Chapter Three
Digitizing the Business:
e-Business Patterns
Table of Contents
e-Business Patterns:
The Structural Foundation
e-Channel
Click-and-Brick
e-Portal
e-Market Maker
Pure-E “Digital Products”
© e-Business Strategies, Inc.
-2-
www.ebstrategy.com
e-Business Patterns: Structural Foundation
In dynamic market environment, manager’s
challenge is how to tell forest from trees
– Are we investing in the right business opportunity?
– Are these opportunities ever going to be useful?
– Are we using the right business model to attack
these opportunities?
The Scoop: New, Web-enabled firms eating into
large, old-economy companies’ businesses
So: Managers of old-economy companies need
right support tools to make strategic moves,
allocate scarce resources, and manage risk
© e-Business Strategies, Inc.
-3-
www.ebstrategy.com
e-Business Patterns: Structural Foundation
But: Choosing target strategy complex
– To move online, large brick-and-mortar
corporations either swallow a startup or go at it
alone. Which is the right approach?
Implication: With focus shifting from physical to
digital assets, managers must monitor
macroeconomic and customer trends
– To trigger new e-business structural designs
– Resulting new business models form the basis for
next gen corporate strategic planning
Sadly: Many companies still not taking the
digital world seriously
© e-Business Strategies, Inc.
-4-
www.ebstrategy.com
e-Business Patterns: Structural Foundation
Bottom line: We are still in early stages of the eBusiness revolution
– There have been and will be moments of extreme optimism;
also moments of extreme pessimism
– What is certain is that it is creating opportunities for
companies willing to adapt
– For others, it represents a destabilizing threat to the status
quo of business-as-usual
– When all is said and done, we’ll find big corporate winners
join ranks of premiere companies in the world
Aim of this chapter
– Help identify winners
– Discuss characteristics leading to their success
– Analyze discernible patterns for better understanding
© e-Business Strategies, Inc.
-5-
www.ebstrategy.com
Going Digital
First step in identifying an e-business leader
– Look at companies asking the innovative questions that are
transforming the rules of today’s business game
When innovative companies change the types of
strategic questions that they ask themselves, the result
is business revolution
– In 1970s, the Japanese posed new questions and changed
rules of the Auto industry
• Not gas-guzzlers, how do we create fuel-efficient cars?
• Not cars that break down, how can we create a highquality car with few manufacturing defects?
• Not piles of “just-in-case” inventory, how can we create a
“just-in-time” inventory process?
© e-Business Strategies, Inc.
-6-
www.ebstrategy.com
Going Digital
In mid 1980s, it was Wal-Mart
– Not what business are we in, what business should we be
in?
– Wal-Mart turned from retailer into supply chain expert
– Offered right product mix at right store
In mid 1990s, it was new entrants who rose to challenge
almost every leading company
– Questions about customer and business model, not
processes, thus challenging sentiment of early 1990s among
leading companies
– AOL vs. CompuServe and Prodigy
– Dell vs. Compaq and IBM
– EMC vs. IBM and StorageTek
– Sun Microsystems vs. HP and Silicon Graphics
© e-Business Strategies, Inc.
-7-
www.ebstrategy.com
Going Digital
In the 2000s, the questions for today’s business
leader will be on the speed with which his/her
firm implements e-business solutions powered
by recent innovations
– How fully digital can we make our customers’
experience?
– Our supply chain?
– Our internal operations and processes?
– Intuit transformed from a stand-alone PC-based
business model into an online financial services
portal when the Internet emerged to threaten it’s
business
© e-Business Strategies, Inc.
-8-
www.ebstrategy.com
Going Digital
Startups continue to shape the direction of
today’s business by taking advantage of recent
technological innovations
E-Business can change the way companies
interact with customers, communicates, sells,
purchases, manufactures, and develops
products
Asking a new question not only produces new
answers but also reinvents the game
Result: a cost advantage that’s not 10 percent
better than competitor’s but rather many fold.
© e-Business Strategies, Inc.
