Electronic Commerce:
Business Models, Strategies, and Implementation
in the Network Economy
Minder Chen, Ph.D.
Professor of Management Information Systems
Martin V. Smith School of Business and Economics
CSU Channel Islands
E-Mail: minder.chen@csuci.edu
Course Web site: http://faculty.csuci.edu/minder.chen/mis310/
Electronic Commerce: Introduction
• Before 1995, the term “E-Commerce” meant Electronic Data
Interchange (EDI).
• The Internet was commercialized in 1995
E-Business
E-Commerce
Commerce
Internet
Commerce
© Minder Chen, 1996-2014
EC - 2
Travelocity
Microsoft Expedia
Priceline.com
Priceline.com
• Priceline (PCLN) was recognized in 2010 for being the
single best-performing stock in the S&P 500 over the past
five years.
• Name your price  Reverse auction, customer-driven ecommerce
• Products/services sold are all perishable goods/services
• Competitors: Orbitz.com, Kayak.com, Hotwire.com,
Expedia, Travelocity, etc.
• Dis-intermediation  direct sales from producers to
consumers, i.e., Cutting out the middleman, e.g., Apple and
Dell
• Re-intermediation  Reintroducing the new middleman,
e.g., Amazon, eBay
© Minder Chen, 1996-2014
EC - 4
Market Capitalization
Who Can Afford Not to Play in the Internet EC Space?
Market Cap (4/16/99)
$11.6 Billion
$ 4.3 Billion
$ 2.5 Billion
$ 2.5 Billion
Cap: 9.771B
Share: $57 7/16
As 6/28/2011
Symbol
Price
Chg
Chg %
Market Cap
PCLN
495.40
8.30
1.70%
23.94B
© Minder Chen, 1996-2014
EC - 5
Priceline Tops $1,000 (Sept. 18, 2013)
• Between April 1999 ~ Oct. 2000, a period when many dot-com
companies failed, Priceline lost 97 percent of its market value.
• The dot-com bubble burst, numerically, on March 10, 2000,
when the technology heavy NASDAQ Composite index, peaked
at 5,048.62. The Nasdaq Composite lost 78% of its value as it
fell from 5048.62 to 1114.11. (March 10, 2000 to Oct. 9, 2002)
• Priceline’s gains have been fueled by its surging international
business through two units, Amsterdam-based Booking.com
(acquired 2005) and Bangkok-based Agoda.com (acquired
2007).
• To diversify its business, Priceline also acquired travel searchengine Kayak Software Corp. for $1.8 billion in a deal that
closed in May 2013. Kayak lets travelers compare prices and
make reservations for hotels, flights, cars and vacations.
Priceline Tops $1,000 (Sept. 18, 2013) on
Growing Demand for Web Bookings [Ref]
© Minder Chen, 1996-2014
EC - 6
The Rise and Fall and Rise of Priceline.com
• By October 9, 2002, in the aftermath of 9/11 (2001), Priceline's stock fell
from nearly $1,000 to only $6.60 a share, while its market value shrunk
from $24.1 billion to $0.25 billion.
“irrational exuberance”
Source:
and fall and rise of Priceline.com
© Minder The
Chen,rise
1996-2014
EC - 7
The Low-Friction Market and E-Commerce Opportunities
• "[The Internet] will carry us into a new
world of low friction, low-overhead
capitalism, in which market information
will be plentiful and transaction costs
low."
-- Bill Gates, The Road Ahead
• "Where there is a friction,
there is opportunity!"
-- Net Ready.
• “Nearly 100% of Innovation – from business to
politics – is inspired not by market analysis, but
by people who are supremely pissed off by the
way things are." - Tom Peters
EC - 8
© Minder Chen, 1996-2014
EC Business Opportunities
• Innovative Ideas, Business
models, and Business strategies
• Funding
• Business and technical talents
• Technological enablers
New business models and ideas are
driving EC initiatives.
Internet technologies are enablers.
