LEADING YOUR COMPANY TO THE WEB Ned C. Hill, Dean Marriott School Brigham Young University.

LEADING YOUR COMPANY TO THE WEB

Ned C. Hill, Dean

Marriott SchoolBrigham Young University

Electronic Commerce: A Quick Overview

What’s wrong with the old paradigm? What is e-Commerce? How large is the market? How is e-commerce (and the Web) changing business? Should my company enter Web-space? What we are doing in the Marriott School and at BYU

What’s Wrong with the Old Paradigm?

The Paper-based Commercial Transaction

Seller

Buyer

Mail

Mail

Mail

Mail

Mail

CarrierBankingSystem

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Invoice

Bill of Lading

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Keying in the Paper World

Keying Keying

Keying

Keying Keying

KeyingKeying Keying

Postal System

Seller’s Computer System

Buyer’s Computer System

What’s Wrong with this Picture? Labor intensive Slow Error prone Uncertain Excessive inventory (and cash) Bottom Line: IT’S EXPENSIVE

What Can We Do? Option 1: Make paper work harder Option 2: Get rid of the paper altogether

Definitions of e-Commerce

Simple: “The selling of products and services using the Internet.”

More General: The use of computer and communication technology to facilitate the information exchange between two parties in a commercial transaction.

Primary Types of e-Commerce Paperless:

– Application to application Electronic data interchange (EDI) Financial EDI (firm to bank) File transfer

– Manual to application Web applications Electronic order entry E-mail

Additional Types of e-Commerce Physical media assisted by computers:

– Facsimile transmission– MICR, OCR, ICR– Bar coding– RF– Voice recognition

Map of e-CommerceAll Electronic

All Paper

EDI, FEDI, FTP

Traditional Paper Transactions

FAX

MICR, OCR, ICR, Bar Coding

Internet, E-mail, E-trade

Pay

men

t and

Rem

ittan

ce A

dvic

e

An e-Commerce Transaction

Seller

Buyer

CarrierBankingSystem

Req

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Invoice

Bill of Lading

Goods

Manual Processes in an e-Commerce World

Keying

Keying

Computer Network (VAN, Internet)

Seller’s Computer System

Buyer’s Computer System

Translation Translation Translation

TranslationTranslationTranslation

P.O. Invoice RA

F.A. F.A. F.A.

Benefits of e-Commerce Lower personnel costs Reduced error rates Faster cycle time Improved customer service Reduced inventory Fewer stock-outs Reduced paper handling costs Faster payments Better control over information

What is the Size of the U.S. e-Commerce Market?

Accurate data is hard to find Three measures

– Number of online households– Revenues from Web advertising– Dollar volume of transactions through the Web

This is NOT the entire e-commerce market– EDI market is even higher than Web market

Online Households

0

10

20

30

40

50

60

70

1997 1998 1999 2000 2001 2002

From Net Profit by Peter S. Cohan

Million

Web Ad Revenues

0

500

1000

1500

2000

2500

3000

1996 1997 1998 1999 2000

From Net Profit by Peter S. Cohan

$ Million

Business Through the Web

0

200

400

600

800

1000

1200

1996 1997 1998 1999 2000 2001 2002

Est. from the U.S. Department of Commerce

$ Billion

Cost Curves

Labor costs Paper costs Building costs

vs. Computer costs Telecommunication costs

Faster and Faster!Time Required to Transmit the 32 Volume

New Encyclopedia Britannica 1200 bps modem……………………..…28 days 28.8 Kb modem………………………..28 hours Basic Rate ISDN…………..……….…6.3 hours T-1 line………………….……….….31 minutes T-3 line………………………………..1 minute ATM-SONET (OC-3)……………....17 seconds ATM-SONET (OC-12)………….....4.7 seconds Newly proposed technology…… .005 second

How the Web Changes Business

Broadcast: 1 to N Network: N to N

Sellers more powerful Buyers gain more power

Customer loyalty Less customer loyalty

High barriers to entry Low barriers to entry

Speed: slow Speed: very fast

Charge for each product Often give away products

Transactions costs: high Transaction costs: low

Traditional Web

Should My Company Enter Web-Space?

Do we have $100,000 to $200,000 to invest in launching a Web site? (And are we willing to invest in maintaining it?)

Are our competitors involved in the Web? Do our customers demand Web services? Do we have customer service opportunities that could

be improved via the Web? Is a significant portion of our customer base under the

age of 30? Do we want to be in business 2-5 years in the future?