-9-
www.ebstrategy.com
Analyzing the Environment
e-Business Patterns
The structural
foundation sets the
new rules of the game
e-Business Models
The strategic
framework allows you
to compete in the game
e-Business Designs
A specific strategy for
what you need to do in
the marketplace
© e-Business Strategies, Inc.
• What is the new opportunity based on certain
customer and market trends?
• What are the macro-economic drivers of the
business change?
• Which digital technologies are going to dominant
your industry?
• What models are better suited to take advantage of new
business opportunities?
• What business processes need to change?
• How do you move from existing model to an e-model
reflecting your firm’s organizational readiness?
• What are the challenges management must face when
executing the new business model?
• Who are your target customers?
• What is your value proposition?
• How do you make money?
• How to finance the company?
• How do you get and retain customers?
• How to attract and retain talented people?
- 10 -
www.ebstrategy.com
Focusing on the Whole Picture
Begins as a Channel, But Extends to
Total Transformation of Business
e-Channel
E-Portal
(B2C)
Pure E
Click and Brick
E-Market-Makers
(B2B)
• Basic efficiency,
effectiveness
enhancements
as the selling
becomes E-enabled
• Traditional business
transferred to the
Net
• Selling
goods/services
• New forms of supply
chain integration
• Payment/settlement
enhancements
© e-Business Strategies, Inc.
• Rise of new
intermediaries
• Consolidation/
transformation of
intermediary
industry
- 11 -
• Customer Expects
“E” everywhere
• Fundamental redesign
of business
• New structures to
allow market making,
trading and virtual
warehousing
www.ebstrategy.com
Table of Contents
e-Business Patterns:
The Structural Foundation
e-Channel
Click-and-Brick
e-Portal
e-Market Maker
Pure-E “Digital Products”
© e-Business Strategies, Inc.
- 12 -
www.ebstrategy.com
Table of Contents
Transaction
Enhancement
e-Channel
Compression
e-Channel
e-Channel
Expansion
e-Channel
Innovation
© e-Business Strategies, Inc.
- 13 -
www.ebstrategy.com
Transaction Enhancement
Augments or replaces the old transaction method
– Home Depot
In most cases, does not alter other aspects of the
process
Consumer
Manufacturer
Electronic Transaction
Sometimes, more technically savvy companies may gain
business from other firms, thereby altering the identify
of players in the channel
– Dell
– Gap
© e-Business Strategies, Inc.
- 14 -
www.ebstrategy.com
E-Channel Compression
Eliminates redundant steps in the channel
– When value added by channel is less than cost of
the channel
– Cisco partner/reseller “always on” e-channels
– Southwest eliminated the ticketing agent “link” by
moving information sharing and transaction
processing online
– Online stock trading
– Amazon.com
X
Consumer
Manufacturer
Electronic Transaction with Disintermediation
© e-Business Strategies, Inc.
- 15 -
www.ebstrategy.com
E-Channel Expansion
• Lengthens the legacy channel
• Counterintuitive? Inefficiencies in the marketplace can
make this approach a necessity
• Infomediaries
– Carpoint in automotive market
– Intuit in financial services
• Vstore.com
Consumer
Manufacturer
Electronic Transaction, Metamediation
© e-Business Strategies, Inc.
- 16 -
www.ebstrategy.com
E-Channel Innovation
Pioneering new channels to satisfy and to
anticipate unmet and potential customer desires
– E-Stamp
Given the high stakes, companies everywhere
want to make it easier and more enjoyable for
customers to do business with them
– In every industry, customer base is fragmented
into multiple segments, each with its own behavior
and needs
– Diversity of customer tastes and needs has led to
a revolution in where, when and how customers
buy the products and services they seek
– Winner will take all!
© e-Business Strategies, Inc.
- 17 -
www.ebstrategy.com
Table of Contents
e-Business Patterns:
The Structural Foundation
e-Channel
Click-and-Brick
e-Portal
e-Market Maker
Pure-E “Digital Products”
© e-Business Strategies, Inc.
