Figure 7.4 The Six Forces Model for the NE Era
1
Unsustainable Competitive Advantage
through NE Systems
• NE technologies, such as Enterprise
Resource Planning (ERP) systems per se
may not confer competitive advantage, as
commercially available systems are
available to anyone.
• Furthermore, even ‘homegrown’ software
systems are often easily imitated.
• Nevertheless, some firms are better at
exploiting these systems than others.
2
Sustainable Competitive Advantage through
NE Systems
• According to Ross, Beath and Goodhue (1996)
sustainable competitive advantage comes from the
following three areas:
Figure 7.10
Resources
Leading to
Sustainable
Competitive
Advantages
3
Alpha, Beta, and Omega Effects in Measuring
NE Strategic Success
•
The GSU NE study depicts 3 anticipated levels of
benefits [Straub and Klein (2001)]:
–
–
–
•
Alpha – 1st order changes that fairly immediately lower
costs and improve productivity.
Beta – 2nd order changes occur when the full effect of
intermediation comes into play.
Omega – 3rd order changes occur when the firm views NE
strategy as a learning process to exploit information
advantages over competitors.
Firms that create a profile of a customer that
indicates the type of products they prefer (e.g.,
Amazon), can profit from such information
advantages.
4
Proprietary Data as a Resource that
Captures a Relationship
• Resources that are publicly available or readily
copied may not be able to provide a sustainable
advantage.
• But those (such as a customer database) over
which a firm has proprietary control may provide
competitive advantage since these often create
large barriers to potential new entrants.
• Creating and sustaining competitive advantage
over time can thus be possible for firms that gather
and creatively use their proprietary customer data.
5
Figure 7.13 Proprietary Data as Resources
that Capture Relationships
6
3 Steps Needed to Dominate the Relationship
with Customers
•
•
•
First, there must be a commitment to collecting
data about customers despite the costs.
Second, the firm’s NE systems must be able to
be personalized to be able to respond to this
customer information.
Third, customers must be able to be “pushed”
information that successfully targets their
personal needs.
7
Model Type
Description
1
Content
Provider
Provides content (e.g., information, digital
products & services via intermediaries)
2
Direct-toConsumer
Provides goods or services directly to
customer often surpassing traditional channel
players
3
Full Service
Provider
Offers a full range of services in one domain
(e.g., financial, health care) directly or via
complementors who are attempting to own the
primary customer relationship
4
Intermediary
Brings together buyers and sellers by
concentrating information (e.g., search
engines, auctions)
8
Table 8.2a Types of NE Business Models (cf. Weill & Vitale 2001)
Model Type
Description
5
Shared
Infrastructure
Brings together multiple competitors to
cooperate by sharing common IT infrastructure
6
Value Net
Integrator
Coordinates value net activities by gathering,
synthesizing and distributing information
7
Virtual
Community
Facilitates and creates loyalty of an online
community of people with a common interest of
enabling interaction and service provision
8
Single Point
of Contact
Offers a firm-wide single point of contact
consolidating all services provided by a large,
multi-business organization
9
Table 8.2b Types of NE Business Models (cf. Weill & Vitale 2001)
Three Key NE Resources
1. The relationship with the customer. This is
usually the most important long-term resource, as it
converts to loyalty and sustained revenues.
 Alternatively, this might be a revenue-producing
relationship with a complementor.
2. Proprietary data is one of the most valuable
resources a firm can own as it can lead to a
sustainable competitive advantage.
3. The transaction may be the least important of
the three.
 Another way to see this is as a customer perception of
your company as the point of contact. NE also allows
firms to establish links directly with their customers base
and by-pass intermediaries.
10
Relationship
Data
Transaction
X
X
X
X
X
X
X
X
1. Content Provider
2. Direct-toConsumer
3. Full Service
Provider
4. Intermediary
5. Shared
Infrastructure
6. Value Net
Integrator
7. Virtual Community
8. Single Point of
Contact
X
X
X
X
X
X
X
X
Table 8.3 Ownership of Resources by NE
Business Models (cf. Weill and Vitale 2001)
11
Figure 8.2 Graphical Symbols for Interpreting
Business Model Schematics

Schematics allow managers to configure their
business models in ways that maximize their
effectiveness, as well as helping others understand a
model and, in so doing, helping to convince others of its
investment potential.
