E Banking

February 7 and 14, 2005 CITM360 – Weeks 5&6

Establishing an eBusinessCITM360 – Weeks 5 & 6

Steven A. Gedeon, PhD, MBA, PEng

February 7 and 14, 2005Dr. Steven A. Gedeon [email protected]

This Week’s Agenda

• Elevator Pitch Prizes• Review Assignment 1• Review of Course to Date

– Entrepreneurship– eBusiness– Business Plans– Market Analysis– Strategy– Business Models

• Interim Presentations


Results from Elevator Pitches

• Entertainment Edge = 73%

• Farmer Bob’s Grocery Depot = 80%

• OP Print = 73%

• Connectix = 78%

• netDrive.com = 75%

• Lottery Click = 68%

• Innotech = 71%

#1

#2#3


Results from Elevator Pitches

• Lowest Score = 1 and 32 Total

• Highest Score = 20 and 97 Total

• Lowest Scorer ave = 59, Hi Scorer = 89

• Success and Excitement Scored Lowest in Every Single eBusiness Idea

• Most Controversial (Highest Stn Dev)– netDrive Success and Excitement– Lottery Click Success and Excitement


Assignment 1 Results

Histogram

0

2

4

6

8

10

12

14

0 2 4 6 8 10 12 14 16

Grade

Nu

mb

er o

f S

tud

ents

CD

FB A


How to be Successful in Life! (How to Improve Your Grade)

• Answer the Question• Think Clearly, Write Clearly, Use Structure

– Start from an Outline!• Topic Sentences, One Idea per Paragraph

– Use Paragraph Breaks, Headings, Titles, Format– Don’t Ramble

• Must Learn How to Write Well– Use the Writing Centre– Strunk & White “Elements of Style”


How to be Successful in Life! (How to Improve Your Grade)

• Don’t Tell Me What I Already Know

• Don’t Surprise Me or Make me Guess

• Be Insightful– “Internet Growing” or “Population Aging” is Not

Insightful

• Do a Reality Check– Ad Revenues, $5 Fee for a Lawyer…


Why Take This Course?

• All Knowledge Worker Jobs Require Entrepreneurial and Intrapreneurial Skills that are Key to Innovation

• (Virtually) All Business is eBusiness• All Business Decisions Require:

– Analysis of the Data (Getting Facts, Research Skills)– Synthesis of the Key Issues, Developing Strategy– Planning (Setting Goals, Articulating Actions, Roles &

Responsibilities, Integration)– Justifying the Return on Investment (ROI)

• Integration of All Your Other Courses• Core Management Skill Development


What is Entrepreneurship?

• Capitalizing on Change• Identifying Opportunities• Marshalling Resources

This Takes Place:• Alone and With Teams• Starting Up New Ventures and Building from

Within an Existing Structure (“Intrapreneurship”)• In Your Personal Life and Within a Job• In Large and Small Companies


Lies an Entrepreneur Told Me

Most of What You Read is a Lie.– Sampling Error

#1 Being an Entrepreneur is Fun. It’s Not!

#2 Entrepreneurs Succeed. Most Fail!

#3 You Should Quit your Day Job and Start Your Company Now. Don’t!

#4 You Need Venture Capital. You don’t!

#5 You Need a Specific Education to be an Entrepreneur. You don’t!

Don’t be Fooled by 30 Success Stories


What is e-Business?

Connecting IT Systems to the Internet

Extending the power of information systems through the reach of the Internet to:

• Suppliers • Customers• Employees

• Affiliation Groups• Connected Devices


The Web is NOT the Internet

• The Internet refers to a Network Infrastructure and certain Standards (Internet Protocol)

• Many Standards – HTTP (e.g. HTML format)– email (POP3, SMTP, IMAP)– Online Chat (e.g. IRC)

• The World Wide Web (using a Web Browser) is only one of many services on the Internet – Intranet, Extranet, Internet


Combining the Internet & IT

• Mediating Technology– B2B, B2C, C2C, C2B

• Universality• Network Externalities

– Metcalfe Law: The Value of the network increases as the square of the number of people in the network

• Distribution Channel• Time Moderator• Information Asymmetry Shrinker (ex.

car dealers)• Infinite Virtual Capacity• Low Cost Standard• Creative Destroyer• Transaction Cost Reducer