- 18 -
www.ebstrategy.com
The Click-and-Brick Pattern
Brick and mortar + Click and
order = Click and Brick
The C&B pattern allows an
existing offline business to
profit from partnering with an
emerging online presence.
– Charles Schwab
Established retailers are
creating new C&B patterns.
Brick & Mortar
Click
• Localized
inventory
• In-store
shopping
experience
• Immediacy (try,
buy, take home)
• Service (returns,
repairs,
exchanges)
• Infomediation
• Speed
• Direct, one-toone experience
• Personalized
content
• Automation
(assistants,
alerts)
– Land’s End
A new variation in C&B
strategy
Click & Brick
– Amazon.com and Toys “R”
Us
© e-Business Strategies, Inc.
- 19 -
www.ebstrategy.com
Why the Click-and-Brick Pattern
Physical stores offer convenience and personal service
– Order online but return at store for an exchange
Established retailer’s clout should procure higher-quality
merchandise for its Web sites than a start up
– Exceptions: commodity items, ex. books
Efficient branding of Web sites through store fronts
– Established retailers’ storefronts are living, 3-D billboards
Traditional retailers have serious cost advantages
– Spend half as much to acquire each new customer as do
Web-only retailers
© e-Business Strategies, Inc.
- 20 -
www.ebstrategy.com
Webvan
Discuss with Ravi the purpose and nature of
this case, now that Webvan is out of this
business
© e-Business Strategies, Inc.
- 21 -
www.ebstrategy.com
Management Challenges
• Lack of merchandise selection on site
• Lack of communication and mgmt
collaboration between the Web site and store
staffs and separate channels for fulfilling
orders and resolving customer and process
problems
• Hiring second-tier talent to staff the Web sites
• Continuing to invest millions of dollars on
Web commerce initiatives w/o generating a
positive ROI (return on investment)
© e-Business Strategies, Inc.
- 22 -
www.ebstrategy.com
Table of Contents
e-Business Patterns:
The Structural Foundation
e-Channel
Click-and-Brick
e-Portal
e-Market Maker
Pure-E “Digital Products”
© e-Business Strategies, Inc.
- 23 -
www.ebstrategy.com
The e-Portal Pattern
Portals are “Killer” apps of e-business
An intermediary or middleman offering an aggregated
set of services for a specific well-defined group of users
– Yahoo! Organizes collections of news, search and
communication services for consumers
– E-Bay, E-Loan, and E*Trade for business activities related to
auctioning, loan financing, and stock trading, respectively
Portals occur when new players succeed in positioning
themselves between customers and suppliers
– Customer focused, enter chain to address specific customer
dissatisfaction with current way of doing business
– Either add value-added services to market channel or
decrease transaction costs of customer/supplier relationship
© e-Business Strategies, Inc.
- 24 -
www.ebstrategy.com
Table of Contents
Eyeball Aggregators
Or Superportals
e-Portal
Auction Portals
Megatransaction
Portals
© e-Business Strategies, Inc.
- 25 -
www.ebstrategy.com
Eyeball Aggregators or Superportals
Attract and direct consumer
traffic with free content and
service offerings
– Deliver customers to
retailers for a fee
(advertisement based or %
of transaction)
Media Network
Retailers leery of
superportals
Commerce Portal
– Disintermediation, especially
of repeat buyers
Yet the mass buying power of
superportals considerable
– Forcing online retailers to
bid for a superportal’s
business
© e-Business Strategies, Inc.
Communications
Portal
Sticky Content
(GeoCities Acquisition)
Content Portal
Search Engine
- 26 -
www.ebstrategy.com
Auction Portals
• Enable buyers and sellers to engage in transactions
across geographic and demographic boundaries
• More than just marketplaces
– Unique community of collectors and hobbyists
• Similarity with traditional auctions
– Highest bidder wins
• What is different
– Online auction does not have the physical merchandise
• eBay
© e-Business Strategies, Inc.
