Section 1: E-Business Basics and Strategic management Teemu Hakolahti

Part 1: Introduction to E- Business

What is E-Business? eBusiness (electronic business) is using technology to improve your business processes. This includes managing internal processes such as: human resources, financial and administration systems as well as external processes such as sales and marketing, supply of goods and services and customer relationships. (Source:

The Evolution of New Businesses Following things has made the E-Business possible: Infrastructure –Internet, Telecommunications, hardware, cable, ISP Supporting services –Web browsers, payment and banking systems, directories, security of systems and transactions. Content –Media, portals, exchanges (Source: E-Commerce Introduction, Professor Joshua Livnat, New York University)

Old Economy Firms Brick and Mortar (=traditional) companies need to adopt to the new economy –Create a new Internet company. –Create a new subsidiary. –Invest in an Internet competitor. –Buy the technology from a consultant. –Work with other firms to create an exchange. –Integrate with suppliers and or customers. (Source: E-Commerce Introduction, Professor Joshua Livnat, New York University)

Definitions e-commerce: The online exchange of value, without geographical or time restrictions, between companies and their partners, employees, or customers. (Singh et al., 2001) e-business: vs. e-commerce  wider implications for example macro factors as PESTLE ( Politics, Economics, Society, Technology, Legal and Environmental )

E-Commerce Transformation of economic activity into digital media –Exchange information, content, agreements, and services among parties that are connected to through the Internet. Enables new ways of creating, delivering and capturing value to customers. –Superior information –Convenience (Source: E-Commerce Introduction, Professor Joshua Livnat, New York University)

Moving from e-Commerce to e-Business Kalakota, 2001: “A core component of successful e-business practice is assessing and redesigning how your firm provides value to its customers” Has anything change since 2001? (Kalakota, 2001): –Why can consumers buy a $999 built-to-order PC from Dell online but not a customized $3,000 color copier from Xerox? –Why does it take only a few minutes to choose a flight, buy an airline ticket, and reserve a hotel room and car through but twice as long to speak with an American or United travel agent?

E-Business A new form of value creation using ICT Understanding of technology and its role in your firm's future  “linking today's business with tomorrow's technology” Kalakota, 2001: It dissolves old business models, changes the cost structure, and rearranges links among buyers, sellers, and everyone in between

E-Business “steps”

Why E-Business? The adoption of new ICTs supports innovative ways to create new business models (eg. Amazon, Facebook, Expedia) Revenue growth? Cost reduction? The entire business platform is being transformed by new technology? the risks, challenges, and difficulties?

Business Webs Business Webs are players in the E- Business Business web (b-web) = The b-web is system: –of suppliers, –distributors, –service providers, –infrastructure providers, –Customers  All that uses the Internet as the basis for business communications and transactions.

Connections in B-Web Consumer-to-Business (C2B) Customer-to-Customer (C2C) Business-to-Consumer (B2C) Business-to-Business (B2B) Government-to-Citizen (G2C)

Part 2: E-Business Strategic Management

Strategic Management: Definition Consist of competitive moves & business approaches to produce successful performance Managements plan: –Running the business –Strengthening firm’s competitive position –Satisfying customers –Achieving performance targets (Source: Richard D. Irwin 1995)

Three big strategic questions 1.Where are we now -- what is our situation? 2.Where do we want to go? –Business position in the markets –Buyer needs and groups we want to serve –Financial outcomes to achieve –Strategic outcomes to achieve 3.How will we get there? (Source: The McGraw-Hill Companies, Inc., 1998)

Five Tasks of Strategic Management 1.Defining business, stating a mission, & forming a strategic vision 2.Setting measurable objectives 3.Crafting a strategy to achieve objectives 4.Implementing & executing strategy 5.Evaluating performance, reviewing new developments, & initiating corrective adjustments (Source: Richard D. Irwin 1995)

Developing Vision and Mission Begins with thinking strategically about –The firm’s future business makeup –Where to take the firm The task is to –Create a roadmap of a company’s future –Decide what future business position to stake out –Provide long-term direction –Give the firm a strong identity (Source: The McGraw-Hill Companies, Inc., 1998)

