Chapter One Chapter One
Moving from
E-commerce to
E-business
Why Study E-business?
Why Study E-business?
Promise:
Streamlined Business
Network Infrastructure Adaptive Supply Chains
Process Automation
Lack of Framework
Reality:
Blizzard of Buzzwords
Customers.com ERP CRM
Digital Economy SCM Portals Exchanges
The scale and scope of modern IT investments requires that managers have a clear understanding of e-business
fundamentals!
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Consequences of not Studying E-business?
Consequences of not Studying E-business?
Poorly Designed Business Processes
Persistent Channel Conflicts & Cross-
Department Tensions
Locally Optimized Business Processes
Order Order Fulfillment Fulfillment
ERP ERP CRM CRM
Procurement Procurement
Incompatible Projects
Resistance
to Changes
Need for a Robust Framework Need for a Robust Framework
E-business Course Goals
Rationalize buzzwords Recognize
commonalties across business environments Framework for
designing more
effective new systems
Provide a Managerial Perspective
A set of basic principles
Understand how to map business needs to e-
business solutions Synthesis
Information Technology (IT) changes, but
management principles persist!
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Enable
Business Strategies and Processes
E-business Applications
IT Infrastructure
Drive
Drive
Enable
What is the basic framework that ties business strategies to applications?
What are the key ideas of e-business strategies and how do they
translate into e-
business design to align IT with business
needs?
Framework for Book
Framework for Book
Table of Contents Table of Contents
Ten Rules of E-business Ten Rules of E-business E-Business Success Stories E-Business Success Stories
What does this mean for What does this mean for managers – Looking Deep managers – Looking Deep E-commerce vs. E-business?
E-commerce vs. E-business?
Key Take-Aways
Key Take-Aways
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E-commerce E-commerce
Refers to selling of products and services over the Web
Transactions fall into three categories:
– Business-to-business (B2B) – Business-to-consumer (B2C) – Consumer-to-consumer (C2C)
The goal of e-commerce is to reduce
transaction costs
E-commerce Maturity
F u n c ti o n al it y
Brochure ware
Web Storefront
E-commerce Transactions
0 1 2 3 4
Communities of Interest Mega-Portals
Complex
Limited
E-commerce Progression E-commerce Progression
E-commerce has evolved rapidly since 1995
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E-business E-business
The back-office applications, systems or
processes that create goods and/or provide services.
E-business includes:
– Customer Relationship Management – Enterprise Resource Planning
– Supply Chain Management
– Human Resource Management Systems
– And more . . .
E-commerce vs. E-business E-commerce vs. E-business
value added
“INPUTS”
• People
• Raw Material
• Serves Customers
• Product Sold
“OUTPUTS”
• Processes
• Facilities
• Equipment
• Finance
• People
TRANSFORMATION
E-business E-commerce
E-business: The transformation of key business
processes through the use of Internet technologies!
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Inputs E-commerce
Products Services
Labor & Capital
Customer Feedback for control E-business
E-business Network of activities
Flow Units (Raw material, people,
information,
etc.) Resources
Process
Analysis & Management
E-business: All About Managing Business E-business: All About Managing Business
Processes Processes
A business process is a network of activities that takes one or more inputs and creates an output
of value to customer
E-business: Linking Today’s Business with E-business: Linking Today’s Business with
Tomorrow’s Technology Tomorrow’s Technology
E-business -- includes all apps and processes enabling a company to service a transaction E-business Evolution
– Phase 1: Presence, information-only – Phase 2: Transactions
– Phase 3: Profitability
E-business in third phase today:
– Psychology of first two phases: technology would trump experience; future would belong to upstarts as eToys
– Psychology of this phase: experience, distribution,
margins are worth something
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Table of Contents Table of Contents
Ten Rules of E-business Ten Rules of E-business E-business Success Stories E-business Success Stories
What does this mean for What does this mean for managers – Looking Deep managers – Looking Deep E-commerce vs. E-business?
E-commerce vs. E-business?
