Ebussiness

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:E-Business:

Improving businessImproving businessperformance through low cost and performance through low cost and open connectivity:open connectivity:

• New technologies in the value chainNew technologies in the value chain• Connecting value chains across businessesConnecting value chains across businesses

in order to :in order to :

• Improve service/reduce costsImprove service/reduce costs• Open new channelsOpen new channels• Transform competitive landscapesTransform competitive landscapes

E-CommerceE-Commerce:• marketing• selling• buying of products and

services on the Internet

e-Business vs e-Commerce

e-Business is more than selling and marketing online!

ImplementImplement

Opportunity Opportunity AnalysisAnalysis

Re-Re-AssessAssess

Understand BusinessUnderstand Business

ImplementationImplementationPlanningPlanning

‘‘Traditional’:Traditional’: ImplementImplement

Opportunity Opportunity AnalysisAnalysis

Re-Re-AssessAssess

Understand Electronic BusinessUnderstand Electronic Business

ImplementationImplementationPlanningPlanning

‘‘E-Business’:E-Business’:

Definitions of the future are ‘fuzzy’Permanent and unpredictable change in the

business and technology environmentTime to market and speed are major competitive factorsContinuous learning & fast adaptation is required

Characteristics of an “Electronic Business journey”:

Definitions are clearNo change in the business and technology

environmentHigh time pressureContinuous learning

Traditional business organization‘develop step by step’:

e-Business vs Business

E-Business is not a project - but rather a journey that requires vision and non-linear procedures

Experimentation and Learning

Supplier network Customer network

Customer service

Outboundlogistics

Sales

Marketing

Productdevelopment

Inboundlogistics

Production

Procurement Being a Connected EnterpriseEmerging e-Strategy

Short Strategy Formulation loops

Continuous experimentation through specific Solutions Prototyping

awar

enes

s

lear

ning

lear

ning

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

The Projected Canadian Electronic Commerce

Market

0

20

40

60

80

100

1997

1998

1999

2000

2001

2002

2003

Source: IDC

Cdn

$ B

illio

n

Business to ConsumerBusiness to Business

The Projected US Electronic Commerce

Market

0

200

400

600

800

1997

1998

1999

2000

2001

2002

2003

Source: IDC

US

$ B

illio

n

Business to ConsumerBusiness to Business

Online Retail Sales - Likewise!

Growth of Online Retail Sales (US)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

1997 2001Source: Forrestor

$ U

S M

M

Books & MusicTravelEntertainmentTicket Event SalePC Hardware & SoftwareApparel & FootwareFinancial Services

CAGR

42.9%

53.7%

44.9%

124.3%

73.5%83.4%

63.0%

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 PlummetAmazon.com - AMZN

Priceline.com - PCLN

Pets.com - IPET

eBay.com - eBay

Same Trend in Canada

1-year trend

Lessons Learned

Fundamentals important, bottom line importantTraditional bricks and mortar assets can represent

significant competitive strengths logistics, inventory, distribution choice in terms of customer access strength and brand

e-Business becomes an element of overall business strategy - not the total business strategy

e-Business still widely seen as a way of transforming business operations and thinking

‘Bricks and Clicks’ - A Hybrid Model

Traditional“Bricks and Mortar”

Pure Web - Dot.com“Clicks”

Hybrid“Bricks and Clicks”

Combines strengths from traditional and

pure Web approaches

Emergence of the Hybrid Strategy

Phases of e-Business Development

Four stage model in E-Business maturity relates business value to e-business leverage

E-Business Leverage

Bus

ines

s Val

ue

Enabler

Driver

Convergence

Transformation

Channel

Over 50% are in the channel phase of

E-Business development with a web presence but no

infrastructure tie-in.

Just under 15% are in the integration phase.

Connections to suppliers and customers are fully E-

Business enabled.

Brochurewareand buying /selling

Integrate with customers

and suppliers

Industry transformation, achieve competitive

advantage

Cross-Industry Supplier/Customer

convergence

Integration

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

Research from Mainspring… 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 name-brand sites as compared to 32% for aggregation sites.

Online Insurance

Growth of Internet-Enabled Insurance (US)

0

200

400

600

800

1000

1200

1997 1998 1999 2000 2001

Source: Forrestor

US $ MM

OtherAutoHomeownersLife

When will you offer financial advice online?

0 10 20 30 40 50 60

Now

< 1 year

1 to 2 years

> 3 years

Don't know

%Source: Forrestor

Why will you offer financial advice online?

0 10 20 30 40 50

Competitive pressures

Help customers makedecisions

Enhance customerrelationships

Customers want online advice

To improve our onlineoffering

%Source: Forrestor

Online Advice

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, self-directed 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)