12
Figure 8.3 Type I: Content Provider Schematic 13
Figure 8.4 Type 2: Direct-to-Customer
Schematic
14
Figure 8.5 Type 3: Full Service Provider
Schematic
15
Figure 8.6 Type 4: Intermediary Schematic
16
Figure 8.7 Type 5: Shared Infrastructure
Schematic for Suppliers-Members
17
Figure 8.8 Type 5: Shared Infrastructure
Schematic for Customers-Members
18
Figure 8.9 Type 6: Value Net Integrator
Schematic
19
Figure 8.10 Type 7: Virtual Community Schematic
20
Figure 8.12 Type 8: Single Point of Contact Schematic
21
Figure 8.13 Lonely Planet as a Hybrid (Molecular)
Business Model Composed of Many Atomic Models
22
Chapter 9. Intermediation and
Cybermediation
Foundations of Net-Enhanced
Organizations
Detmar Straub, 1st Edition
Copyright © 2003 John Wiley & Sons, Inc.
23
9.2 What is Intermediation?
•
Intermediation: a business
process that lies between
and facilitates (adds value
to) the points in a value
chain (see Figure 9.1)
Intermediaries often
provide an informationbased service rather than a
product.
•
–
•
Their typical role is to bring
multiple buyers and sellers
together.
Common examples are:
stock brokers and travel
agents.
Figure 9.1 Intermediaries
24
in the Value Chain
Intermediaries in a Value Chain
•
The role of an intermediary is to:
1. Use information to match buyers and sellers,
2. Facilitate the rapid transfer goods and services
through their operation.
•
Two major categories of intermediaries are:
1. Virtuals: who do not take ownership of products and
services.
2. Aggregators: who may own, but do not produce or
even assemble the goods and services themselves.
•
When an intermediary offers its services over
the Web, it is called a cybermediary.
25
9.4 Dis-intermediation, Re-intermediation and
Cyber-mediation (Figures 9.2 and 9.3)
• Disintermediation: adding a parallel link going around
intermediators [Delta Airlines, encouraged customers to
call direct to the airline, saving a 5-15% commission
and disintermediating its travel agents].
• Re-intermediation: electronic re-insertion into the role
of intermediator in a firm’s value chain [Delta.com
allowed customers to go directly to its Web site to buy
electronic tickets, taking over the job of brokers via a
direct connection.
– This is a direct-to-consumer business model, or possibly a
shared infrastructure model, as in the case of Orbitz
• A firm that offers intermediary services over the Web, is
a cybermediary. This can disintermediate agents. 26
Figure 9.2
Disintermediation
via Traditional
Channels
Figure 9.3
Reintermediation
of Delta into
the Value Chain
27
9.5 Theory of Intermediation
• Since purchases and transactions that are least costly
are preferable to customers, especially for
commodity goods and services,
• All other things being equal, the value chain with the
fewest intermediaries will have the lowest price.
• However, there are additional costs:
– Intermediaries have their own cost structure.
– Consumers incur costs when searching for goods/services
to purchase.
• Thus a consumers must weigh a cost tradeoff
between searching for the cheapest commodity price
and paying extra to use an intermediary.
28
Figure 9.5 Intermediation Pre- and Post- Internet
29
Intermediation Pre- and Post-Internet
• A decade ago, for example, intermediation in air travel,
involved both airlines and consumers paying commissions to
travel agents.
• When the issue of disintermediation was first discussed, many
predicted the complete demise of intermediators.
• Sarker, Butler & Steinfield (1995) argued instead that
cyberspace would change intermediation, but never make it
irrelevant.
• They differentiated between categories of threatened
intermediaries, like travel agents, who could lose their
business, with cybermediaries, (e.g., Travelocity), who had
very low marginal costs and would thrive.
• Supplemented intermediaries, firms that decide to
reintermediate into the value chain, were also predicted to
succeed.
30
Search efficiencies and
information
management
Use knowledge of how to
procure items & services;
create trading floor for
buyers and sellers
Expedia.com
eBay.com
Routinizing and
guaranteeing
transactions
Handle complex
transactions; insure
payments and shipments
Ibm.com
Amex.com
Logistics
Delivery of goods, locally
or globally
Ups.com
Aggregating demand/
negotiating prices
Gather orders & negotiate
prices with client(s)
Priceline.com
ETNs like Covisint
Creating packages
Break bulk through largevolume purchases, and
reassemble into packages
Dell.com
Table 9.2 Value-Added Roles of Intermediaries and
Cybermediaries (based on Westland and Clark, 2000)
31
9.7.1 Portals and Content Aggregators
• Companies like Yahoo and Amazon are described
as cyberspace “portals” and “content aggregators”
– Their true business models are complex hybrids and
include being intermediaries and making direct-toconsumer sales.
• Again the main idea is replacing physical
processes with information processes.
• If Yahoo was a retailer like Wal-Mart, its
distribution system, etc., would have to be huge.
– Instead it handles these processes through its Web-based
and information-based systems. Its market niche in the
economy is based on this.
32