Three Stages of Web Involvement

Stage 1: “Brochure”– One-way information broadcast– Lowest cost, easiest to maintain– A holder for your place in e-commerce

Stage 2: “Basic Transactions”– Offer basic transactions: orders, payment– Requires significant maintenance, real-time

processing– May compete with existing business avenues

Three Stages of Web Involvement

Stage 3: “Complete Business Partnership”– Multiple transactions with customers– Integrated functionality– Builds customer loyalty, long-term

relationships– Involves major funding commitments

Three Stages of Web Involvement

Stage 1Stage 1

Stage 2Stage 2

Stage 3Stage 3

Cisco: Product Info. DesignOrders StatusCustomer service DeliveryPayment

LandsEnd:CatalogOrders

WSJ:News

Suggestions on Entering Web Space

Keep your focus on your customer--don’t get lost in the technology

Use EC to improve processes and information flow--don’t pave over old cow paths

Develop customer loyalty by providing multiple connections that add value

Partner when necessary to widen your ability to provide services

Can We Sell Through the Web?P

rodu

ct

Sim

ple

Com

ple

x

Unskilled Sophisticated Customer Knowledge Level

Web Applications

Difficult/Impossible

Web Applications

OKWeb Applications

OK

Web Applications OK but

Must Be Sophisticated

Can We Sell Through the Web?P

rodu

ct

Sim

ple

Com

ple

x

Unskilled Sophisticated Customer Knowledge Level

Cisco

Dell

Amazon.com

Term insurance

Estate planning

Groceries

Suggestion: Analyze the Timelines You Create for Your Customers

What processes do they go through to find us? How do we tell them about our products? How do they order from us? How do they contact us about customer service

problems? How do they pay us? What other information would they like to have

about status, payments, availability, etc., and how do they get it?

Determine Your Timelines

Seller

Buyer

Mail

Mail

Mail

Mail

Mail

CarrierBankingSystem

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Time delays, internal processing, costs, bottlenecks

Want to Find an Internet Business Opportunity?

Hint: Study Possible Timelines

Consumer shopping Applying to college Buying a house Booking a flight Checking out a book from a library

Illustration: NetRoadshow Public stock and bond offerings Old timeline:

– Executive visits to possible customers– Extensive exchange of paper information

Innovation:– Create electronic roadshow– Customers get passwords to watch at leisure– Information exchanged electronically– Sales calls follow

Results– SEC approved– Over 400 shows in 1999, at $20,000 each– Goldman Sachs, DLJ, Bear Stearns use– Company acquired for $50M by broadcast.com

The University--As a Business

BYU located in Provo, Utah 31,000 students--largest private university

campus in U.S. 300,000 alumni 6,000 employees $300 million annual budget Cost structure: 80% salary

The Marriott Schoolof Management

110 faculty 5 masters programs, 2 undergraduate

– MBA, top 50 (tops in “payback”)– Masters of Accounting, number 2

2,300 undergraduate students 700 graduate students 1,100 graduating students per year

Why We Entered Web Space Marketing

– Competition uses Web extensively

– Image is important (rankings)

Desire to improve “customer” service– Prospective students

– Current students

– Alumni

– Recruiters

Desire to extend influence internationally Need to contain costs/positions

How We Did It

Used outside consultant to develop strategy– Brought together all programs and functions

– Developed list of priorities

– Coordinated with rest of university efforts

Formed a Web development team– Four students plus full-time staff member

Analyzed top Web sites from other universities and companies

Developed plan to phase in Web site over time

Marriott School Web Site Phase 1: Infrastructure and design

– Went online Aug. 30th– Primarily information (“Brochure Stage”)– Navigation tools developed

Phase 2: Database integration– Data base driven pages (Oracle)– Some transactions (applications)– Ease of maintenance– Online spring 2000

Phase 3: Transactions and customization– Multiple transactions and value-added services– My Marriott, My Courses, My Students, etc.– Online fall 2000

Other Uses of e-Commerceat Brigham Young University

Grade transcripts EDI Telephone bills EDI Inter-library loans EDI Applications Internet Student loan documents EDI Course registration Intranet Ordering supplies Internet Course delivery Internet, etc.

Technology Goals at BYU Permanent e-mail address for all students/alumni Moving towards use of Internet for 100% of applications

and registrations Apply EDI to purchasing, invoicing, prices, etc. Move 100 correspondence courses to Internet by Jan 2000

(then 200, 300, etc.) Intranet-based services for students, alumni, recruiters, etc. Increase electronic holdings for library Use of Internet to assess teaching, services, etc. Will soon require laptops for all students

Changing the Educational Paradigm

Utilize technology to help deliver course content Asychronous vs. synchronous Mixed-mode learning Use professors for what they do best

– Mentoring– Q & A– Discussion subjects

Use technology for what it does best– Exercises– Factual material– Objective testing

Examples of Computer-Assisted Courses

Chemistry Replaces lectures Rat Lab Decreases costs Bacteriological Lab Allows

experiments Engineering Technology Controls equipment Languages Adaptive learning Music Visualizing Bach Accounting Repetitive drills

Course Key Feature

Conclusions Technology is changing the business (and the

educational) paradigm Learn all you can about e-commerce Direct benefits of e-commerce are impossible to

measure--but can you measure the value of your telephone?

You will be doing e-commerce sooner or later--might as well get started now!

References on e-Commerce

Peter Cohan, Net Profit, Jossey-Bass, 1999--investing and competing in the Internet business world

Bruce Judson, Hyper W@rs, Scribner, 1999--good commentary on online business opportunities

Nicholas Negroponte, Being Digital, Knopf, 1995--one of the most insightful commentaries on the Information Age

Karen Southwick, Silicon Gold Rush, Wiley, 1999--strategies for developing a high-tech business

Don Tapscott, The Digital Economy, McGraw Hill, 1996--how the Information Age will impact the economy

Don Tapscott, Growing Up Digital, McGraw Hill, 1998--how the younger, computer-literate generation will change business and the world