Key Take-Aways
Key Take-Aways
E-business is Changing All Industries E-business is Changing All Industries
Communications
Communications Utilities Utilities Hospitality Hospitality
Automotive
Automotive Financial Financial Insurance
Insurance Petrochemical/ Petrochemical/
Process Process Transportation
Transportation
Manufacturing Manufacturing
Health Care
Health Care Entertainment/ Entertainment/
Hi-Tech Hi-Tech Consumer/
Consumer/
Services Services Retail
Retail
What differentiates the e-business efforts of leading
companies from the pack?
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Visionary Firms and E-business Visionary Firms and E-business
Visionary companies understand current business designs are inadequate for doing business in the e- commerce era
– Can buy a $999 built-to-order PC from Dell online but not a customized $3000 color copier from Xerox
– Cisco can overhaul its product line every 2 years, but Kodak cannot seem to deliver rapid innovations to meet changing customer requirements
Visionary companies have integrated operations to support changing customer requirements
– E-customers’ needs, tastes, and expectations transforming shape of the enterprise
Necessary: fusion of business designs, processes,
apps, and systems on an unprecedented scale
Visionary Firms and E-business Visionary Firms and E-business
Management at leading companies often ask:
– How will ecommerce change our customer priorities?
– How can we construct a business design to meet these new customer priorities?
– What kind of new apps infrastructure do we need to orchestrate the new business design?
– What short-term and long-term investments in
people, partners, and tech must we make to
survive, let alone thrive, in the new economy?
E-business Capabilities E-business Capabilities
Process-based
– Capacities that transforms material or information and provide advantages on dimensions of cost and quality.
– E.g., United Parcel Service (UPS)
Systems-based
– Capacities that are broad-based involving the entire supply chain and provide advantages of short lead times and customization.
– E.g., Dell Computer
Organization-based
– Capacities that are difficult to replicate and provide abilities to master new technologies.
– E.g., Cisco Systems
Let’s look at a few visionary companies….
Founded in 1907 to become world’s largest express and package delivery firm
– 13.2 million packages per day, 3 billion/year – 344,000 employees; $29.8 billion revenue
– 11th largest airline; Largest cellular user in the world
Initially a laggard in use of IT. In 1980s and throughout the 90s, spent billions of dollars putting in place
– Tracking and tracing technology – Frontline handheld technology – E-commerce capabilities
– Huge customer databases
Benefits
– 2 Million tracking requests per day over the web
– Connect 1.7 million sellers with 7 million buyers every day Annual IT investment of over $1 billion
United Parcel Service
United Parcel Service
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Dell - Build to Order E-channel Dell - Build to Order E-channel
Challenges
– Scale to large volumes - $50 million a day – Service consumers & businesses
Solution
– Premier Pages: Provide full-service (leasing, financing, order status)
– Increases effectiveness of their sales force
Benefits
– Sales today: 60% Businesses, 40% Consumers
– Improved Customer Service (7x24 account status, real-time order status)
– More efficient, lower-cost sales cycle
Cisco Systems Cisco Systems
Most successful “New Economy” firm with
“Old Economy” discipline and operational excellence
Cisco has propagated IT throughout the organization, in every major function
Significant investments in back office ERP ($30M) and Internet/Intranet ($100M)
Almost $400M annual savings from use of technology
E-business use is a major competitive long-term strategy for Cisco
Made it very difficult for slow-moving, traditional
companies (Lucent, Nortel) to catch up
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What Do Leading Firms Have in Common, What Do Leading Firms Have in Common,
Business-Wise?
Business-Wise?
Unusually successful within their industries Profitable and growing
Clear strategic intent – Wal-Mart (Low Price Guarantee) Long-term technology blueprint -- “Built to last”
Complex, multi-functional business model
Good places to work – employees turnover low Continually innovative
Fit among strategy, business model, systems
Table of Contents Table of Contents
Ten Rules of E-business Ten Rules of E-business E-business Success Stories E-business Success Stories
What does this mean for you – What does this mean for you –
Looking Deep Looking Deep
E-commerce vs. E-business?
E-commerce vs. E-business?
