1. Components of a Business Model
Value Cluster
Marketspace Offering
Resource System
Financial Model

2. Point-Counterpoint: Single vs. Cluster of Benefits
Single Benefit
Cluster of Benefits
Clear, non -
contradictory communication to
Customers rarely desire one benefit
customer
In the online world, back -
office systems can
Partnerships can be assembled with “like -
easily be reconfigured for different benefits
minded” firms
With an online presence, a firm can provide
Back -
office systems must be tailored to distinct
multiple benefits --
with no tradeoff of
benefits
performance (e.g.,
provide broadest selection
Focuses employee hiring and retention n
and low price)
Focuses the enterprise o
Examples of firms that offer multiple benefits
include portals (i.e., Yahoo!), ISPs (i.e.,
AOL), product sites (i.e., BN.Com) and
information services (i.e., WSJinteractive)

3. Shattering the Myth That Consumers Care Only About Prices Online
Percentage of Customers Who Care About Attribute
Attribute
Source: JP Morgan Report: etailing and the five Cs

4. Consumer Decision Process
Disposal
Loyalty
Satisfaction
Purchase Decision
Evaluation of Alternatives
Information Search
Problem - Recognition
Pre-Purchase
Purchase
Post-Purchase

5. Consumer Decision Process — Flower Purchase Example
Flowers
Disposal
Loyalty
Satisfaction
Purchase Decision
Evaluation of Alternatives
Information Search
Problem - Recognition
Pre-Purchase
Purchase
Post-Purchase
Need recognition, potentially triggered by a holiday, anniversary or everyday events
Search for ideas and offerings, including:
Available online and offline stores
Gift ideas and recommendations
Advice on selection style and match
Evaluation of alternatives along a number of dimensions, such as price, appeal, availability, etc.
Purchase decision
Message selection (medium and content)
Post-sales support
Order tracking
Customer service
Education on flowers and decoration
Post-sale perks

6. Egg Diagram for 1-800-flowers.com
Gift reminder service
Holiday specials
Everyday celebrations suggestions
Special occasion suggestions
Ideas and Information
“Care and handling”
“Do it yourself”
Special events and educational workshops held at stores
Floral ideas
Garden ideas
Home ideas
Gift ideas
Gourmet ideas
Store locator
Recommendations by budget
Bestsellers
Flower / Gift Decision Process
Need Recognition
Product Offering
Gift Recommendations
Education on Flowers and Decoration
Search for Ideas and Offerings
Gift guru
Favorite gifts
Gift frequency
Gift impossible
Gift baskets
Corporate gift services
Post-Sale Support
Order receipt
eQ&A online customer service
FAQ
Customer service inquiry form
Post-Sale Support and Perks
Evaluation of Alternatives
Product price
Product picture
Product description
Delivery information
Delivery availability
Perks
Miles earned with flower purchases
Free gifts
Discounts at AOL & BN.com with flower purchases
Member specials
Message Selection
Purchase Decision
Shopping basket
E-commerce transaction
Special shopping features
Delivery outside US
1-800-lasfloras.com
Gizmo fully-animated greeting cards
Physical cards in gifts

7. 1-800-flowers.com Resource System
Address Book
BloomNet Network
Third-Party Contractors
Strong Distribution Network
Gift
Recommend-
ations
Fulfillment Center
Stores
Online Gift Center
Gift Reminder
Broad Assortment of Gifts
High Quality of Flowers
Rich Content
Personalization Capabilities
Popular Website
Garden Works
Integrated Partner Offers
Telephone
3,000 Affiliates
Plow & Hearth
Online
Customer Service
Widespread, Easy Access
Great Foods
Multiple Contact Points
Franchise Stores
Catalog
Technology
Strong Brand Name
Wide Reach to Customers
Customer Service Centers
= Core Benefits
Snap
Starmedia
= Activities & assets
Integrated online offline Systems
MSN
AOL
= Capabilities

8. Benefits and Challenges of Hybridization
Persistent connection with customers
New value for customers
Access to new customers
Scalability
Cannibalization
Channel conflict
Customer confusion
Investor confusion

9. Egg Diagram for 1-800-flowers.com
Prompts on toll-free number recording
Suggestions from CSRs* in-store and via phone
Special events and educational workshops held at stores
Prompts on toll-free number recording
Suggestions from CSRs* in-store and via phone
Brochure
Gift reminder service
Holiday specials
Everyday celebrations suggestions
Special occasion suggestions
Offline Product Offering
Ideas and Information
“Care and handling”
“Do it yourself”
Floral ideas
Garden ideas
Home ideas
Gift ideas
Gourmet ideas
Store locator
Recommendations by budget
Bestsellers
Flower / Gift Decision Process
Need Recognition
Online
Product Offering
Gift Recommendations
Education on Flowers and Decoration
Search for Ideas and Offerings
Gift guru
Favorite gifts
Gift frequency
Gift impossible
Gift baskets
Corporate gift services
Suggestions from CSRs in stores via phone
Brochure
Post-Sale Support
In-store customer service
Customer service on toll-free number
Order receipt
eQ&A online customer service
FAQ
Customer service inquiry form
Post-Sale Support and Perks
Evaluation of Alternatives
Product price
Product picture
Product description
Delivery information
Delivery availability
Information from CSRs in-store and via phone
Brochure
Perks
In-store specials
Specials offered via phone
Miles earned with flower purchases
Free gifts
Discounts at AOL & BN.com with flower purchases
Member specials
Message Selection
Purchase Decision
Shopping basket
E-commerce transaction
Special shopping features
Delivery outside US
1-800-lasfloras.com
Gizmo fully-animated greeting cards
Physical cards in gifts
Select card in-store
Select card via phone
Purchase in-store
Purchase via phone
*CSR = Customer service representative