© Minder Chen, 1996-2014
EC - 9
The Cycle of Electronic Commerce
Access
Searches
Surfing
Customers
Online Ads
Follow-on Sales
Online Orders
Standard Orders
Distribution
Online: soft goods
Delivery: hard goods
Electronic Customer Support
© Minder Chen, 1996-2014
EC - 10
EC and Business Processes
Seller
Dis/Re-intermediation
Selling Process
Provide
Info
Send info
Data sheets,
catalogs, demos
Corporate Databases
Request info
Phone,
fax, e-mail
Get
customer
Buyer
Procurement Process
Identify
need
Web surfing
Web site
Web searches,
web ads
Find
source
Newsgroups
Provide
info
Demos,
reviews
Fulfill
order
Evaluate
offerings
Net
communities
Web site
P.O.s
Credit cards, e-cash
Purchase
EDI
Deliver soft goods electronically
Support
Web site, phone,
fax, e-mail, emailing list
Operate,
Maintain,
Repair
Customer Feedbacks/Reviews
© Minder Chen, 1996-2014
EC - 11
Study ZipRealty.com
• Findability: Identify needs  Search Criteria
• Result list: Sorting attributes, default sorting
attribute
• Show partial information in the result list.
• Questions:
– What will be the role of real estate agent in light of
emerging real estate web sites such as
ZipRealty.Com?
– How does ZipRealty make money?
– Where does ZipRealty get its data from?
Example: http://www.ziprealty.com
© Minder Chen, 1996-2014
EC - 12
Changes in the Net Economy
• Business environment
– Local / Physical

Global /Virtual

Intangible

Continuous
• Business assets
– Tangible
• Business change
– Periodic
• Business production
– Mass Production

Mass Customization
Mass Personalization
•
Customization is under direct user control: the user explicitly selects
between certain options such as ticker symbols for the stocks you
want to track.
• Personalization is driven by the computer which tries to serve up
individualized pages to the user based on user's needs.
Source: http://www.useit.com/alertbox/981004.html
© Minder Chen, 1996-2014
EC - 13
• Mass customization and market making
Source: http://www.squidoo.com/zazzle101
Source: Zazzle Marketplace http://www.zazzle.com/sell/more/faq
© Minder Chen, 1996-2014
EC - 14
Mass Customization: http://www.zazzle.com/
• The unfulfilled need of a user again was the
mother of invention: The two brothers, Bobby and
Jeff Beaver, wanted to create a cool t-shirt to advertise a
party at their fraternity (in order to "draw in plenty of nice
girls"). They realized how difficult it was at that time to get
high-quality custom t-shirts without having to order larger
quantities at a promotions company or to rely on the low
quality of heat-transfer at the local copy store.
• Unique digital custom printing technologies
• Zazzle is not a technology company – it is a
“market maker ” - How to make a profit on Zazzle
• “Niching the niche” - a mass customization
ecosystem
Source: http://mass-customization.blogs.com/mass_customization_open_i/sneaker/
© Minder Chen, 1996-2014
EC - 15
Network and Information Economy
• Information is costly to produce but cheap to
reproduce.
– Price information according to its value not its cost.
• Managing intellectual property.
– Maximize the value of your intellectual property, not the
terms and conditions that maximize the protection.
• Information as an “experience good”
– Consumers must experience it to value it. How does
Zappos.com (sells shoes etc.) manage to sell
“experience goods”?
– Brand and trust building is critical.
• The economics of attention
– A wealth of information creates a poverty of attention.
© Minder Chen, 1996-2014
Source: Information Rules
EC - 16
Attention Economy (Eyeball, Stickness)
• The attention economy is increasingly one where the
consumer product costs nothing to reproduce and the
supplier need to add valuable intangibles that cannot be
reproduced easily. He identifies these intangibles as:
– Immediacy - priority access, immediate delivery
– Personalization - tailored just for you
– Interpretation - support and guidance
– Authenticity - how can you be sure it is the real thing?
– Accessibility - wherever, whenever (mobile devices)
– Embodiment - books, live music
– Patronage - "paying simply because it feels good",
– Findability - "When there are millions of books, millions
of songs, millions of films, millions of applications,
millions of everything requesting our attention — and
most of it free — being found is valuable."
• Source: http://edge.org/conversation/better-than-free
© Minder Chen, 1996-2014
EC - 17
PageRank, Traffic, and Ads
• “Attention economy” and “reputation
economy” are too fuzzy to measure.