E-Business Strategic Management: Customers embrace new channels, new organizational structures are being designed around market segments. Managers must ask: –What are the implications of e-commerce on the form and function of twenty-first-century organizations? –In the race to please customers, how will existing brick-and-mortar companies transition into e-commerce companies? Can they? –Can existing e-commerce firms ward off the threat posed by new entrants? (Source: Kalakota, Robinson; 2001)

Major trends Driving E- Business (Kalakota, Robinson, 2001)

Moving Your Company into E-Business Understand your E-Business Environment: (see prev. slide) Company builds awareness and makes a plan to create a new customer value Develop a clear vision of what the customer needs are and what the customer is looking for Develop a clear understanding of what capabilities you need in order to address the customer needs

E-Business strategy formulation Kalakota, Robinson (2001): Knowledge building helps the company understand what the customer is looking for and where the industry is going Capability evaluation defines the existing business and identifies what capabilities it has today and what capabilities it needs to have tomorrow. e-Business design asks what value proposition a business must provide to take advantage of digital capabilities. How is this value going to be packaged into products, services, or experiences? The design is also a roadmap that helps the company get where it needs to go. The most important question: What result do I want to get?

Understanding the customer 1. Who are my customers? 2. How are my customer priorities shifting? 3. Who should be my target customer? How will the e- business help reach my target customer segments? Customer value and relationship trends 4. How can I add value to the customer? 5. How can I become the customer's first choice? 6. How does my product reach customers? Technology trends 7. Do we understand the environment and industry trends? 8. Do we understand technology trends? Supply chain trends 9. What are the current priorities in the supply chain? Competition 10. Who are my real competitors? What is my toughest competitor's business model? What are they doing really well? Core competencies 11. What capabilities do we have today? 12. What capabilities and resources do we need to speed up our execution? (Source: Kalakota, Robinson, 2001)

Idea Screening (Kalakota, Robinson, 2001)

1. Who are my Customers? Life goal-planner Serious investor Hyperactive trader One-stop shopper

2. How are my Customers’ priorities shifting? Peter Drucker: “ The Customer rarely buys what the business thinks it sells him”  what is paid for is satisfaction Improve things that customers would like to improve How technology can and will change customers’ needs and alter markets? What has happened in past 5 years and what will happen in next 3 years?

Value Migration in Book Retailing (Kalakota, Robinson, 2001)

3. Who is my target Customer? Am I targeting the end user, distributor, or value-added reseller? In order to grow my company, whom should I be targeting? What are the needs of this new target customer base?

4. How can I add value? How do I add value to my target customer base? Do I save money? Offer convenience? Offer new forms of value? How can a company provide increasing value for its customers while simultaneously reinventing certain parts of its business?

5. How Do I Become My Customer's First Choice? You can be your customers' first choice if you dazzle them with unexpected service In order to become your customers' first choice, you must offer incentives Understanding the customer choice process means knowing who will buy the service or product, when, in what form, and how.

6. How Does My Product Reach the Customer? If a good product doesn't reach its intended customer, the company will flounder or fail Eliminate unnecessary steps and the associated costs –How are your company's products delivered? –How many steps do they go through before they reach the customer? How many of these can be eliminated? –How can this distribution and delivery process be streamlined by using the Internet?

7. Do we understand the environment and industry trends? Technology isn’t driver towards investments in e-business  rapid business change is Managers need to evaluate the environment they are in Company should undertake an environmental analysis every couple of years to spot major discontinuities

8. Do we understand Technology Trends? It’s hard to predict which technology will capture the market Choose just one technology or make multiple choices? Why? Expenses? Make good plan A (and make backup plan B!)

9. What are the current priorities in the supply chain? SUPPLY CHAIN EXAMPLE: Supplier – Manufacturing- Distribution- Retailer- Customer  Execution  Planning Orchestrating all the players across the supply chain!

10. Who are my real competitors? Competitors aren’t just other companies doing the same thing you’re doing Competitors of today? Up-starts that will become fierce competitors in five years?

11. What capabilities do we have today? Define/review your strengths and weaknesses Aspects e.g.: customer interaction Products Production People Technology After this definition you understand your readiness in each area, your existing e- business environment and risks

12. What capabilities and resources do we need to speed up our execution? Capabilities assessment (step 11) identifies what you acquire, improve or build Aligment between company’s vision and capabilities describes present state and what kind of development is needed to achieve the vision