Strategic Information Systems

Preparing for the E-Business Environment

What is E-Business?

IT enabled business processes.

Netcentric business:

• Traditional networks

• Internet technology (extranets, intranets)

• Telecommunications intensive

Transforms processes (business, society, government)

Achieve better-faster-cheaper.

Business processes that EXPLOT IT

Inclusive Domain of E-Business

ElectronicCommerce

IT Enabled Enterprise Applications

ElectronicCollaboration

ERP CRM

SCM KM

Groupware

ElectronicCommunities

Defining E-business…one view:

Business Intelligence

Data Mining

Defining E-business…another view:

Phased Development Over Time

brochureware

E-commerce

Catalogs on Internet

Customer transactions on Internet

E-business

E-enterprise

Business to Business Internet

Enterprise Apps

Extranets Intranets The Internet

Suppliers Customers

The Firm

E-business Systems

E-commerce Systems

Defining E-business…yet another view:

See quote on next page.

E-commerce is concerned with revenue-generating transactions that cross firm boundaries.

E-business is primarily concerned with the application of Internet technologies to business processes within the firm.

From E-Commerce

by Traudon and Laver (2001)

How is E-commerce different from E-business?

E-Commerce:

Generating revenue (direct or indirect)

Selling goods and services over the Internet

Transaction focused (buyer and seller)

Numerous business models (how do we make money?)

E-Business:

All aspects of the business (ex: cost reduction; business intelligence).

General better-faster-cheaper focus.

Business process re-engineering

Wider organizational impact (all processes)

Are non-profits “left out” of

E-commerce/E-business

PurchasedSuppliesInboundLogistics

Operations

Product R&D, Technology, and Systems Development

Human Resources Management

General Administration

OutboundLogistics

Sales andMarketing Service

E-Business Impacts all processes in the Value Chain.

Michael Porter’s VALUE CHAIN

support

functions

July 30, 2002

U.S. sales in the interactive/e-commerce sector climbed steadily from $28 billion to $31.4 billion from 2000 to 2001, an increase of 12.1%. By 2002, interactive/e-commerce sales are expected to increase by another 14.6%, hovering around $36 billion. E-commerce revenues in the United States are predicted to reach $81.1 billion by the year 2006.

SOURCE: Direct Marketing Assn.

August 2, 2002 As published by eMarketer

January 15, 2002

Of the estimated 497.7 million Internet users worldwide, 29.8% of them are from Western Europe. The United States lays claim to 29.2% of Internet users. However, the United States still takes home the bulk of e-commerce revenues (43.7%), compared to Western Europe (25.7%), Japan (15.8%) and the Asia-Pacific region (6.1%).

SOURCE: International Data Corp.

Retail e-commerce sales hit $9.8 billion

May 30, 2002

U.S. retail e-commerce sales for Q1 2002 reached $9.849 billion, up about 19% from the same period in 2001. The latest results were down, however, from the Q4 2001 figure of $11.2 billion. Total retail sales

for Q 2002 were $743.8 billion.

SOURCE: U.S. Census Bureau

Disintermediation

Re-intermediation

Information Transparency

Electronic Marketspace

Mass Customization

New terms, recurring themes…

E-Commerce existed before the Internet and is not completely reliant on the Internet.

• Electronic Data Interchange (EDI)

• Value Added Networks (VAN’s)

• Local Area Networks (LAN’s)

Digitization of the Product/Service

Digitization of the Process

Digitization of the Delivery Agent

Three Dimensions of E-Commerce:

E-Commerce Economics

Physical Agent

(A)

Digital Agent

(B)

Physical Product

(A)

Digital Product

(B)

Physical Process

(A)

Digital Process

(B)

The Continuum: Product A is purely physical; Product B is purely digital

Average cost

Quantity

Quantity

Average cost

COST CURVES

Regular products

Digital products

E-Commerce Economics

The Power Shifts Inherent in E-Commerce

Examples:

Information availability affects consumer decision making.

Information transparency exposes the inefficiencies of processes to customers.

Downward price pressures.