Key Take-Aways
Key Take-Aways
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Ten Rules of E-business Ten Rules of E-business
Rule 1 Technology is no longer an afterthought in forming business strategy, but the actual cause and driver
Rule 2 The ability to streamline the structure, influence, and control of the flow of information is dramatically more powerful and cost- effective than moving and manufacturing physical products Rule 3 Inability to overthrow the dominant, outdated business design
often leads to business failure
Rule 4 E-commerce is enabling companies to listen to their customers and become either “the cheapest,” “the most familiar,” or “the best”
Rule 5 Don’t use technology just to create the product; use it to
innovate, entertain, and enhance the entire experience
surrounding the product, from selection and ordering to
receiving and service
Ten Rules of E-business Ten Rules of E-business
Rule 6 The business design of the future increasingly uses
reconfigurable e-business community models to best meet customers’ needs
Rule 7 The goal of new business designs is for companies to create flexible outsourcing alliances that not only off-load costs but also make customers ecstatic
Rule 8 For urgent e-business projects its easy to minimize
application infrastructure needs and to focus on the glitzy front end apps. The oversight can be costly in more ways than one
Rule 9 The ability to plan an e-business infrastructure course swiftly and to implement it ruthlessly are key to success; ruthless execution is norm
Rule 10 The tough task for management is to align business
strategies, processes, and applications fast, right, and all at
once; Strong leadership is imperative
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Ten Rules of E-business: Rule 1 Ten Rules of E-business: Rule 1
Technology is no longer an afterthought in
forming business strategy, but the actual cause and driver
– Conventional, risk-averse businesses cannot ignore e-business
– E-commerce poses most significant challenge since advent of computing
– Most execs unaware of impact of these changes – Need to see business differently; maintaining
status quo not a viable option
Ten Rules of E-business: Rule 2 Ten Rules of E-business: Rule 2
The ability to streamline the structure, influence, and control of the flow of information is dramatically more powerful and cost-effective than moving and
manufacturing physical products
– Core driver of structural transformation of business
– Few companies have info-centric business designs for continuous business change and innovation
– Changing info flow requires changing product mix and ecosystem
• DEC’s demise
– Most companies unable to cannibalize existing business
structures, reallocate assets to compete with startups
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Ten Rules of E-business: Rule 3 Ten Rules of E-business: Rule 3
Inability to overthrow the dominant, outdated business design often leads to business failure
– CompuServe & Prodigy Vs. AOL
Not the earliest adopters, but the most serious, eventually prevail
– AOL outlasted, outwit, and outsmart competition
Often in the early phase, there is an “arms race” between competitors
Need to convert technology advantage to process advantage to business model advantage
Deeply-embedded innovations are difficult to implement –
but also to copy!
Value Chain Disaggregation and Value Chain Disaggregation and
Reaggregation Reaggregation
Disaggregation to separate means, or products, from ends, or customer needs
– Value of a business in the needs it serves, not in products it offers
– Intel with continuous innovation in chip design and manufacturing
– Requires identifying, valuing, and nurturing core of business:
the underlying needs satisfied by company
Reaggregation to lower cost or enhance differentiation from competitors
– Streamlines entire value chain
– Success dependent on well-integrated enterprise apps
– Amazon.com Vs. Barnes and Nobles
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The Road Ahead: Steps to a New Beginning The Road Ahead: Steps to a New Beginning
Six steps of disaggregation and reaggregation
– What is the new industry structure?
• Configuration
– What does the digital consumer want?
• Value in terms of experience and expectations – What are the new economics?
• How to convert value creation into revenue?
• How do you engineer the end-to-end value stream?
– How do we reorganize our business?
• Right partnerships – Where is the value?
• Integration
– How do we implement change?