• But, because of Google (and other search
engines), we can now convert from
reputation (PageRank) to attention (traffic) to
money (ads).
Adapted from: [PDF]why $o.oois the future of business (free) Chris Anderson
© Minder Chen, 1996-2014
EC - 18
Value to User
Popularity Adds Value in a Network
Positive Network
Externality
(Network Effects)
Networks
• Real: LAN, Internet, Fax
• Virtual: Virtual community, Chat
room, Instant messenger,
Skype, FaceBook
Number of Compatible User
© Minder Chen, 1996-2014
EC - 19
Benefits to the Merchants (Sellers)
• Expanded marketing channels and global reach
to increase sales of existing products to
generate additional revenues
• Target marketing: Use the web to target their
offers to a niche market
• "The store is always open!"
• Establish better relationships with customers.
• Low distribution cost of product/service
information
• Increased speed to market
© Minder Chen, 1996-2014
EC - 20
Benefits to the Consumers
• Convenience: no driving around and no long wait
times at checkout counters
• Informative and engaging presentation
• Value presented upfront: Demo and free
download (experience the experience goods)
• Easy flow and navigation
Homeplus in Korea (Tesco)
• Search capabilities
• Constant updates
http://www.extremetech.com/mobile/99033-virtual-stores-help-shoppers-save-real-time
© Minder Chen, 1996-2014
EC - 21
Moving Your Business Online
• Companies are motivated by either fear or greed to
move to their businesses to the net. To .com your
company is becoming an imperative. Companies
have to transform their current business models to
an innovative business model.
• Be aware of internet tax law and (1998 Internet Tax
Freedom Act & 2013 The Marketplace Fairness Act).
• Interstate/international commerce laws
Your competitor is just
one-click away
© Minder Chen, 1996-2014
EC - 22
Showrooming at Retail Stores
Source: http://online.wsj.com/article/SB10001424052702304587704577334370670243032.html
http://www.cnn.com/2012/06/17/opinion/greene-showrooming/index.html
EC - 23
© Minder Chen, 1996-2014
Low
Customer Need for Product Information
High
Compassion about the product (SMM)
Technology-Fit: Customer and Product
Second Wave
Earlier Adopter
Jenny Craig
Chrysler
AA
FedExp
Microsoft
Web Laggards Second Wave
Tide
Denny's
Nike
Pepsi
Customer Demographics Match
Poor
High
Source: Forrester Research
© Minder Chen, 1996-2014
EC - 24
Is EC Appropriate for You?
NetFlix: Atoms to Bits
[ Video Nicholas Negroponte ]
Asset-Light Generation
From Hand to Cloud & Back…
Rise of the Sharing Economy
[ See Internet Trends &
eBook, airbnb.com ]
Industries who set up
virtual storefronts
© Minder Chen, 1996-2014
EC - 25
Business Models Based on the Value Chain in the Market Place
Raw
material
producer
Exchange
• Independent
market
operators
• Consortia
Manufacturer
Distributor
C2B
Examples:
• B2B: alibaba.com
• B2C: Amazon.com
• C2B: Priceline.com
• C2C: eBay.com,
craiglist.com
© Minder Chen, 1996-2014
New
Middleman
Service Providers:
• Logistics
• Financial
Retailer
B2C
Consumer
B2C
EC - 26
C2C
Business-to-Business vs. Business-to-Consumer
Business-to-Consumer
•
•
•
•
•
•
•
No vendor loyally
No switching costs
Time-insensitive
Short-term
Casual
Many vendors
Products differentiated
on price, image
© Minder Chen, 1996-2014
<
Business-to-Business
•
•
•
•
•
•
•
Relationship-based
Very high switching costs
Extremely time-sensitive
Long-term
Mission-critical
Few partners
Partners differentiated on
reliability, flexibility
EC - 27
Buyer
• Brick-and-mortar
– Face-to-Face
• Mail order
– Mail
– Printed catalog
• Phone order
– Telex
– Phone
– Fax
Click and Mortar
Business Channel: Multi-Channel Presence
Seller
• Electronic commerce
• EDI
• Email
Pure Play
• Web
Multi-channel plays will have extraordinary power if companies
elegantly blend and synchronize those channels.
