e-Business
Discussion with UW Students

Agenda (from Abstract)
 e-Business vs e-Commerce vs Internet
 What makes e-Business different from business?
 The rise and fall of the dot.com economy
 Successful models for e-Business
 The drivers of benefit for e-Business applications
 The value of Brand with e-Businesses
 The potential for e-Business in Insurance and high quality on-line Financial Advice

e-Business vs e-Commerce
E-Commerce:
• marketing
• selling
• buying of products and services on the Internet
E-Business:
Improving business performance through low cost and open connectivity:
•
New technologies in the value chain
•
Connecting value chains across businesses in order to :
• Improve service/reduce costs
•
Open new channels
•
Transform competitive landscapes e-Business is more than selling and marketing online!

e-Business vs Business
‘Traditional’:
Re-
Assess
Implement
Implementation
Planning
Opportunity
Analysis
Understand Business
‘E-Business’:
Re-
Assess
Implement
Implementation
Planning
Opportunity
Analysis
Understand Electronic Business
Traditional business organization
‘develop step by step’:
 Definitions are clear

No change in the business and technology environment
 High time pressure
 Continuous learning
Characteristics of an “Electronic Business journey”:
 Definitions of the future are ‘fuzzy’
 Permanent and unpredictable change in the business and technology environment

Time to market and speed are major competitive factors

Continuous learning & fast adaptation is required
E-Business is not a project - but rather a journey that requires vision and non-linear procedures

Experimentation and Learning
Short Strategy Formulation loops
Emerging e-Strategy
Product development
Procurement Marketing Being a
Supplier network Inbound logistics
Outbound logistics
Customer network
Connected Enterprise
Production Sales
Customer service
Continuous experimentation through specific Solutions
Prototyping

1997-1999 - e-Business Mania Strikes!
 E-Business becomes a major economic force
 NASDAQ hits 5,000
 Venture capital in abundance
 Focus on new economy, new business models, growth potential
 no attention to traditional fundamentals
 bricks and mortar viewed as liability
 Traditional businesses shake in their boots at the threat of new non-traditional nimble bold competitors
 Dot.Com start-ups in every field
 Dot.Com multi-millionaires made over night

B2B and B2C - Huge Potential
40
20
0
100
The Projected Canadian
Electronic Commerce
Market
80 Business to Consumer
Business to Business
60
800
600
400
200
0
The Projected US
Electronic Commerce
Market
Business to Consumer
Business to Business
Source: IDC Source: IDC

Online Retail Sales - Likewise!
$25,000
$20,000
$15,000
Growth of Online Retail Sales (US)
Books & Music
Travel
Entertainment
Ticket Event Sale
PC Hardware & Software
Apparel & Footware
Financial Services
$10,000
$5,000
$0
1997 2001
CAGR
42.9%
53.7%
44.9%
124.3%
73.5%
83.4%
63.0%
Source: Forrestor

2000 - The Dot.Com Bubble Bursts!



The Demise of Dot Com Retailers.
Weak financials, intense competition, and investor flight will drive many of today's online retailers out of business in 2000. Those that survive must refocus funding on building hard assets to achieve scale, service, and speed.
Wall Street will run out of patience.
Financial markets exasperated with non-existent online profits will turn a deaf ear to persistent "investment mode" rhetoric and soundly punish merchants who bleed red ink. Recent stock disasters like Value America and eToys -- whose market caps as of January 11, 2000, are down $3.1 billion and $7.7 billion respectively from 1999 highs -- serve as bad omens for online stores that lack a unique approach or technology.
The revenge of the brick-and-mortars will begin.
The narrowing of the playing field in 2000 will rationalize but not resolve online retail competition. It will usher in a new era characterized by a few large players that exploit deep customer relationships and a presence across multiple channels to entrench themselves. To measure their success, these firms will ditch new economy platitudes in favor of unfashionable old metrics like margins, profits, and customer retention costs.
Forrester Research, 1999/2000

Valuations Plummet
Amazon.com - AMZN Pets.com - IPET
Priceline.com - PCLN eBay.com - eBay

Same Trend in Canada
1-year trend

Lessons Learned


 logistics, inventory, distribution
 choice in terms of customer access
 strength and brand



‘Bricks and Clicks’ - A Hybrid Model
Traditional
“Bricks and Mortar”
Pure Web - Dot.com
“Clicks”
Combines strengths from traditional and pure Web approaches
Hybrid
“Bricks and Clicks”

Emergence of the Hybrid Strategy

Phases of e-Business Development
Four stage model in E-Business maturity relates business value to e-business leverage
Convergence
Just under 15% are in the integration phase.
Connections to suppliers and customers are fully E-
Business enabled.
Cross-Industry
Supplier/Customer convergence
Transformation
Over 50% are in the channel phase of
E-Business development with a web presence but no infrastructure tie-in.
Industry transformation, achieve competitive advantage
Channel
Brochureware and buying /selling
Integration
Integrate with customers and suppliers
E-Business Leverage
Source: PricewaterhouseCoopers

Phases of e-Business Development

The Journey Requires Investment
Significant multi-year investment predicted

The Journey Requires Investment
Significant multi-year investment predicted

The Benefits of e-Business





Generate additional Revenues
 New markets
 New products
 New customers
Reduce Costs (Integration and ‘Collaboration’)
 Process efficiency
 Reduce IT variety and -complexity
 Synergies with other initiatives
Customer Retention (‘Added Services’ and ‘Virtual Community’)
 Know more about your customers


Integrated channel management
Proactive and personalized offerings
Improve Image / Position Brand
 Applying innovative technologies
 Leadership enterprise
 Address younger customer segments
Not to miss the boat
 Keeping options open
 Acquire know-how
 Focused investments

e-Business and Brand

 Online financial services customers are initially motivated by price sensitivity, but that influence declines as they realize the benefits of convenience
 Brand is more important online than offline
 When researching insurance purchases online, 56% of customers went straight to name-brand sites as compared with 32% for aggregation sites.
 When initiating a purchase online, 60% went to namebrand sites as compared to 32% for aggregation sites.

Online Insurance
Growth of Internet-Enabled Insurance
1200
(US)
1000
800
US $
MM
600
400
200
0
1997
Other
Auto
Homeowners
Life
1998 1999 2000 2001
Source: Forrestor

Online Advice
When will you offer financial advice online?
Don't know
> 3 years
Why will you offer financial advice online?
To improve our online offering
Customers want online advice
1 to 2 years
< 1 year
Enhance customer relationships
Help customers make decisions
Now
0
Source: Forrestor
10 20 30 40 50 60
%
Competitive pressures
Source: Forrestor
0 10 20 30 40 50
%

Online Advice vs Face to Face




Forrester: Few financial companies believe that online advice will replace the human advisor. Except for a small group of low-end, selfdirected customers, consumers are expected to continue to seek advice from financial advisors. More than half of our respondents believe that online advice solutions will never be a compelling alternative to working with one of their advisors, even as the technology improves.
Almost half of financial institutions believe that online advice will enable advisors to deliver additional value to their customers.
As automated advice vendors piece together the elements of the new advice creation process,we believe that use of online advice will surge.“
Customers don ’t care about the data-entry and number-crunching aspect of advising -- they pay for the conversation they have after the analysis is done. These online solutions will enable our advisors to spend more time with their customers.” (Insurer)