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What is E-Business and does it matter? Definitions and Emerging E-Business Models

Professor Feng LiThe Business SchoolUniversity of Newcastle upon TyneE-Mail: Feng.li@ncl.ac.uk

© Feng Li, 2006

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What is E-Business?

Where do you draw the line? Software; Book Car Mortgage

Measuring E-Business depends on how far you stretch the ‘rubber band’!

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What is E-Business?

E-Commerce – electronic transactions conducted by business partners (narrow definition)

E-Business: buying and selling, servicing customers, collaborating with business partners, and conducting electronic transactions within an organisations

Turban, Efraim, David King, Jae Lee and Dennis Viehland (2004) Electronic Commerce: A Managerial Perspective 2004. Pearson Prentice Hall, New Jersey

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What is E-Business? …2

E-Commerce as digitally enabled commercial transactions between and amongst organisations and individuals

E-Business refers primarily to the digital enablement of transactions and processes within a firm, involving only the information systems under the control of the firm

E-Business are those activities other than ‘buying and selling’ via electronic channels

Laudon, Kenneth C & Carol Guercio Traver (2003) E-Commerce: Business, technology and society. 2nd edition. Pearson Addison Wesley, Boston

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What is E-Business … 3

For this module, a broad definition of E-Business is adopted

It encompasses all internal and external electronically based activities and processes.

E-commerce is part of E-Business, which focuses on the electronic commercial transactions between and amongst organisations and individuals

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What is E-Business? … continued

‘E-business is all about time cycle, speed, globalization, enhanced productivity, reaching new customers and sharing knowledge across institutions for competitive advantage’

-- Lou Gerstner, ex CEO of IBM

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What is E-Business … continued.

Not just about dot com’s and Internet only companies

Transform existing businesses through the Internet and related technologies

Integration within and between organisations – break down barriers and boundaries

Enabling new possibilities – new ways of doing business - not possible in the past

Origin go back several decades A wealth of knowledge already available -

through large research programmes

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Dot Com Crash – End of E-Business?

Underlying rapid growth has never stopped – even during the dot com crash

The Web has become an increasingly important part of consumers' everyday lives - shopping, banking, amusing, education …

Part of mainstream business culture, fulfilling its promise as a medium that can connect consumers and enterprises and cut red tape from transactions

Pure plays versus multi-channels - Web sites are necessary for any business - even if the online arm loses money

E-Commerce still only a small section of the economy (e.g. e-commerce < 5% of retailing)– ‘big bang’ yet to come

Not the end – the fun has just started !

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E-Business: Classification

Business to Business (B2B) Business to Consumers (B2C) Consumer to Consumers (C2C) Consumer to Business (C2B) E-Government (B2G, C2G etc.) Intra-Organisation E-Business Others – P2P etc.

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Why E-Business? Why Now?

Demand Pull – The New Economy Information economy - Information content & labour – over

60% New economics of information

Technological Push – the ‘ICTs Revolution’ Convergence of computing, telecom & media Exponential growth of the Internet Mobile communications

Rapid development of the Internet Mass, public infrastructure Individuality, interactivity, mobility & consumer

experiences Government Initiatives & Targets Others …

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Context for E-Business

All industries became information-intensive Information – and communication – are crucial

to success of industrial & commercial operations

Fast growing ICTs & information industries   Profound Impacts on what activities locate

where, how territories administered, markets served, linkages maintained between customers & suppliers

Need for new strategies, business models & organisational designs

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E-Business Models

E-Shops – web marketing or a shop (B2C)

E-Procurement – E-tendering & procurement of goods and services

E-Shopping Centres/E-Malls– a collection of E-shops

E-Auctions – E-implementation of bidding mechanisms

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E-Business Models .. continued

Virtual Communities – members with common interests

Collaboration Platforms – tools & infor. environment for members to collaborate

Third-Party Marketplaces – leaving web marketing to third party

Value-Chain Integrators

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E-Business Models .. continued

Value-Chain Service Providers – support part of value chain (e-logistics, e-payments)

Information Brokerage, Trust and other services – business information and consultancy; trusted third party services

Others (e-betting/gambling; syndication ……)

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Implications of E-Business: Fundamental and Pervasive transformation

New strategy & business models New organisational designs New inter-organisational relations New work organisation and new ways

of Working Others …

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Organisational implications

Two ways to beat competition and succeed in the market: Product/service innovations Organisational/managerial innovations

Organisational innovations essential to efficiency and competitiveness

Internet enables new organisational designs/new ways of doing business – often in ways impossible in the past

Within AND between organisations – the entire value/supply chain/network

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De-Construction of Integrated Businesses

What does your company really do? Customer relationship business -

scope Product innovation and

commercialisation businesses - speed Infrastructure management

businesses - scale Unnatural Bundle – everything

operate at sub-optimal level

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Customer Relationship

Driven by scope economy Customer service-oriented culture Customisation – developing relationship

with them and understand their needs Offer as many products as possible to

maximise selection for customers Tailor bundles of products and services

to capture a larger share of wallet

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Product Innovation & Commercialisation

Driven by speed – the faster the better Using all possible distribution channels to

reach customers Organisational culture geared to attract

and retain creative talents Operations tailored to serve the needs of

creative talents for breakthrough innovations

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Infrastructure Management

Driven by scale economy – pumping as many products through it as possible

Full utilization of facilities & low cost operations

Culture – cost reduction & standardisation

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Already Happening ...‘Transformational outsourcing’

J.P. Morgan - IBM will take over most of the bank's computing operations - $5bn over 7 years

Ford spin off Visteon – computing on demand deal with IBM - $2bn over 10 years

Telecom Italia – HP will provide IT management services – worth 225 million euros, or about US$243 million over 5 years

Other functions – and entire business processes – increasingly being outsourced too

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Organisational Design:

When is Virtual Virtuous?