© Minder Chen, 1996-2014
EC - 28
The B2C Business Models – Bricks, Clicks, Revolution and Evolution
Physical Store
Virtual Store/Pure Player
Clicks
Bricks
• Bricks organizations set up
separate click organizations to
give the required freedom to
operate in the fast moving Click
environment
or
• Clicks organizations were
created through VC capital
Gap, Safeway, Wallmart
Bricks & Clicks
• Sat on the sidelines for the explosion
• Evolved to online commerce
• Online services are incremental
• Not huge differentiators for clients
• Source of convenience
• Took advantage of lessons learned
• Assets CHEAP from Click failures
© Minder Chen, 1996-2014
eBay, Amazon, Webvan,
Wingspan Bank, Yahoo
• Mergers or sales of assets to Bricks
• Folding bricks ventures into portfolio
• Narrow focus of offerings
Wells Fargo, Safeway,
Barnes and Noble
EC - 29
The Long Tail
http://en.wikipedia.org/wiki/Long_Tail
Source: Chris Anderson, “The Long Tail”, Wired, http://www.wired.com/wired/archive/12.10/tail.html
Reference: From Niches to Riches: The Anatomy of the Long Tail (lnk)
© Minder Chen, 1996-2014
EC - 30
Niche Gets Richer Online
© Minder Chen, 1996-2014
EC - 31
Recommendation System
Amazon
© Minder Chen, 1996-2014
EC - 32
Changing “Demand Curve”
• The total volume of low popularity items exceeds the
volume of high popularity items.
• Why? Search Cost, Carrying Cost, Niche
• Changing demand curve: Recommendation systems
Recommendation System
• Amazon: Collaborative filtering
• NetFlix: CineMatch
Jon Krakauer wrote Into Thin Air
Joe Simpson, Touching the Void
© Minder Chen, 1996-2014
EC - 33
Product Variety Comparison for Internet and Brick-and-Mortar Channels
The unlimited “shelf space” of the Internet.
Free:The Future of a Radical Price, Chris Anderson
Product Category
Large Online
Retailer
Typical Large
Brick-and-Mortar Store
Books
CDs
DVDs
3,000,000
250,000
18,000
40,000 – 100,000
5,000 – 15,000
500 – 1,500
Digital Cameras
213
36
Portable MP3
players
128
16
Flatbed Scanners
171
13
http://www.heinz.cmu.edu/~mds/smr.pdf
© Minder Chen, 1996-2014
EC - 34
Long Tail: Pure Players vs. Physical Retailers
Profit threshold
http://www.wired.com/wired/images.html?issue=12.10&topic=tail&img=1
http://www.wired.com/wired/archive/12.10/tail_pr.html
© Minder Chen, 1996-2014
EC - 35
The Real Cost of Music: Physical vs. Digital
© Minder Chen, 1996-2014
EC - 36
© Minder Chen, 1996-2014
EC - 37
EC Strategies: 4 Cs
Customers
Commerce
Content Community
Case Study: The $250 Neiman Marcus Cookie Recipe Story
© Minder Chen, 1996-2014
EC - 38
Customers
• Obsess over your customers
• Remember that the Web is an infant
– What do you have to offer that the physical world
cannot in order to attract customers?
• If you make one customer unhappy, he won't tell
five friends -- he'll tell 5,000 on newsgroups, list
servers, and so on.
– "Word of mouth" (WOM) factor gets
amplified on the Net
• The shifts of balance of power away from
business and toward customer.
- Jeff Bezos
© Minder Chen, 1996-2014
EC - 39
Amazon Story
• Spring 1994, Jeff Bezos observed that Internet
usage was increasing by 2,300 percent a year.
• Choose books to start with because …. Bezos
reviewed the top 20 mail order businesses
methodically, and asked himself which could
be conducted more efficiently over the
Internet than by traditional means, and ……
• Choose Seattle as HQ because …..
• Name it Amazon because …..
• The 4Cs at Amazon.com …
Source: http://www.achievement.org/autodoc/page/bez0bio-1
Another Example:
© Minder Chen, 1996-2014
EC - 40
WOM and Viral Marketing: Good, Bad, and Ugly
• WOM: Words of Mouth
• eWOM: Yelp.com, Amazon User Reviews, eBay
Buyers and Seller rating.