E-Commerce Economics

BENEFITS OF ADOPTING E-BUSINESS

Economic Benefits: better-faster-cheaper

(Hold down transaction, labor costs)

Relational Benefits: customers and other organizations

Strategic Benefits: long term survival, profitability

E-commerce Revenue Models:

• Advertising

• Subscription/membership fee

• Service fee (per transaction)

• Direct Sales

• Affiliate (fees for business referrals)

E-commerce Business Models:

(based on the nature of transaction agents)

• Business to Consumer (B2C)

• Business to Business (B2B) (E-marketplaces; infomediaries)

• Consumer to Consumer (C2C) (infomediaries)

• Business to Employee (B2E)

• Government to Citizens (G2C)

• Collaborative Commerce

• Mobile Commerce

Organizational Preparednessfor E-business

External forces for change

Organizational RESPONSE strategies:

BPR; Continuous Improvement; Strategic IT systems; Business alliances; E-business

Organizational Preparedness

What organizations will survive/thrive in an E-business environment?

Innovation supported by:

• Organizational culture

• Organizational structure

• Organizational leadership

Organizational Preparedness

Components of Organizational culture:

• vision

• values

• formal and informal structures

• communication networks

• decision making

• leadership style

• morale and human resources

Organizational Preparedness

Styles of Organizational structure:

• bureaucratic

• organic (informal, entrepreneurial)

• process/team oriented

Organizational Preparedness

Styles of Organizational leadership:

• authoritative

• charismatic

• coaching/enabling

• coordinating

WINNERS AND LOSERS

Winners:

Internet service providers (AOL)

Portal service providers (Yahoo)

Software companies selling E-business services

Technology suppliers

Mid-size (and some smaller) businesses that gain wider access to customers

Large companies that successfully build fully integrated systems (FedEx; Walmart)

Consumers

WINNERS AND LOSERS

Losers:

Smaller wholesalers and distributors

Salespeople

Brokers (traditional mediaries)

Poorly planned and envisioned online-only companies (dot.coms)

A change in the foundation of competitive advantage…

New companies are advantaged by their

• Lack of legacy systems

• Lack of legacy assets

• Lack of legacy mindset

What about their disadvantages?

Organizational Change for E-Business

Old Rule: IT for operational support.

New Rule: IT is critical to business strategy.

What are the barriers that keep organizations from adopting this

new rule?

IT and Change

IT Leader must deal with...• Changes to Information Technology.• Changes to the organization because of

changes to IT.

Change can be viewed as problem or opportunity:• Problem when not effectively managed• Opportunity for organizational success

Organizational Change for E-Business

“If an entity in the value chain begins to do business electronically, companies up and down that value chain must follow suit, or risk being substituted.”

*Ravi KalakotaWHY?

Principles of E-business Design

1) Empower the customer• Self-service• Disintermediation• Disseminate, not restrict information

2) Increase process visibility• For employees, customers, suppliers

Principles of E-business Design

3) Treat each customer as a market segment • Technology-mediated customization• “Mass-customization”

4) Treat your assets as liabilities• Outsource processes (manufacturing)• Brand intensive, not capital intensive

Principles of E-business Design5) Build enterprise applications

• Connect disparate systems (middleware as an alternative)

• Knowledge workers• Multi-channel integration for customer

6) Create communities of value

(E-business communities)• Supplier partners• Related technology partners• Same industry competitors

Principles of E-business Design

7) Separate the economics of information from the economics of things

• Content separated from medium• Near-zero cost of info replication

8) Control the “standard”• Innovate• Give away product to reach critical mass

In-house core competencies

Infrastructure/processes

Products/Services

Channels Customers

CustomersNeeds

Integrated Channels

Products/Services

FlexibleInfrastructure/

Processes

Outsourced andIn-house corecompetencies

REVERSING THE VALUE CHAIN

Choose a FOCUS for achieving and retaining market

leadership

•Service Excellence

•Operational Excellence

•Continuous Innovation Excellence

BETTER-FASTER-CHEAPEREND