- 27 -
www.ebstrategy.com
Megatransaction Portals
Category killers
– Lock up portal real estate and create a critical mass of
customers
– Travelocity in online travel and Hoovers for financial news
Online travel services portals
– Killing traditional agencies
• Reduced agent commissions; Consumers’ acceptance of
paperless transactions; Ease of use of completing online
transactions
– Expect to see consolidation and integration in online travel
• Expedia offers airline tickets, hotel rooms, air/hotel
packages
– Travel services portals to consolidate along two segments
• Full-service and off-price discount
– Keys to success
• Automation of the look-to-book process
• Channel synchronization
© e-Business Strategies, Inc.
- 28 -
www.ebstrategy.com
Table of Contents
e-Business Patterns:
The Structural Foundation
e-Channel
Click-and-Brick
e-Portal
e-Market Maker
Pure-E “Digital Products”
© e-Business Strategies, Inc.
- 29 -
www.ebstrategy.com
The e-Market Maker Pattern
Online intermediary, connects disparate buyers
and sellers within a common vertical industry
– Eliminates channel inefficiencies; aggregates
offerings from many sellers or matches buyers and
sellers
– Buyers: lower purchasing costs; reach new
suppliers
– Suppliers: lower sales cost; reach new customers
Revenue models:
– % of transaction, subscription, mark-up
© e-Business Strategies, Inc.
- 30 -
www.ebstrategy.com
The e-Market Maker Pattern
Major role for e-Market makers in industries
with these characteristics:
–
–
–
–
–
–
Large market size
Fragmented supply chain
Unrecognized vendor or product differentiation
High information-search costs
High product-comparison costs
High workflow costs
© e-Business Strategies, Inc.
- 31 -
www.ebstrategy.com
The Pure E-Digital Products Pattern
New innovations in s/w, h/w and communications
placing digital content at center of business
– software, music, video, news
– digital goods produced, delivered, consumed and licensed
electronically
– delivery of digital goods already changing; delivery as a
service
Growth of digital products due to
–
–
–
–
–
proliferation of Internet devices
cheap and abundant availability of bandwidth
inexpensive PCs, more free PC programs
industry standardization of APIs
XML permitting interface between data and speech and other
systems
© e-Business Strategies, Inc.
- 32 -
www.ebstrategy.com
The Pure E-Digital Products Pattern
3 types of entrepreneurial activity characterize
digital-goods market
– high-quality end user technologies, services and
products
– s/w and h/w platforms
– distribution infrastructure
© e-Business Strategies, Inc.
- 33 -
www.ebstrategy.com
High-Quality, High Speed Content to
Consumers: Digital Music
Internet altered how music
will be distributed
– “Collapse of the middle”
pattern
– Artists bypassing major
labels to reach audience
directly
– Business as usual will soon
mean no business at all for
many of the industry’s
middlemen
– New companies and peerto-peer technologies
emerging to meet needs of
the digital music download
business: MP3.com,
Napster, Gnutella, Pointera
© e-Business Strategies, Inc.
- 34 -
www.ebstrategy.com
New Platforms for Digital-Media Delivery
Market for delivery of Internet services through
handheld devices new and evolving rapidly
– PDAs and mobile phones
WAP standard emerging for delivery of Internetbased services to mass-market wireless phones
WML for Internet apps and content for wireless
phones
Next gen mobile delivery systems include voice
browsers and speech-recognition systems
– TellMe and HearMe
© e-Business Strategies, Inc.
- 35 -
www.ebstrategy.com
New Infrastructure Services for Digital
Content Delivery
New infrastructure services required to support
faster content distribution
– Content delivery or congestion mgmt services
• Digital Island and Akamai Techologies
– Caching services
• Inktomi and CacheFlow
– Outsourcing services
• Exodus or Level 3
Supported by different business models
– Content delivery vendors paid by Web site owners
but
© e-Business Strategies, Inc.
- 36 -
www.ebstrategy.com
E-Business
Strategies, Inc.
www.ebstrategy.com
contact@ebstrategy.com
678-339-1236 x201
Fax - 678-339-9793