Challenges in Challenges in (E-Commerce) (E-Commerce) StrategyStrategy

Ajit KambilAjit KambilGlobal Director, Global Director, Technology and Innovation,Technology and Innovation,Deloitte Research.Deloitte Research.

OutlineOutline

The context.. (US viewpoint)The context.. (US viewpoint) What went wrong What went wrong The underlying transformationsThe underlying transformations What we need to addressWhat we need to address

The times they were a The times they were a changing…changing…

to be followed by..to be followed by..

And even more..And even more..

But there is silver But there is silver lininglining The lowest interest rates in decadesThe lowest interest rates in decades Unemployment rate has flattenedUnemployment rate has flattened Corporate cash flows and profitability Corporate cash flows and profitability

are going upare going up Oil prices are more stableOil prices are more stable Household spending is holding Household spending is holding

steadysteady New life in the venture capital New life in the venture capital

environmentenvironment

It should be no surprise It should be no surprise eCommerce is not top of eCommerce is not top of mind for CXOsmind for CXOs Generate demand and cut costGenerate demand and cut cost Reduce over capacityReduce over capacity Restore pricing power in their Restore pricing power in their

industryindustry Compete in deflationary and Compete in deflationary and

inflationary environmentsinflationary environments New regulationsNew regulations

Many eCommerce initiatives Many eCommerce initiatives were oversold and under-were oversold and under-delivereddelivered Not enough real value Not enough real value

in exchange in exchange processes processes

Did not create a win-Did not create a win-win-win between win-win between buyers, sellers and buyers, sellers and market makersmarket makers

Governance and Governance and business model failurebusiness model failure

Process redesign Process redesign integration costs were integration costs were very highvery high

Others drowned in Others drowned in liquidityliquidity

Despite the failures – Despite the failures – there are genuine there are genuine successessuccesses

Auction based market place founded in 1995 45 million subscribers in March 2002 61+ million subscribers by January 2003 Rapid international expansions and

diversification 2002 gross merchandise sales on eBay

exceeded US$13 billion eBay motors ($4.3 billion) Computers ($1.9 billion) Consumer Electronics ($1.8 billion) Books/Movies/Music ($1.4 billion) Sports ($1.2 billion)

EBay is lot more than a EBay is lot more than a consumer auctionconsumer auction Clearance – Time is money and many high technology products Clearance – Time is money and many high technology products

are perishable. Liquidation on eBay is cheaper and often are perishable. Liquidation on eBay is cheaper and often generates higher pricesgenerates higher prices

Resale - Accelerate upgrades while reaching new customers Resale - Accelerate upgrades while reaching new customers and driving new growthand driving new growth

Customer Insights - Product demand, pricing and customer Customer Insights - Product demand, pricing and customer preferencespreferences

Fashions and Nostalgia – Nissan 350z, the mini are hot productsFashions and Nostalgia – Nissan 350z, the mini are hot products B2b – New channels to small businessesB2b – New channels to small businesses

Resale markets like eBay should not be ignored as even large Resale markets like eBay should not be ignored as even large companies look to to them for value. companies look to to them for value.

Resale markets must be factored into supply chain strategies Resale markets must be factored into supply chain strategies especially in a down turn. especially in a down turn.

There are other There are other promising market promising market applicationsapplications

Nevertheless there is Nevertheless there is technology and innovation technology and innovation fatigue and skepticismfatigue and skepticism Technology often outruns the Technology often outruns the

useruser User expectations for User expectations for

convenience have gone up but we convenience have gone up but we all carry multiple gadgetsall carry multiple gadgets

But there are But there are fundamental and fundamental and disruptive changesdisruptive changes Socio-Economic and Socio-Economic and

Demographic ChangesDemographic Changes– Aging of developed world Aging of developed world

populations seeking populations seeking economic and health economic and health securitysecurity

– New security concerns – New security concerns – national and corporatenational and corporate

– Major workforce Major workforce disruption at the level of disruption at the level of knowledge workersknowledge workers

– China and India plugged China and India plugged into the world economyinto the world economy

– New customer culturesNew customer cultures

Businesses are rapidly Businesses are rapidly outsourcingoutsourcing Business ModelsBusiness Models

– OutsourcingOutsourcing– Business networks Business networks

are becoming more are becoming more complexcomplex

– Decoupling returns Decoupling returns from physical, from physical, informational, informational, relationships and relationships and other intangible other intangible assets assets

– Competing through IPCompeting through IP

Technological Changes Technological Changes on the horizon include:on the horizon include: Information Information

TechnologiesTechnologies– Auto-IdentificationAuto-Identification– Grid computingGrid computing– Utility computingUtility computing– New InterfacesNew Interfaces– New sensors and New sensors and

MEMsMEMs NanotechnologyNanotechnology Power technologiesPower technologies Bio-technologyBio-technology

From a business From a business perspective the questions perspective the questions remain the same..remain the same.. How will a new idea impact my business?How will a new idea impact my business? What is the business case for a new What is the business case for a new

technology or initiative?technology or initiative? What are effective models for moving from What are effective models for moving from

innovation to deployment of a new idea or innovation to deployment of a new idea or technology? What works?technology? What works?– How should I organize to capture the value? How should I organize to capture the value?

(collaboration, co-opetition, internal development (collaboration, co-opetition, internal development etc)etc)

What are the broader social impacts of the What are the broader social impacts of the technology?technology?– How will individuals, unions and society respond to How will individuals, unions and society respond to

these changes?these changes?

Beyond the obvious Beyond the obvious there are broader there are broader challengeschallenges What are we really managing and measuring?What are we really managing and measuring?

– Many intangibles are invisible in much of traditional accounting?Many intangibles are invisible in much of traditional accounting?– Thankfully cash flow and earnings can be measured.Thankfully cash flow and earnings can be measured.

How should we conceptualize strategy in networks?How should we conceptualize strategy in networks? Does IT matter (not so according to the recent HBR)?Does IT matter (not so according to the recent HBR)? What technology capabilities and architectures are required to What technology capabilities and architectures are required to

compete in the future? (IBM wants to sell it to you on demand)compete in the future? (IBM wants to sell it to you on demand) How do we increase individual and knowledge worker How do we increase individual and knowledge worker

productivity?productivity? How do individuals really collect and interact with information How do individuals really collect and interact with information

to make critical decisions?to make critical decisions? How should governments respond to technological change How should governments respond to technological change

and create environments suitable for attracting the best labor, and create environments suitable for attracting the best labor, capital and other value creating assets to meet the promises capital and other value creating assets to meet the promises and obligations to their citizens?and obligations to their citizens?– How can information technology support the growth and How can information technology support the growth and

economic aspirations of a society?economic aspirations of a society?

ConclusionsConclusions

eCommerce is not novel any moreeCommerce is not novel any more Today we want to know how to make it Today we want to know how to make it

work better to satisfy individual, work better to satisfy individual, corporate and societal needs. corporate and societal needs.

Within this context each of us has to Within this context each of us has to decide how we create distinctive value decide how we create distinctive value in a competitive market place for ideas in a competitive market place for ideas for different audiences.for different audiences.– The latest CAIS issue suggests some The latest CAIS issue suggests some

directions for this in a summary of an ICIS directions for this in a summary of an ICIS panelpanel