• Watch United Break My Guitar at
https://www.youtube.com/watch?v=5YGc4zOqozo and be
ready to answer the following questions:
– Who benefited (companies, individuals, products) from
this video?
– Why this video went viral?
– How can you create a viral video?
• Anger is more influential than other emotions such
as joy through social networks. [ref]
© Minder Chen, 1996-2014
http://en.wikipedia.org/wiki/United_Breaks_Guitars
EC - 41
Self Assessment: Customer Caring
What do your customers need?
What requests do they make of you?
How do you respond to customer’s requests?
What kind of information can they get from you?
What process do they go through?
How do you produce and distribute it to them?
What are the steps that your customers have to take
to complete a purchase transactions?
How do they get shipment status?
How are exceptions handled?
What do you need from customer?
What do you know about customer preferences?
What information could you use to better target your
product and service offerings?
What to build relationships?
How can you engage customers in an ongoing dialog?
How can you continue to provide information, products,
and services to reinforce your ongoing relationships?
© Minder Chen, 1996-2014
EC - 42
Virtual Communities
• User generated
contents
• Crowdsourcing
• Money
• Content
• Demographics
•
•
•
•
Virtual
Community
Content
Hard goods
Games
Services
Providers
Users
• Advertising
Advertisers
© Minder Chen, 1996-2014
Other
Websites
EC - 43
www.parentsoup.com
http://www.ivillage.com/pregnancy-parenting/
-- Community Web Site
© Minder Chen, 1996-2014
EC - 44
Groupon Business Model: Group Buying
© Minder Chen, 1996-2014
EC - 45
Group Buying Sites
Site Name
Number Rewards for Sharing
of Cities With Friends
Groupon.com 42
LivingSocial.c 13
om
Tippr.com
1
Woot.com
online
Gilt.com
online
Ideeli.com
online
$10 for you if new
invitee joins and buys a
deal
Free deal if 3 friends
buy it; $5 to invitees
who sign up; $5 to you
if they buy a deal
Deal gets better as
more people buy it
None
$25 for each invitee
who buys
$25 for each invitee
who buys
Type of Deals
iPhone
App
Hip city locales Yes
and activities
Hip city locales Yes
and activities
Hip city locales No
and activities
Technology
Yes
gadgets
High fashion
Yes
High fashion
No
Source: http://online.wsj.com/article/SB10001424052748704896104575139692395314862.html
EC - 46
© Minder Chen, 1996-2014
Revenue Streams
•
•
•
•
Transaction
Subscription / Listing Fee
Value-added services
Donation and Sponsorship:
KhanAcademy.org Twitter's estimated advertising revenue:
2012: $288.3 million; 2013: $582.8 m.
2014: $950 million; 2015: $1.33 billion
• Advertising
– Google Ad Words
– Google Ad Sense
Google revenue:
2012: $50.2 billion; 2011: $37.9 billion
Facebook revenue:
2012: $5.1 billion; 2011: $3.7 billion
Yahoo revenue:
2012: $5 billion; 2011: $5 billion
Source: eMarketer Inc.
(source: Link, 9/12/2013)
© Minder Chen, 1996-2014
EC - 47
Freemium Model and Monetization
• Consumers: Everything on the Internet should to be free.
• Merchant: How can I make a profit if everything is free.
• Monetization is a buzzword for adapting non-revenue-generating assets to
generate revenue.
• Examples:
–
–
–
–
Free web browsers: Netscape Communicator and Internet Explorer
Free email: Juno, mail.yahoo.com, hotmail.com, gmail
Free web hosting: Geocities, Angelfire, Zoom
Free ...
All tangible and intangible items that can
be copied adhere to the law of inverted
pricing and become cheaper as they
Gilder's Law
improve.
$250
Cost of a 3-minute
Long Distance Call
$0
1930
Year
© Minder Chen, 1996-2014
1999
Anticipate this cheapness in your pricing
strategy and product/service
development strategy
Source:
http://en.wikipedia.org/wiki/Freemium
EC - 48
[PDF]why $o.oois the future of business (free) Chris Anderson
[PDF]FREE: The Future of Radical Price
© Minder Chen, 1996-2014
EC - 49
Providing Free Services: Is There a Free Lunch?
