E-business models
Making sense of the Internet
business landscape
Unprohibited want
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Massive channel disintermediation?
Delineation between technology
producers and technology users?
Conducts of Dot-com
Performance of vogue virtual
integrations?
The “new” economics of
information
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Evan & Wurster
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Less about any specific new technology than a
new behavior for reaching critical mass;
The universal pervasion of open standards;
The precipitate changes of the structure of
entire industry and the ways companies
compete
M. Porter:
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Return to the fundamental principles underlying
the novelty of phenomena
Operations of new business
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Be shaped and reshaped by customers
and the business community
Emerging through evolution and
adaptation
A flexible Value web (network)
dominated a single/dedicated value
chain
What is a model?
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The properties of models
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Enable study of the structure of a complex system,
relationships among structural elements,
assumptions, and a description of the system in action
Can be built before the real system to help predict how
the system might respond if we change the structure,
structure, relationships, and assumptions
A model in the world of business
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A description of a complex business that enables study of
its structure, the relationships among structural elements,
and how it will respond in the real world
What is the so-called business
model?
A business model depicts the content,
structure, and governance of
transactions designed so as to create
value through the exploitation of
business opportunities.
Amit & Zott (SMJ, 2001, p.511)
The Content of Business
Model
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The good or information that are being
exchanged
The resources and capabilities that are
required to enable the exchange
E.g., transparency of transaction, vertical
& horizontal expansion of product/service,
the degree of customization, technologies
of transaction
The Structure of Business
Model
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The parties that participate in the exchange
The ways in which these parties are linked
The order process and the adopted
exchange mechanism
E.g., the providers of complementary
assets, transaction speed, mode, simplicity,
safety & reliability, integration of online &
offline supply chains
The Governance of Business
Model
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The ways in which flows of information,
resources, and goods are controlled by
the relative parties
The incentives for the participants in
transactions
E.g.,cooperative and shared incentive
among allied partners, commitment and
investment of co-specialized assets,
loyalty maintenance
E-business Models
A description of roles and relationships
among a firm’s consumers, customers, allies,
and suppliers that identifies the major flows of
product, information, and money, and the
major benefits to participants, almost, over
Internet .
(Weill & Vitale, Place to Space, 2001, p.34)
E-business models & examples
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Distributors models
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Focused distributor models
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Portal models
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Retailer, marketplace, aggregator/infomediary,
exchange, E*trade, Amazon
Horizontal, vertical, affinity, AOL, Yahoo!, iVillage
Producer models
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Manufacturers, service providers, educators,
advisors, information/news service, custom
suppliers, Ford, GE, Boeing, Ernst & Yong, WSJ, McGraw-Hill
E-business models & examples
(cont.)
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Infrastructure provider models: to construct business that
deliver the technology infrastructure
Focused distributor
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Infrastructure retailer/marketplace/exchange, CompUSA, Staples,
IngramMicro, Egghead
Portal
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Horizontal/vertical infrastructure portals, AOL, AT&T, Oracle
Producer
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Equipment/component manufacturers, infrastructure software/services
firms, IBM, Dell, Compaq, Oracle, Ariba, MS, Doubleclick
 Custom software/hardware suppliers, Dell, Andersen Consulting
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Does Adam Smith’s law still work?
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Three technological prerequisites to facilitate
market economy
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Excludability
Rivalry
Transparency
Could Internet technologies promote above three
properties for the information-based economy?
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If not all, some business mechanisms will be needed
Indicators of survival business
model
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Customer value—segmentation, value proposition
Scope—core or by-products
Pricing—attractive willingness-to-pay prices
Revenue sources—exploitation & leverage of
complements
Connected activities—the complete value chain
Construction—IT infrastructure, organization, and
key champion
Capability—acquisition of necessary competence
Sustainability—setup firewall to prevent imitation
Business models: a matter of
perspective
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The customer perspective
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Efficiency, responsiveness, security
Anything valuable more than social contact &
face-to-face interactions?
The business community perspective
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Assets investment: current/tangible/intangible
assets
Revenue flow: commerce/content/community/
infrastructure revenue sources
Cost allocation: M/I/T categories
Crafting an e-business web
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Attach to the gateway
Leverage with the complements
Search the common interface
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Enhancement on functionality
Expansion of diversity on existing
businesses
Extension on new businesses
Exit for far-leap
Extended readings
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Evans, P. and T. Wurster (1997),
“Strategy and the New Economics of
Information,” Harvard Business Review,
75(5), Sept.-Oct., pp.70-83.
Porter, M. E. (2001), “Strategy and the
Internet,” Harvard Business Review,
79(3), March, pp.62-78.
Referred papers
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Chatterjee, Debabroto, Rajdeep Grewal and V.
Sambamurthy (2002), “Shaping Up for E-commerce:
Institutional Enablers of the Organizational
Assimilation of Web Technologies,” MIS Quarterly,
Volume 26, Number 2, pp.65-89.
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Fichman, R. G. and Kemerer C. F. (1999), “The Illusion
Diffusion of Innovation: An Examination of Assimilation
Gaps,” Information Systems Research, Sept. pp, 255-275.
Kline, R. B. (1998), Principles and Practices of Structural
Equation Modeling, The Guilford Press, New Work.
Referred papers (cont.)
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Grover, Varun, and Pradipkumar Ramanlal
(1999), “Six Myths of Information and Markets:
Information Technology Network, Electronic
Commerce, and the Battle for Consumer
Surplus,” MIS Quarterly, Volume 23, Number 4,
pp.469-495.
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Stigler, George (1961), "The Economics of
Information", Journal of Political Economy.
Distorted Market Signals
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Attracting the base of customers by heavy discounts
rather than true costs
Click-through is not the same as cash
Booming by the curiosity rather than utility
Revenue inflow from stocks rather prices
Enjoying subsidized inputs
Masking true costs but transferring them to
shareholders
Understatement of the need of capital for asset
building
The Illusion of Prosperity
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Dot-Coms multiplied so rapidly because of
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Every low barriers to entry
Raising capital without having to demonstrate
performance and viability.
Just going through a period of transition
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Return to the fundamentals eventually
A Return to Fundamentals
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Industry structure
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Five/six forces analysis
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Competitors/complementarities
Customers
Suppliers
Substitutes
Entrants
Sustainable competitive advantage
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Operational effectiveness
Strategic positioning