Business Models

Foothill College

Electronic Commerce

Agenda

• Business models

• Example companies

• Business process (PTP)

• Analyzing process models

• Introduction to Value Webs

What is a Business Model?

• A value chain that connects participants

• The path of goods in a supply chain

• The path of transactions in an exchange

• The path of information in a value chain

• Interdependencies / paths in a “value web”– Ultimately, how you expect to make money

Acronyms First

• B = business

• C = consumer

• M = marketplace

• A = application– Each “participant” is a node along a “for

value” transaction exchange (value chain)– Models must include two or more participants

Networked Business Models

• Connect more participants

• Integrate “business process”

• Transfer information much faster

• Support hybrid transaction models

• Lend themselves to workflow / BPR

Business Models

• B2C, B2B

• C2C, C2B

• B2B2C, M2B2C

• Market models and M2M

• Internet exchange

• e-Hubs / e-Market places

• Direct commerce

B2B - Business to Business

• The big mover

• e-Business driven

• EDI and Internet based

• 80% of “e-Commerce” $s

• Estimated at $1 trillion spend– growing to 2.5 trillion by 2005– will be all of digital commerce by 2010

B2B Examples

• IBM

• HP

• Cisco

• Dell

• Intel

B2C - Business to Consumer

• Consumer driven

• Earliest e-Commerce

• Initially was retail - computers

• Books, CDs, travel, and entertainment

• 500,000 commerce sites in all verticals– many “click-and-mortar” strategies– driven by large “Web only” players

B2C Examples

• Amazon.com

• Drugstore.com

• Wal-Mart.com

• Safeway.com

• 1-800-flowers.com

B2B2C - Business to Business to Consumer

• Suppliers of products / services to B2C

• Large back end players:– financial services– distribution, replenishment– payments, EDI, supply chain– New portal B2C model

• Can include direct commerce

B2B2C Examples

• Yahoo!

• Fed-ex, UPS

• Safeway (hybrid)

• Direct commerce vendors:– Vitessa, CrossCommerce, EnText– iConomy, Escalate, iVendor

C2C - Consumer to Consumer

• Auctions– facilitated at a portal

• Peer-to-peer– Napster model– file exchange– transaction optional

• Classified ads at portal sites

C2C Examples

• E-Bay

• E-wanted

• Match.com

• Napster (model)– C2M2C really reflects the actual model

• Excite Classifieds

• Direct “C2C” really doesn’t exist today

C2B - Consumer to Business

• Reverse auction

• Post a “wanted” message

• Businesses will bid on message

• Can be automated at an exchange

• Creates very large consumer markets– a way to liquidate distressed inventory– or participate in a “C2M2B2C” exchange

C2B Examples

• Priceline• Autobytel.com*• GreatShop.com• Reverse auction C2B is the driver

– In these examples, C2M2B is the model– A marketplace “intermediary” is needed– *autobytel.com is technically a C2M2B, or

C2M2B2C, as a B2B marketplace is central

Market Models

• Market = intermediary

• Vertical exchange model– markets trade or share commodities– DynegyDirect, VerticalNet

• Napster / eBay are market intermediaries

• Dynamic pricing / collaborative commerce– Large buy-side / sell-side portals / exchanges

B2M2X Examples

• eBay

• VerticalNet

• VertMarkets*– Part of Vertical Net

• DynegyDirect**– Part of Enron Online – still operational

• Commerce One, Ariba, and Covisint

Internet Exchange

• Large B2B component– estimated at 33% of all B2B in 2003

• Dynamic pricing– prices are set by buyers and sellers

• Multiple buyers and sellers– it is a “market place” where many buyers

and many sellers are present. Usually it is organized around a specific vertical market

Exchange Players

• ANXeBusiness Corp– EDI network / markets

• General Electric (GSX)– Sold to Francisco Partners 6/02

• Covisint auto exchange• DynegyDirect

– Enron online (energy) closed 7/02– Still operational in energy, logistics, retail

E-Markets and E-hubs

• Exchange

• Market place

• Channel partners

• eXtended enterprise

• Add process to portals– Community, content, and commerce– Creating process share from member value

E-Hub Vendors and Players

• Covisint

• Vertical Net

• I2, Manugistics

• ANX - auto exchange

• See Net Market Makers for info / terms:– http://www.netmarketmakers.com/– http://www.netmarketmakers.com/glossary/

Direct Commerce

• New retail model• Deliver products from suppliers• Commerce “appears” on portal sites• Portals are the “merchant of record”• eCommerce vendor delivers back end• Portal and commerce vendor split margins

Direct Commerce “Founders”

• Vitessa (purchased)• Cross Commerce (gone)• iConomy (gone)• iVendor (gone)• Escalate (SCM software)• EnText (gone)

– All launched in Spring 2000, as the bubble burst for 90% of their target customers.

Analyzing Process

• The PTP model

• Process

• Transactions

• Participants

• Creating “value webs”

The Model - PTP

• Process

• Transactions

• Participants

• Can be used to describe and explain all business models, especially the Internet

• Analytically – defines “process share”– Market share of a given business process

Business Process Cycle

Discover

Settle Perform

Negotiate

Process (P)

• Discover

• Negotiate

• Performance

• Settle / payment

• Actions of participants– Process can stall, fail, or require more than

one turn to fully complete (close) a cycle

Transactions (T)

• Spot

• Recurring

• Replenishment

• Dynamic

• Modalities of transactions

Participants (P)

• Consumer

• Business

• Market

• Application

• Types of actors

Analyzing Value Webs

• Look at PTP

• Analyze each component of the model– Process– Transactions– Participants

• Look at the number of process turns

• Look at the efficiency of process turns

Summary

• Internetworking allows many models– e-Commerce was people driven– e-Business is process driven

• eMarketplaces support process– E-Hubs connect addition of partners

• Business models are business process– Use the PTP model to analyze process models

Review

• What is a business model?

• What are C, B, M, and A?

• What are “extended value chains”?

• What are P, T, and P in process?

• What is a definition of “value web”?

Exercises

• How many business models do you participate in each week? Draw some.

• Are these networked process models?

• If so, how do goods, transactions, and information flow among participants?

• Name five B2C successes / failures

• Is a grocery store a “portal”? Explain.