Successful
E-Business
Prepared for AWC
September 19, 2000
James Wong, President & Founder
www.focitech.com
Agenda


A Little Background
Answer 5 questions:








Why E-Business?
How does E-business Fit with Current
Business?
What are the economics of E-Business?
What are the risks?
How do you prepare for E-business
Market Challenges
Why Foci (Of Course)
Question & Answer
Backgrounder




Met at Arthur Andersen
Largest bond scandal investigation
Pioneered real-time online extranet
Every business needs this in 1996
Yeah right
 Mom’s banana bread

I. Why E-Business



Currently less than 1% of US Economic Activity
Implications: Disrupt the Basic Rules of
Competition
Manufacturing and Supply Chain Companies
with E-Business




½ the overhead of median competitors
40% to 60% lower working capital per unit of
sales
5% - 10% lower costs of goods & services
Corresponding levels of productivity & efficiency
E-business a waste of
money. Not!!!



IBM and Cisco savings of $500 to $750
Million a year.
Dell Computer, Intel & dozen other
leaders are selling well over $1 billion a
year.
Enterprises that have implemented ebusiness solutions saw their client base
increase by 8%
Financial Services &
Securities Trading





Online trading a danger to US economic
health
Within a year, it became an online
player
1/3 of all trades now occur online
70% of all Charles Schwab trade online
World wide explosion of online trading
Car Dealer Market



Relatively small numbers of cars directly
bought online
> ½ buyers research online before hand
Dealers facing 10% to 15% price cuts as
a result
II. How does e-business fit
with current business?

“Must do” list for companies
1.
2.
3.
4.
5.

Perfect you long-term customer relationships
Harmonize all your channels on behalf of the
customer
Perfect your logistics
Position yourself to be a power brand
Seek to become a value-adding intermediary
Why is it important?

Customers, channels, logistics, brands and
differentiation
1. Customer Relationships



Death of transaction economy
Cutting price for online and offline
enterprises by 10% to 15%
Key to success is repeat business
Amazon 70% repeat business
 Spends 20% on customer acquisition


Established business is at an advantage
~ $200 for services
 ~ $30 to $50 for products

2. Channel Harmony




Original premise: “channel conflict”
Channels must complement and mesh
with existing channels
Now it’s “clicks and bricks” or “click and
mortar” instead of “clicks vs. bricks and
mortar”
Compaq having problems trying to
bypass distributors
3. Logistics



Critical to the competitive game
Amazon spending millions on
infrastructure
Dell and WalMart won through logistics
4. Branding

Erosion of product brand equity to
relationship brand equity


Established brands have advantage



Amazon, AOL, Yahoo!
Walmart, Dell, Toys R Us
Create a brand on the Internet – how
much?
Took AOL $??? Million to create it’s
brand
5. Value-Adding
Intermediaries

IT traditionally been disintermidiation


B2B supply chain mgmt hubs


I.e. Touch tone phone and cash machine
Ariba handled $70 B supply chain transaction
within 6 weeks, $120 B in a year
Well defined vertical hubs reducing supply
chain costs by 20%

Chemdex charges 5% to 10% vs 40% to 80%
commissions
III. What are the New
Economics of E-business

Today’s accounting rules are distorting
real economics of e-business


Marketing / Customer acquisition costs
should be depreciated. It’s really R&D.
Repeat business generate much higher
margins.

Yahoo!, eBay & Amazon generate 70%
to 85% margins on digital services
IV. What are the Risks?

Business model risks


Industry boundary risks



Autobytel – locate, negotiate, arrange financing
and insurance, and deliver car
Is it a car dealer? A banker? A shipper?
Economic risks


Many don’t appear to have a real business
model just Internet “strategy” and web-site plan
Many costs – cust. acq, technology, mktg
Organizational risks

How to think like an ebusiness? Speed? Talent?
V. How to prepare for EBusiness

Spinoff


Mix results thus far for BN.com, P&G
(reflect.com)
Spinoff is appropriate if:
Unrelated business
 Requires different value discipline
 Address new and different market
 Will deliver a different product range

V. How to prepare for EBusiness (continue)

Build an e-business culture within the
enterprise – best results mandated by
upper mgmt led by marketing
department


Schwab, Wells Fargo, Dell & Cisco
successful
Speed – must move quickly, tolerance
for risks

If e-business team cannot than must
move aside
B2B Versus B2C

B2C



Consumer focus
Substitute for retail
Low value added


“Wham bam give me your credit card man”
B2B



Business-to-business focus
Extending existing relationships with customers,
employees, suppliers and partners
About increasing revenue, and reducing costs
Small vs Mid vs Enterprise
Enterprise
1-to-1
Complex
Integration
Custom Built
BroadVision,
Vignette, Ariba,
CommerceOne
MarchFirst
Mid Market
1-to-1
Complex
Integration
Foci, Allaire, Xuma,
Webridge
Small
1-to-Many
Simple
No Integration
One Size Fits All
YahooStore, iCAT,
zShops
Enterprise Market Challenge





Complex products
Complex pricing
Legacy systems integration
1-to-1 relationships
Unified commerce interface
Foci Well Positioned as Ebusiness Solutions Provider





Focus on mid market businesses
In business since 1996
Proven methodology
Established client base
Validated solutions
Summary

E-business is about extending business
on line



Empowering your customers
E-business is about increasing revenue
& reducing costs
It’s about survival!
Question
& Answer
Contact Information





Jamesw@focitech.com
To learn more visit www.focitech.com
Address: 1808 Bellevue Avenue, Suite
200, Seattle, WA 98122
Phone: 206.320.9868
Fax: 206.320.9866