10. 1-800-flowers.com Activity System
Both
Online
Offline
Key
Introduction of
New Product
Categories
Electronic
Greeting Cards
Gift
Recommendations
Gift Reminder
Program
Broad Product Line
Online Gift Center
Address Book
Nationwide
Presence
Florist
Participation
BloomNet Network
Partnership With Associated Product Lines
Company
Offline
Stores
Company
Franchise Stores
MSN
Multiple
Customer Contacts
Strategic Alliances
Online BN
In-Store
AOL
Alliance With Distribution Carrier
Telephone
Affiliate Programs

11. 1-800-flowers.com Value System
Address Book
Gift
Recommend-
ations
Online Gift Center
Logistics
Gift Reminder
Broad Assortment of Gifts
Fresh Flowers
Sourcing
Garden Works
Product Partnerships
Brand Name
Telephone
Plow & Hearth
Online
Reasonable Prices
Widespread, Easy Access
Great Foods
Multiple Contact Points
Stores
Affiliates
Logistics
BloomNet Network
Media Partnerships
= Core Benefits
Snap
Starmedia
= Actions
MSN
AOL
= Capabilities

12. 1-800-flowers.com Value System
Address Book
Gift
Recommend-
ations
Online Gift Center
Logistics
Gift Reminder
Broad Assortment of Gifts
Fresh Flowers
Sourcing
Garden Works
Product Partnerships
Brand Name
Telephone
Plow & Hearth
Online
Reasonable Prices
Widespread, Easy Access
Great Foods
Multiple Contact Points
Stores
Affiliates
Logistics
BloomNet Network
Media Partnerships
= Core Benefits
Snap
Starmedia
= Activities & assets
MSN
AOL
= Capabilities

13. Competencies vs. Resource Systems
Point -
Counterpoint
Focus on Competencies
Focus on Resource Systems
Organizations can lose focus by not isolating
Isolation of a handful of key competencies leads
the few key capabilities that differentially lead to
to ignoring other key success factors
competitive advantage
It is the combination of capabilities --
not
Exceptional competencies provide competitor
capabilities in isolation --
that provides
advantage since most a
ctivities are the “price of
competitive adva
ntage
entry” into a particular online market

14. Alternative Shareholder Value Model

15. Alternative Shareholder Value Models

16. Revenue Growth Choices: 1-800-flowers.com
Gardenworks
Plans to branch into a wide variety of product categories
Greatfoods.com
Plow & Hearth
Home Decor
New
Plants
Gourmet Treats
In-Store Seminars
Greeting Cards
Products
Existing
Corporate Gift
Services
Existing
New
Existing
New
Online Markets
Offline Markets

17. Does Profit Matter? Build Profit or Build User Base?
Point -
Counterpoint
Build Profit
Build User Base
Basic financial rules will eventually apply
Standards will ultimately dictate success
Cash flow drives shareholder value
Standards require huge investment
s in building
Shareholders will become frustrated as time
a customer base
passes
Once customer base dominates ,
other firms will
concede and eventually large margins will be
available

18. Sawhney and Kaplan — B2B Models
Vertical Hubs
Paper
Chemicals
Plastics
Steel
Logistics Management
Media Buying
Advertising
Energy Management
Functional Hubs
Source: Adopted from Business 2.0, September 1999, page 88

19. Sources of Content Origination
RJS Model Summary
Sources of Content Origination
Single Brand
Multiple Brands
Supply Side
Demand Side
Hybrid Integrator
(Cisco.com)
Hybrid Aggregator
(Amazon.com)
Forward-Integrated Producer
(Walmart.com)
Supply-Side Aggregator
(Surplusdirect.com)
Demand-Side Aggregator
(Accompany.com)
Backward Integrated User
(Dellonline.com) - B2B
Focus of Strategy

20. Business Model Choices Must be Consistent With Sources of Competitive Advantage
Business Model Options (Not Mutually Exclusive)
Forward-Integrated Producer
Content Production
E-Business Interface
Content Utilization
Backward-Integrated User
Content Production
E-Business Interface
Content Utilization
Content Production
Content Production
Supply Aggregator
Content Production
E-Business Interface
Content Utilization
Content Production
Content Production
Content Production
Content Utilization
Content Utilization
Demand Aggregator
Content Production
E-Business Interface
Content Utilization
Content Utilization
Content Utilization
Content Utilization