• Facebook/Google and You
If you are NOT paying for it,
you’re not the customer.
You are the product being sold.*
*Andrew Lewis
http://www.metafilter.com/95152/Userdriven-discontent#3256046
** See a counter argument at http://powazek.com/posts/3229
© Minder Chen, 1996-2014
EC - 50
Multifaceted Model for Web-Based EC Design
• ATTRACT: Hits
–
–
–
Communities of interest
Changing topics for repeat customers
Features that encourage customers to explore
• ENGAGE: Leads
–
Special areas encourage customer to register (i.e. selection of
articles customized for visitors interests)
• PARTICIPATE: Sales revenue
–
Free download (video, audio, & software)
– Shopping
–
–
Attract
Jump
Chat and News
Subscription
Engage
Participate
• JUMP: Advertising revenue
– Other products of interest to customer
–
Other sites of interest to customer
© Minder Chen, 1996-2014
Adapted from Netscape Communications Inc., 1996.
EC - 51
End-to-End Process of An E-Commerce Site
Advertising
Customer
service
Lead generation
Fulfillment
Merchandising
Payment
© Minder Chen, 1996-2014
Order processing
EC - 52
Opening an Online Business
• Identify a need and a niche
• Determine what you have to offer
(products/services)
• Set your business goals
• Design your EC architecture
• Assemble your EC teams
• Build your web site
• Set up a system to handle sales
• Provide customer services
• Advertise/promote your online business (online
and offline)
• Evaluate site performance & improve continuously
© Minder Chen, 1996-2014
EC - 53
EC Site Life Cycle
© Minder Chen, 1996-2014
EC - 54
Web Metrics
• Hit – any Web server request that generates a log file entry. A
page has many elements (html, gifs), each generating a hit.
• Page – Web server file that is sent to client user agent, usually a
browser.
• Session – all actions (i.e. requests, resets) made in single visit,
from entry until logout or time out (e.g., 20 minutes of no
activity).
• Visitor – a user or bot/spider/crawler that makes requests at a
site. Can be new, returning, registered, anonymous.
• Buyer – visitor that purchases something
• Customer – a visitor that registers (sometimes defined as buyer)
• Conversion rate – rate at which visitors transition to desired
state (buyers, customers, registered, started checkout)
• Host – remote machine, identified by IP address, used for visit.
• Referrers – Page that provides a link to another page. Can be
internal or external
• Web logs, Google Analytics, and Alexa
© Minder Chen, 1996-2014
EC - 55
EC Hosting
• Yahoo!Small Business
– http://smallbusiness.yahoo.com/ecommerce/
• Ebay
– http://pages.ebay.com/help/sell/sell-getstarted.html
• Amazon Marketplace
– http://www.amazon.com/gp/help/customer/display.htm
l?nodeId=1161232
• Drupal.org
– http://drupal.org/hosting
• Wordpress: Open source solution for a web site.
– http://wordpress.org/
• Webs.com: Webs’ point-and-click Site Builder
requires no technical skills.
© Minder Chen, 1996-2014
EC - 56
The Elements of User Experience
The Elements of User Experience
© Minder Chen, 1996-2014
Source: Jesse James Garrett, The Elements of User Experience,
http://jjg.net/elements/pdf/elements.pdf
EC - 57
Site Elements
• Home page: Menu-driven, News-oriented, Path-based, etc.
• Graphics and texts
• Submenus pages & subsites (alternative home pages for special
audiences)
• Tables of contents, site indexes, site maps
• Product/service/information pages
• "What's new" pages
• Search features (Findability): Search criteria and sorting
order of the results
• Contact information
–
•
•
•
•
Street address, phone number, fax numbers, maps, travel directions,
parking information
User feedback and virtual community pages
Bibliographies and appendixes
FAQ (Frequently Asked Questions) pages
Customized server error pages
Source: Web Style Guide at http://webstyleguide.com/wsg3/index.html
© Minder Chen, 1996-2014
EC - 58
Web Site Architecture Design: Website Navigation Diagram
Navigation Map
See http://webstyleguide.com/wsg3/index.html for Web Style Guide
And http://webstyleguide.com/wsg3/3-information-architecture/index.html for Information Architecture
© Minder Chen, 1996-2014
EC - 59
Site Structure Choices
Choose the right site structure
for your audience and content.