• transactional• geographical• automational• analytical• informational• sequential• knowledge management• tracking• disintermediation

IT Capabilities

IT Capabilities take advantage of Internet Properties to secure differentiation and competitive advantage


Examples of e-Businesses

• E-Auctioning• E-Banking• E-Commerce• E-Communications• E-Directories• E-Franchising• E-Fulfillment• E-Gambling• E-Gaming• E-Information• E-Learning• E-Logistics

• E-Mailing• E-Marketing• E-Media• E-News• E-Operations Management• E-Research• E-Supply• E-Trading• E-Transaction Processing• E-Travel• E-Virtual Reality• E-Zines

B2B – B2C – B2E – G2C – P2P


e-Business Challenges

• Attracting and Keeping Customers– eyeballs, user experience, stickiness, branding

• Internet Time to Market– Rapid Implementation of New Services– Time to Market

• Back End Integration: Single Biggest Problem– Content Sources, Legacy Systems– ERP, Sales Force Automation, Customer Service, Logistics,

Fulfillment• Quality of Service

– Real-time, transactions, scalability, availability, performance• Lack of Experienced Resources

– Management, domain, architects, development


Things to Consider

• Value Proposition to Customers and Customers’ Propensity to Buy

• Uniqueness, Importance, Sustainability• Niche or Mass Market (Mass Customization)• Revenue Model• Methods & Costs of Building Traffic• Ability to turn Traffic into Profits• Fulfillment Requirements & Capacity


Choosing a concept

• “Choose a business concept you’re excited about and want to experience. Choose something you’re really good at. Build on your strengths.”

• “When you go into business for yourself, make sure that you know something nobody else knows. Do something better than anybody else. Develop a unique idea or unique marketing position.” (Business Plans That Work, pp. 18-19)

• “Take a look at your e-business idea and decide whether or not the value of the product or service you plan to offer increases with greater use or distribution over the internet.” (see pp. 42-49)

• “If you have a good idea, you’ll have competitors. Acknowledge that. The question now becomes, what significant competitive advantage do you see for yourself?” (p. 24)


Lessons Learned

• It is difficult to succeed in business without:– Passion– Great People (Ability to Execute) – A Good Idea (Value-Added Differentiation)– A Business Plan (Vision and Organization)– Entrepreneurship (Capitalizing on Change)– Sufficient Cash

• Early and Ongoing Customers• Enough External Financing


Business Plans

• What is the Purpose of the Plan?– Raise Financing? – Clarity of Thought?– Operating Plan for Employees ?– Report to the Board?

• Who is the Audience?– Angel, VC, Banker, IPO– Acquirer or Acquiree


Business Plan Overview

• Executive Summary

1. Mission, Goals & Objectives

2. The Business Opportunity (Big Picture)

3. Market Analysis

4. Key Success Factors (Strategy)

5. Marketing Plan

6. Processes and Technology Plan

7. Organizational Matters

8. Financial Plan• Concluding Comments • Appendices


The Business Planning Process

• Identify the Opportunity (Start with an Idea) • Marshal Scarce Resources (Skunkworks, Prototype)• Market Analysis (Gather Info, Meet with Customers)• Determine Key Success Factors• Articulate the Business Opportunity• Create Plans (Market, Technology, Org, Financial)• Articulate the Goals and Objectives• Create and Disseminate the Business Plan• Implement the Plan• Monitor and Revise the Plan


Market Analysis Section Outline

• Macroeconomic Trends

• Overall Market Analysis (Growing, Flat, Trends, other info)

• Customer Analysis (Segment and Define the Customer & Influencers in Detail!)

• Company Strengths & Weaknesses

• Competition (Current and Future)


Customer Analysis = Segmentation

• Detailed Understanding of their Pain• Detailed Understanding of the Niche Segment• Detailed Understanding of WHO within the

company/family will decide/influence (titles)• What are their other Choices?

– Share of Mouth/Mind/Ear?– Other websites?

• What do you know? What do you need to know? Where will you get this information?