• New generation leaders who understand how to create
digital future by design and intent, not by accident
Challenging Traditional Definitions of Value Challenging Traditional Definitions of Value
Customers need businesses to improve
– Speed of service – Convenience – Personalization – Price
Managers should ask how they can use technology to create new value proposition for the customer
– Domino’s Pizza, Dell, Amazon.com
Ability to view world from customers’ perspective
prevents visionary companies from starting in wrong place and ending up at wrong destination
– Market segmentation analysis difficult to execute in turbulent
environment
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Changing the Notion of Value: E-commerce Changing the Notion of Value: E-commerce
Web and ecommerce have accelerated value innovation in speed, convenience,
personalization and price dimensions of a service
– Changed underlying value proposition
Customer’s looking for cheapest, most familiar, or best quality product
– A product or service that is 98 percent as good, unfamiliar or costs 50 cents more will not survive – Companies following such middle-of-the-road
strategies will underperform
Ten Rules of E-business: Rule 4 Ten Rules of E-business: Rule 4
E-commerce is enabling companies to listen to their customers and become either “the
cheapest,” “the most familiar,” or “the best”
– “The cheapest” not synonymous with inferior quality
• Southwest’s “No Frills Flying”
• Wal-Mart’s “Everyday Low Prices”
– “The most familiar” means customers know what to expect
• McDonald’s, Coca-Cola took decades to build brand
• AOL and Yahoo carved out strong identities in
only a few years using technology
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Ten Rules of E-business: Rule 4 Ten Rules of E-business: Rule 4
– Being “the best”
• Reinventing service processes to enhance quality
• Turning company on a dime to move in more profitable directions
• Raising relationships with customers and suppliers to unprecedented levels of
cooperation and trust
• Amercian Express’ Return Protection Plan
Ten Rules of E-business: Rule 5 Ten Rules of E-business: Rule 5
Don’t use technology just to create the product;
use it to innovate, entertain, and enhance the
entire experience surrounding the product, from selection and ordering to receiving and service
– Amazon.com in the book retailing industry identified new source of customer value by streamlining consumers’ buying experience – Microsoft anticipated changing customer
experiences and reengineered several value
chains: Travel (Expedia), Automotive (CarPoint),
Real Estate (HomeAdvisor), Finance (Investor)
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Ten Rules of E-business: Rule 5 Ten Rules of E-business: Rule 5
CEOs must understand the threat posed by value migration
– Is there an Amazon.com that can squeeze margins in your business?
– If not, can you create one -- “destroy your business” initiative at GE?
– Are any new entrants in your industry leveraging Web to rewire customer experience and change service expectations?
CEOs must understand how to manage in a
fast-moving environment
Ten Rules of E-business: Rule 6 Ten Rules of E-business: Rule 6
The business design of the future increasingly uses reconfigurable e-business community
models to best meet customers’ needs
– Competition no longer between companies but between Business Webs (BWs)
• Auto-By-Tel vs. Big Three in the car industry Cost
Quality
Delivery
Flexibility
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Process Outsourcing Investment
Partnerships Contract
Manufacturing Administration
HR Accounting
IT
Do not outsource core competence Focus: efficiency and cost reduction
Outsource critical tasks
Focus: Time-to-market, Market position via
ease of doing business 1
stGen:
Cannot do
everything well
2
ndGen:
Cannot go at it alone
3
rdGen:
Need advice, contacts
and Web savvy
Co-create critical tasks Focus:
Market position via ease of doing
business (e.g, GE in India)
Harvesting Outsourcing: E-business Core Harvesting Outsourcing: E-business Core
Competencies
Competencies
Creating the New Technoenterprise:
Creating the New Technoenterprise:
Integrate, Integrate, Integrate Integrate, Integrate, Integrate
App integration key to e- business
– Not easy, requires major app overhaul for integrated front-end/back-end
infrastructure
– Integrated app architecture critical with advent of e-
commerce
– Threat of losing customers looming large with advent of new market entrants
Strategy Process
Customer Needs
Corporate Strategy
Process Strategy
Application Integration
Decisions
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Ten Rules of E-business: Rule 7 Ten Rules of E-business: Rule 7
The goal of new business designs is for companies to create flexible outsourcing
alliances that not only off-load costs but also make customers ecstatic
E-business enabled outsourcing a big deal
– Pressure by shareholders for double-digit revenue growth
– CEOs have already reengineered, downsized and
cut costs; now looking at technology to transform
business model and deliver results
Ten Rules of E-business: Rule 8 Ten Rules of E-business: Rule 8
For urgent e-business projects its easy to
minimize application infrastructure needs and to focus on the glitzy front end apps. The
oversight can be costly in more ways than one
– Decision to adopt e-business architecture is a business, not technical, decision
The lack of attention to the back-office systems and process side of E-business is the primary
reason for many project failures.