Not all the smart people work for you - market gives you access to them

Internal capability vs. partners Short-term vs. long-term Autonomous vs. Systemic innovations Integrated companies vs. SMEs

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Web/Cluster Strategy

Webs – clusters of companies consolidate around a particular technology

Examples – Intel/Microsoft; SAP’s integrated solutions;

Spread risk, increase flexibility, enhance innovation, reduce complexity

Conditions - technological standard & increasing returns

Shapers and adapters – choose your role Grow market share vs. grow the pie Unbundling & outsourcing

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Internet Banking:Cheap channel VS new business model?

Internet as a new cheap convenient distribution channel

New entrants challenge the integrated banking model

De-construction of the integrated banking processes

Future scenarios?

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Deconstruction of Telecom Value Networks

Boundaries increasingly eroded Traditional business model may

not longer be sustainable Deconstruction of integrated value

chains The emergence of new value

networks Competing at multiple fronts

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E-Government and E-Public Services

‘After ecommerce and e-business, the next Internet revolution will be e-government’ The Economist, 28 June 2000

USA - $600billion annual procurement spending EU – euro720billion combined Big private sector companies typically achieve

20% saving by procuring online Slashing purchasing and fulfilment cycles and

lower admin costs by up to 75% and halve stocks Potential to fundamentally change the way

people relate to government!

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Modernizing government in the UK

Better government, better policy making, better responsiveness to what people want and better public services by reforming the machinery of government in the UK- especially through the use of ICTs – information age government

Electronic service delivery to join up service provision across departmental boundaries, break down silo based delivery networks and allow citizens to interact with government whenever they choose

Joined up working between different parts of government and provide new efficient and convenient ways for citizens and businesses to communicate with government

E-Government targets - making 100% of services available electronically by 2005 – almost achieved

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Emerging issues in E-Government

All existing research shows in the UK joint up government providing joint up services is not happening – yet?

Public services - People as citizens or customers

So far 85% all public sector IT projects are deemed to be failures (IBM worldwide head of government services)

Purposes of E-Government – stated and real

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Emerging issues in E-Government (2)

E-Government and the redefinition of power structure and the buy-in from key stakeholders Strong resistance from those negatively affected The practical feasibility of achieving joint up

government ? Potential Conflicts between strategic objectives

efficiency gains could be translated into reduced employment in certain sections of the public sector (as many as 1 in 5 - 800,000!)

clash with other strategic objectives of the Government such as full employment – an issue that will need to be carefully addressed given that the public sectors are the biggest employers in many regions in the UK

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What Next ?

Old established corporations will not disappear

The new energetic dot.com’s would not necessarily survive

A new class of firms would emerge All organisations need to go through profound

changes Prahalad, C K & Venkat Ramaswamy (2004)

The Future of Competition. Harvard Business School Press, Boston

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What is E-Business? How the Internet Transforms Organisations

Chapter 1. Introduction Chapter 2. What is E-Business

and Does It Still Matter? Chapter 9. Emerging E-Business

Models in the Network Economy

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Suggested Reading Jelassi, Tawfik & Albrecht Enders (2005) Strategies for E-Business:

Creating Value through Electronic and Mobile Commerce. Pearson Education Ltd, Harlow

Farhoomand, Ali (2005) Manageing (e)Business Transformation: A global perspective. Palgrave Macmillan, Basingstoke

Turban, Efraim, David King, Jae Lee and Dennis Viehland (2004) Electronic Commerce: A Managerial Perspective 2004. Pearson Prentice Hall, New Jersey

Laudon, Kenneth C & Carol Guercio Traver (2003) E-Commerce: Business, technology and society. 2nd edition. Pearson Addison Wesley, Boston

Chaffey, David (2002) E-Business and E-Commerce Management. Pearson Education Ltd, Harlow

Timmers, Paul (2000) Electronic Commerce: Strategies and Models for Business-to-Business Trading, Wiley, Chichester

Rappa, Michael (2004) Managing the Digital Enterprise. http://digitalenterprise.org/index.html Especially chapter 5 - Business Models on the web. http://digitalenterprise.org/models/models.html

100’s of new books on e-business and e-commerce …

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Suggested reading 2

Cabinet Office (2000) ‘e-governmnent-A strategic framework for public services in the Information Age.’ London: HMSO

Li, F (2003) Implementing E-government Strategy in Scotland: Current Situation and Emerging Issues. Journal of E-Commerce in Organisations 1 (2) April-June 2003:44-65

Cornford, J (2004) Understanding the Process of Implementing Electronic Local Government in England - http://www.campus.ncl.ac.uk/unbs/sbi/Project2.asp?ProjectID=3

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Readings … 3 Hagel III, John and Marc Singer (1999) Net Worth: Shaping

Markets When Customers Make the Rules. Harvard Business School Press, Boston (Chapter9)

Li, Feng (2002) Internet banking in the U.K.: From new distribution channel to new business models. The CAPCO Institute Journal of financial transformation. http://www.capco.com/pdf/j06art10.pdf

Christensen, Clayton & Michael Raynor (2003) Innovator’s Solutions, Harvard Business School Press, Boston

(also Christensen’s earlier book on Innovators Dilemma and latest book Seeing what next?)

Zuboff, Shoshana & James Maxin (2004) The Support Economy. Allen Lane, London

Prahalad, C K & Venkat Ramaswamy (2004) The Future of Competition. Harvard Business School Press, Boston

Peters, Tom (2003) Re-Imagine! Dorling Kindersley, London