Source: http://webstyleguide.com/wsg3/3-information-architecture/3-site-structure.html
© Minder Chen, 1996-2014
EC - 60
Browsing vs.Searching
Large sites are just too large to depend solely on
browsing. Heavily used pages are likely to appear
on browsing menus pages, but obscure pages
deep within the site will only be found and read
through web search technologies.
Source: http://webstyleguide.com/wsg3/3-information-architecture/3-site-structure.html
© Minder Chen, 1996-2014
EC - 61
Designers vs. Users
Source: Steve Krug, Don’t Make Me Think, 2006.
© Minder Chen, 1996-2014
EC - 62
Sample Page Layout/Structure
Source: http://webstyleguide.com/wsg3/6-page-structure/3-site-design.html
© Minder Chen, 1996-2014
EC - 63
Cross-Selling and Up-Selling
Amazon’s Collaborative Filtering/Recommendation system
© Minder Chen, 1996-2014
EC - 64
Personalization
© Minder Chen, 1996-2014
EC - 65
The Evolution of EC Implementation
Extension
eCRM
eProcurement / SCM
eMarketplace / Auction
Functionality
Process Integration
Fulfillment
Settlement
Workflow
Web-based Transaction
Product database queries / Search
Electronic Payments
Fund transfer
Real-time
organizations
Communities of
Interests
Marketplace creator
1:1 Relationship
Customer Interactivity
Registration / Forms
Email
Games / Chat room / eForum
Publishing (Brochure-ware)
Advertising
Marketing
Information
Maturity
© Minder Chen, 1996-2014
EC - 66
Future EC Trends
•
•
•
•
•
•
•
•
•
Broadband internet connection: i.e., ADSL/Cable
modem, 3G/4G
Streaming media and web-based learning (e.g.,
MOOC)
More interactive virtual community (e.g., Second Life)
Customization and personalization
SoLoMo: SOcial networks, LOcation-based services,
MObile commerce and apps (SoLoMo) (link; link2)
Affiliate partners (e.g., Amazon Associate)
Multiple-channel integration
Affordable EC software and hosting service for smallmedium-size companies
Standards such as XML to enable B2B E-commerce
© Minder Chen, 1996-2014
EC - 67
The End
• Backup Slides on Business Models
© Minder Chen, 1996-2014
EC - 68
© Minder Chen, 1996-2014
EC - 69
© Minder Chen, 1996-2014
EC - 70
Elevator Pitch
Our business [list name] will deliver [list key
deliverables] to [list key beneficiaries] to enable
them to [list key benefits]. The business is headed by [list
founder and key executives, investors, and advisors] that have [list key
background and qualifications]. The business [will launch/was
launched] on [date] and we [will begin/began] delivering [first product
or service] on [date]. We expect to prove our business model and
achieve profitable growth on [date] and anticipate that the terminal
value of the business will be [list anticipated value], which represents a
[list return] to investors. The total cost to achieve this goal will be [total
cost], which includes the following key cost categories [list]. We have
currently received [list dollars of funding secured to date] from the
following sources [list]. We anticipate receiving the remainder of the
funding by [date] from [list sources]. The key risks for the project are
[list risks]. These risks will be managed by [list key approached to
managing each risk].
• Source: Applegate and Saltrick, “Developing an Elevator Pitch
for a New Venture.”
© Minder Chen, 1996-2014
EC - 71
Elevator Pitch
• Elevator Pitch – What is it?
–
–
In the time it takes to ride an elevator from the 1st to the 10th
floor – explain the gist of your business idea to a stranger!
An elevator pitch conveys the businesses’ key features and
rationale in a clear, concise way so that it can be communicated
easily to others
• Who is the primary audience?
–
–
Potential investors, customers, suppliers, partners, employees
Anyone who has or could have a stake in your business
• Why does it matter?
–
–
–
–
–
Communicate – What, why, how, where and when
Teaser to generate interest – the upfront hook!
Share a coherent vision of the firm’s goals and high level
strategy for achieving these goals
And, last but not least - Raise $$$!
Plus, it might be your only shot!