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Ten Rules of E-business: Rule 9 Ten Rules of E-business: Rule 9
The ability to plan an e-business infrastructure course swiftly and to implement it ruthlessly are key to success; ruthless execution is norm
– Most e-business strategies in dire straits even before they start
– Managers often don’t understand complexity of converting strategy into a working architecture
The goal of every successful e-business strategy is help the firm
either save or make
money.
Ten Rules of E-business: Rule 10 Ten Rules of E-business: Rule 10
The tough task for management is to align business strategies, processes, and
applications fast, right, and all at once; Strong leadership is imperative
– Many managers good at planning strategy and looking at things strategically but not at
implementing strategy
– Implementation takes leadership, commitment and backbone
– “Creative destruction” or breaking free from habits
of past necessary
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Table of Contents Table of Contents
Ten Rules of E-business Ten Rules of E-business E-business Success Stories E-business Success Stories
What does this mean for What does this mean for managers – Looking Deep managers – Looking Deep E-commerce vs. E-business?
E-commerce vs. E-business?
Key Take-Aways
Key Take-Aways
Current Issues in E-Business Current Issues in E-Business
Effectively consolidating the processes and IT operations resulting from mergers
Developing flexible supply chains – physical, information and financial -- to enable mass customization of
products and services
Managing global supplier, production and distribution networks
The customer oriented integration -- using technology to combat the increased “commoditization” of
products/services
Using self-service to cut internal and external operating
costs
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Are You Ready?
Are You Ready?
Does senior management understand?
– Implementation side of strategy?
– That entire business platform is being transformed by new technology that tightly integrates internal and external processes?
– The risks, challenges in integrating and
implementing enterprise apps necessary for an e- business enterprise?
– What it takes to build inter-enterprise, tech-
supported processes, such as SCM, that form backbone of ebusiness?
– Do you have baggage – legacy apps, calcified
processes, bureaucratic controls and inflexible
business models
Fundamental Questions in Each Phase Fundamental Questions in Each Phase
• How will e-commerce change our customer priorities?
• What new things do our customers want?
• How can we construct a business design to meet these new customer priorities?
• What kind of new applications infrastructure do we need to orchestrate the new business design?
• What short-term and long-term investments in people,
partners, and technology must we make to survive, let
alone thrive in this new environment?
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Are Customers Are Looking for Are Customers Are Looking for
Internet Business Solutions Internet Business Solutions
• Customer attitudes — from tactical to strategic
• Customers require solutions — not just products and services
• Internet business solutions are evaluated and selected by the business decision-makers — not the technical staff
• Business decision-makers are looking for a
trusted advisor
Table of Contents Table of Contents
Ten Rules of E-business Ten Rules of E-business E-business Success Stories E-business Success Stories
What does this mean for What does this mean for managers – Looking Deep managers – Looking Deep E-commerce vs. E-business?
E-commerce vs. E-business?
Key Take-Aways
Key Take-Aways
- 49 -
Time
E-business is NOT about Technology E-business is NOT about Technology
E-business decision-makers are Presidents, CEO’s, CFO’s, and department heads
What motivates them – business strategy & direction, NOT technology
Tactical
Strategic Business
decisions
Technology
decisions
E-business Management Challenges E-business Management Challenges
The Cost Of Making A The Cost Of Making A Technology Mistake Has Technology Mistake Has
Increased Exponentially Increased Exponentially
Coco-Cola invest 600 Million in
Logistics platform Siemens invests
1 Billion in Supply Chain Project
Nike reports 400 Million loss due to supply chain
software snafu
Why Should Senior Management Be Much Why Should Senior Management Be Much
More Focused On E-business Decisions More Focused On E-business Decisions
Today?
Today?
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