1. Chapter 1 Overview of e-commerce Framework
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2.  What are the distinct categories of e-commerce?
Questions
 What is e-commerce?
 What are the distinct categories of e-commerce?
 How is e-commerce different from traditional commerce?
 Why study e-commerce?
 What is the e-commerce decision-making process? .

3. e-commerce Strategy Process
Strategic Framework
e-commerce Strategy Process
Framing the market
Defining the business model
Customer interface
Market communications
Branding, implementation, and evaluation
These are the beginning chapters of the book, after the overview.

4. e-commerce Platforms Strategic Framework Network infrastructure
Convergence of media
Platforms are changing as quickly as technology is changing. As of the end of 2000, there are majors moves by Apple, Microsoft, and contributors to Linux to redefine the Graphical User Interface (GUI), all radically.

5. What is e-commerce? Exchanged of digitized information
Technology-enabled transactions
Technology-mediated relationships
Intra- and Inter-organizational activities
Exchanged of digitized information between parties
Technology-enabled transactions
Customer Interfaces
Technology-mediated relationships
market space managed or mediated largely by technology
Intra- and Inter-organizational activities supporting exchange

6. Definition
e-commerce can be formally defined as…
technology-mediated exchanged between parties (individuals, organizations, or both) as well as the electronically based intra- or inter-organizational activities that facilitate such exchanges.
Definitions such as this are essential to ensure that discussions are grounded on the same definitions.

7. Distinct Categories B-2-B
Business-to-Business (B-2-B)
New cooperation, merger, consortiums
Business-to-Business (B-2-B)
Purchasing
Procurement
Supplier management
Inventory management
Channel management
Sales activities
Payment management
Service
Support
New cooperation, merger, consortiums

8. Distinct Categories B-2-C
Business-to-Consumer (B-2C)
Front office frequently tracked
Business-to-Consumer (B-2C)
Amazon
Yahoo!
Schwab.com
Front office frequently tracked

9. Distinct Categories C-2-C
Consumer-to-Consumer (C-2-C)
Between and among
Auction exchanges
Consumer-to-Consumer (C-2-C)
e-Bay
Monster.com
ICQ
Yahoo! Personals
Between and among
Auction exchanges

10. Distinct Categories C-t-B
Consumer-to-Business (C-2-B)
Economically motivated or social advocacy
Consumer-to-Business (C-2-B)
Mercata.com
voxcap.com
Economically motivated or social advocacy

11. Four Categories of e-commerce Business originating from...
Consumers
Business
B2B
C2B
And selling to...
This is a good visual placement of the four parts of e-commerce.
Consumers
B2C
C2C

12. e-commerce / Traditional Commerce
Core strategic decisions are technology-based
Real-time competitive responsiveness
24 X 7
Technology and people’s ability to adapt to the newer technology are still critical to the solution. As of the end of 2000, Microsoft’s new features in Microsoft® Office 2000 where largely not adapted by the business community.

13. Technology-Based Customer Interface
Screen-to-face interaction
Monitors
ATMs
PDAs
WAP
Screen-to-face interaction
Monitors
ATMs
PDAs
Palms
Handsprings
Blueberrys
WAP
DoCoMo iMode
Nokia 7110
Potential to increase sales and decrease costs
Interface failure costs organizational and technology costs PDAs - Personal digital assistants

14. Technology-Based Customer Interface
Screen-to-face interaction
 sales
costs
organizational and technology costs
Screen-to-face interaction
Monitors
ATMs
PDAs
Palms
Handsprings
Blueberrys
WAP
DoCoMo iMode
Nokia 7110
Potential to increase sales and decrease costs
Interface failure costs organizational and technology costs PDAs - Personal digital assistants

15. Customer Interaction Customer Time controlled by customer Seller
Entices, influences, and targets
Uses history and demographics
The key is that the more knowledge the customer has, the faster the old paradigm of “make it and marketing will make them come” is thrown out as a viable model in the New economy. Networked customers tend to be more knowledgeable customers, because of the increasing speed with which information is easily obtained.

16. Customer Behavior Third-party measurement firms
Extensive tracking capabilities
Real-time financial estimates
Third-party measurement firms
Vividence
Accrue
Tracking capabilities
length of stays
page views on a site
contents of wish lists
shopping carts
purchases
dollar amounts of purchases
repeat purchases
conversion rates of visitors who have completed transactions
other metrics
Real-time financials
click-throughs and yields to purchase

17. Network Economics Metcalf’s Law
the value of a network is “n” squared being the number of nodes on the network
Network economics
positive feedback
increased returns
Metcalf’s Law
the value of a network is “n” squared being the number of nodes on the network
Network economics
positive feedback
increased returns
word-of-mouth (WOM)
viral marketing
in a highly networked environment is persuaded to pass on a marketing message to several participants, spreading quickly
ICQ
an instant messaging system

18. Nontraditional Performance Metrics and Emergent Valuation Models
No widely acceptable methods to measure e-commerce business performance
Historic measurements not full measurements
Some new methods are being devised
No widely acceptable methods to
evaluate and track the progress of e-commerce business
calculate the economic value of an e-commerce business
Historic measurements
cash flow
derivative of cash flow
market capitalization
standard metrics to judge basic business performance under debate
Some new methods such as real options valuation
yield accuracy observed valuations

