Web Applications OK Unskilled Sophisticated Customer Knowledge Level

28. Can We Sell Through the Web? Cisco Estate planning Dell Simple Complex Product Term insurance Amazon.com Groceries Unskilled Sophisticated Customer Knowledge Level

29. Suggestion: Analyze the Timelines You Create for Your Customers • What processes do they go through to find us? • How do we tell them about our products? • How do they order from us? • How do they contact us about customer service problems? • How do they pay us? • What other information would they like to have about status, payments, availability, etc., and how do they get it?

30. Determine Your Timelines Seller Mail Mail Check Check and Remittance Advice Request for Quote Purchase Order Banking System Carrier Quote Invoice Bill of Lading Mail Mail Mail Buyer Time delays, internal processing, costs, bottlenecks

31. Want to Find an Internet Business Opportunity?Hint: Study Possible Timelines • Consumer shopping • Applying to college • Buying a house • Booking a flight • Checking out a book from a library

32. Illustration: NetRoadshow • Public stock and bond offerings • Old timeline: • Executive visits to possible customers • Extensive exchange of paper information • Innovation: • Create electronic roadshow • Customers get passwords to watch at leisure • Information exchanged electronically • Sales calls follow • Results • SEC approved • Over 400 shows in 1999, at $20,000 each • Goldman Sachs, DLJ, Bear Stearns use • Company acquired for $50M by broadcast.com

33. The University--As a Business • BYU located in Provo, Utah • 31,000 students--largest private university campus in U.S. • 300,000 alumni • 6,000 employees • $300 million annual budget • Cost structure: 80% salary

34. TheMarriott Schoolof Management • 110 faculty • 5 masters programs, 2 undergraduate • MBA, top 50 (tops in “payback”) • Masters of Accounting, number 2 • 2,300 undergraduate students • 700 graduate students • 1,100 graduating students per year

35. Why We Entered Web Space • Marketing • Competition uses Web extensively • Image is important (rankings) • Desire to improve “customer” service • Prospective students • Current students • Alumni • Recruiters • Desire to extend influence internationally • Need to contain costs/positions

36. How We Did It • Used outside consultant to develop strategy • Brought together all programs and functions • Developed list of priorities • Coordinated with rest of university efforts • Formed a Web development team • Four students plus full-time staff member • Analyzed top Web sites from other universities and companies • Developed plan to phase in Web site over time

37. Marriott School Web Site • Phase 1: Infrastructure and design • Went online Aug. 30th • Primarily information (“Brochure Stage”) • Navigation tools developed • Phase 2: Database integration • Data base driven pages (Oracle) • Some transactions (applications) • Ease of maintenance • Online spring 2000 • Phase 3: Transactions and customization • Multiple transactions and value-added services • My Marriott, My Courses, My Students, etc. • Online fall 2000

46. Other Uses of e-Commerceat Brigham Young University • Grade transcripts EDI • Telephone bills EDI • Inter-library loans EDI • Applications Internet • Student loan documents EDI • Course registration Intranet • Ordering supplies Internet • Course delivery Internet, etc.

47. Technology Goals at BYU • Permanent e-mail address for all students/alumni • Moving towards use of Internet for 100% of applications and registrations • Apply EDI to purchasing, invoicing, prices, etc. • Move 100 correspondence courses to Internet by Jan 2000 (then 200, 300, etc.) • Intranet-based services for students, alumni, recruiters, etc. • Increase electronic holdings for library • Use of Internet to assess teaching, services, etc. • Will soon require laptops for all students

48. Changing the Educational Paradigm • Utilize technology to help deliver course content • Asychronous vs. synchronous • Mixed-mode learning • Use professors for what they do best • Mentoring • Q & A • Discussion subjects • Use technology for what it does best • Exercises • Factual material • Objective testing

49. Examples of Computer-Assisted Courses Course Key Feature • Chemistry Replaces lectures • Rat Lab Decreases costs • Bacteriological Lab Allows experiments • Engineering Technology Controls equipment • Languages Adaptive learning • Music Visualizing Bach • Accounting Repetitive drills

50. Conclusions • Technology is changing the business (and the educational) paradigm • Learn all you can about e-commerce • Direct benefits of e-commerce are impossible to measure--but can you measure the value of your telephone? • You will be doing e-commerce sooner or later--might as well get started now!