© Minder Chen, 1996-2014
http://nuvc.innuvation.org/Elevator_Pitch_Workshop_v2.ppt
EC - 72
Key Issues
• Overview of the problem your business will solve
and opportunity it will address
–
–
–
–
–
–
Why does this problem matter?
How severe is it?
How big is the opportunity?
How fast is it growing?
Why has it not been solved yet?
Why can you solve it when others could not?
• What value is being created?
• Who are the primary beneficiaries?
– Think about who is capturing the value
– Consider that some groups may capture more than
others – these represent the ideal first customers
© Minder Chen, 1996-2014
EC - 73
Products/Services and Competitors
• What are the products and services that you
will deliver to solve the problem
• How do these products and services meet the
unsolved market problem?
– Do they immediately solve the entire problem?
– Or what is the product and service “path” for
getting there?
• Who are the competitors and why are your
products and services superior?
– Focus on direct competitors
– Consider segmenting direct competitors by type
– Why, where and how does each competitor or
type fall short?
© Minder Chen, 1996-2014
EC - 74
Revenues and Resources
• How do you plan to generate revenues
– Short term
– Longer term if there is a twist or kicker
• Hit the high points of your business model
– Profitability
– Leverage – As revenues and size increases, do gross
and/or operating margins improve?
– Scale efficiencies - how do the mechanics and economics
of your business model scale
• What are the resources required?
– Money – Capital intensity?
– Time – core development, unique product versions for
different customer types, distribution channel build, etc
– Team background and expertise – what are the critical
competencies of the team?
© Minder Chen, 1996-2014
EC - 75
Teaser and Vision
• Teaser to pique interest
– Punchy, crisp and clearly articulated
– Incentivizes stakeholders to care by logically
presented the case for how the business benefits
them
– Delivered with confidence but not cockiness
– Should leave them wanting to hear more about the
details at a later date
• Communicate a common vision and goals
– Everyone on the same page, working toward the
same goal
– Minimize non-productive activities, speeds up time
to market
© Minder Chen, 1996-2014
EC - 76
Raising Money
• Raise $$$
– Distilling the essence of your business idea into a
few critical points reflects well on you
– Strong elevator pitch results in more favorable
assessment of your talents by potential backers
» VCs would rather back a Grade A management team with a
Grade B product than vice versa
– Decisions to proceed forward with due diligence are
often made on the basis of the elevator pitch and
the accompanying follow up conversation by
seasoned VCs
© Minder Chen, 1996-2014
EC - 77
What
How
Who
Cash Flow
Source: Alexander Osterwalder & Yves Pigneur, Business Model Generation (Preview version), 2009.
EC - 78
© Minder Chen, 1996-2014
Describe a Business Model: 9 Building Blocks
How
What
Partner
CLIENT
CLIENT
Network
SEGMENTS
SEGMENTS
Key CLIENT
Issues To
CLIENT
Solve
SEGMENTS
SEGMENTS
Who
Customer
CLIENT
CLIENT
Relationships
SEGMENTS
SEGMENTS
Customer
CLIENT
CLIENTS
CLIENT
Segments
SEGMENTS
CLIENT
Offer
CLIENT
SEGMENTS
SEGMENTS
Competencies,
CLIENT
Activities,
CLIENT
SEGMENTS
SEGMENTS
Resources
SEGMENTS
Distribution
CLIENT
CLIENT
Channels
SEGMENTS
SEGMENTS
Cost
CLIENT
CLIENT
Structure
SEGMENTS
SEGMENTS
Revenue
CLIENT
CLIENT
Streams
SEGMENTS
SEGMENTS
How Much?
Source: Describe and Improve your Business Model
© Minder Chen, 1996-2014
EC - 79
Reverse Engineering Facebook’s Business Model with Ballpark Figures
http://www.businessmodelalchemist.com/
© Minder Chen, 1996-2014
EC - 80
Five Essential Elements Of Business
Source: Ram Charan, What the CEO Wants You to Know
© Minder Chen, 1996-2014
EC - 81
• Hit/page hit/ Referrers/ Host (location), domain,
IP address/
© Minder Chen, 1996-2014
EC - 82
Information
Architecture
http://www.pivotdigitalmarketingagency.com.au/websites/information-architecture/
© Minder Chen, 1996-2014
EC - 83