Moore’s Crossing the Chasm

Bow

ling Alley


Strategy

• Every organization has one – even if it is not written down or is contradictory or poor

• Strategy is a Tool for integrating into a cohesive whole

• Strategy is a Synthesis of the Market Analysis to determine the Key Success Factors

• Strategy drives the Market, Technology, Organization, and Financial Plans


Strategy

CompetitiveStrategy

StakeholderValues

End UserExpectations

CompanyStrengths & Weaknesses

Opportunities&

Threats

InternalFactors

ExternalFactors


Strategic Analysis

Porter’s Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry

• Threat of entry• Threat of substitution• Bargaining power of buyers• Bargaining power of

suppliers• Rivalry among current

competitors


Generic Strategies

• Maximization of Value Chain

InboundLogistics

OperationsOutboundLogistics

Marketing& Sales

Service

Margin

Procurement

IT and Product Technology

HR and Operations ManagementCompany Infrastructure, Legal, Governance…


Generic Strategies

• Alteration of Value Chain (Value Shop)

ProblemFinding

ProblemSolving

Choice ExecutionControl &Evaluation

Sales


Generic Strategies

• Stage of Operations (Value Network)

NetworkPromotion

ServiceProvisioning

InfrastructureOperations

Partnerships


Generic Differentiation Strategies

• Price Differentiation• Image Differentiation (Branding)• Support Differentiation• Quality Differentiation• Design Differentiation• Timeliness Differentiation• Undifferentiation (Copycats)• Others?


Generic Strategies

• Position within an Existing Industry Structure– This is the Traditional View of Strategy– These companies are “Market Takers”

• Create a New Industry Structure– “Competing for the Future” Hamel & Prahalad– These companies are “Rule Breakers” and

“Rule Makers”


Elements of a Business Model

Business Model Component Q’s for all Business Models Q’s Internet Business Models

Positioning• What are the 5 Forces?• What is the value chain?

Is the firm in a “good space” ? How are you maximizing both IT and Internet capabilities?

Customer Value• What’s the value

proposition?

Is the firm offering something distinctive or at a lower cost than its competitors ?

What is your differentiation?

What is it about the Internet that allows your firm to offer its customers something distinctive? Can you solve new problems for customers?

Scope To which customers (geographic and demographic) is the firm offering value? What is the range of products and services offered?

What is the scope of customers that the Internet enables your firm to reach? Does the Internet alter the product or service mix?

Revenue Source/Revenue Model

Who pays for what value and when? What are the margins in each market?

Are revenue sources different with the Internet? What is new?

Copyright © 2001, The MacGraw-Hill Companies, Inc., Internet Models and Strategies, Afuah and Tucci. All Rights Reserved. (modified)


Elements of a Business ModelPricing How does the firm price the value? How does the Internet make

pricing different?

Connected Activities What set of activities does the firm have to perform to offer this value and when?

How many new activities must be performed because of the Internet? How much better can the Internet help you to perform existing activities?

Implementation What organizational structure, systems, people, and environment does the firm need to carry out these activities?

What does the Internet do to the strategy, structure, systems, people and environment?

Capabilities What are your firm’s capabilities and capability gaps that need to be filled? How does the firm fill these capabilities?

What new capabilities do you need? What is the impact of the Internet on those capabilities?

Sustainability What is it about the firm that makes it difficult for other firms to imitate it? How does the firm sustain its competitive advantage?

Does the Internet Make the sustainability easier or more difficult?


Dominant Revenue Models

• Commission

• Advertising

• Margin or Markup on Products

• Production

• Referral

• Subscription or Membership

• Fee-for-Service (incl. bandwidth, storage…)


Interim Presentation Req’ts

• Who is the Customer (in detail!) and what is their Pain?• Who are the Competitors and what is your

differentiation?• What is the Business Model?• Where are you in the Value Chain and why is this a good

place?• How will you create Revenues?

– You must figure out how to fund your e-business, by early customers or raising financing

• What are your Key Success Factors/Issues?• What do you still need to figure out or Research?

No Plans Required Yet


Interim Presentations

• How will you present your idea? How many presenters? What is the role of each group member?

• 10 - 12 minutes for presentation, time limit strictly enforced• ~10-20 minutes for questions & discussion

(record feedback and comments from class, this will help focus the business plan)

• Use of PowerPoint is expected, e-mail me a copy of your slides (after class is ok). Bring USB drive with your powerpoint, CD… ensure you can access it.

• Required - Hand-in a hard copy of the power point before starting your presentation

• Everyone to review every presentation. Attendance Req’d

E Banking

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