19. Point Counterpoint: Valuations - Do they or don’t they make sense?
Valuations Make Sense
Valuations Do Not Make Sense
Increased focus on path to profitability and revenue
Uncertainty leading to wide fluctuations
Many companies do not demonstrate profits for a long period of time
There is an inconsistency in the valuation of on-line and off-line companies
Techniques such as real options valuation yield observed valuations
Investors are investing on valuations
Network economics and information economics create highly profitable companies
Valuations make sense:
After the April 2000 NASDAQ slump, there has been an increased focus on path to profitability and revenue
Lines are beginning to get drawn between winners and losers
Techniques such as real options valuation yield observed valuations
Investors are placing hundreds of billions of their money based on valuations
Network economics and information economics will combine to create highly profitable companies that dominate their industries
Valuations do not make sense:
There is a high level of uncertainty leading to wide fluctuations
NASDAQ fell by 30% in April 2000
Many companies do not demonstrate profits for a long period of time, making it hard to value them
There is an inconsistency between assumptions made in the valuation of on-line and off-line companies
On-line companies tend to assume high market share growth and not as severe impact of competition
There is often a “bending” of the accounting rules by on-line companies
Valuations are based on the number of customers and make the assumption that the economics of “monetizing” them will remain favorable
Many stocks tend to be moved by momentum
Can be a “bending” of the accounting rules by on-line companies
Valuations are based the assumption that the economics of “monetizing” them will remain favorable
Many stocks tend to be moved by momentum

20. Growth in Number of Internet Users
U.S. Online Population Forecasts by Researcher
Population (Millions)
It is significant to study e-commerce because it combines the study of both industry and economic structure, wealth creation, and social structure considerations.
This chart illustrates the projected growth of Internet use through the year 2003.
These figures suggest that % of the United States will be online.
Other focuses such as B-2-C and B-2-B project similar adoption rates. In B-2-B, Microsoft has stated that on some expenses it has been able to reduce them to 15% of the original cost in 1999, such as procuring computers for their offices. Oracle has stated that in 1998 through the first half of 2000, it saved over a billion dollars in expenditures by using B-2-B. It becomes clear, then, that many businesses will not be competitive in the long run without embracing e-commerce.

21. Growth in Number of Internet Users
U.S. Online Population Forecasts by Researcher
Population (Millions)
Metcalf’s Law seems to be a part of the overall picture here.

22. Impact 1: Economics of Growth
Increasing “speed of adoption”
Far outdistances other technology growth
Scale and velocity reshapes economic growth
Speed with thought, justification, and purpose makes more sense that only first-to-market arguments of 1998 and 1999.

23. Impact 2: Blurring of Industry Boundaries
NAICS codes suffer from a blurring of boundaries.
Old categories breaking down
“Last mile” to consumer homes see a blur of alternative telecommunications networks
NAICS codes (old SIC codes), the traditional business classifications suffer from a blurring of boundaries.
The North American Industry Classification System (NAICS) is replacing the U.S. Standard Industrial Classification (SIC) system. NAICS will reshape the way we view our changing economy.
NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America.
Old categories breaking down
“Last mile” to consumer homes see a blur of alternative telecommunications networks (telephone lines, digital subscriber lines, cable TV, cable Internet, digital satellite TV, digital satellite Internet, and wireless providers

24. Impact 3: Transformation of Social Structure and Society
Transforming
learning
group communications
scientific interchange
how society functions
Ubiquitous Website addresses
Transforming
learning
group communications across time zones
scientific interchange
how society functions
Ubiquitous Website addresses referenced in other media

25. Opportunities for Wealth Creation
Enormous market capitalization for several New economy players
consumer products
financial markets
middleware enabling commerce
services
advertising
Enormous market capitalization for several New Economy players
consumer products
Amazon.com
priceline
financial markets
E*trade
Schwab.com
middleware enabling commerce
Ariba
Vignette
CommerceOne
services
CMGI
Sterling Commerce
VeriSign
advertising
DoubleClick
24/7
avenuea
Confluence of factors
number of users
blurring and aggregation in a “winner-take-all” model
transformative nature of e-commerce on rest of economy

26. Could it be this chart does not take into account the inverse yield curve of long term US Treasury bonds at the end of 2000, predicting a possible recession in the future?
Nevertheless, the growth is staggering.

27. Business-to-Business e-commerce Projections, In Millions (1996-2000)
The numbers should make people wake up!

28. Projects like this, may or may not occur
Projects like this, may or may not occur. The risk is the position that one puts a company in to ignore it. With the exception of Fisher (Fisher of Chevrolet’s Body by Fisher), can anyone name any of the hundreds of horse carriage makers at the turn of the century?

29. Internet Adoption Rates Versus Other Mediums
Internet as Mass Medium — North American Adoption Curves TV
Radio
North American Users / Households (MM)
50 Million Users / Households
Cable
Commercial Internet
Price and availability are factors. For networked computers, the more ubiquitous, the more powerful: perhaps a corollary to Metcalf’s Law.
Years to Reach 50 MM Users
Radio: 38 years
Commercial Internet: 5 years
TV: 13 years
Cable*: 10 years
* Launch of HBO in 1976 used to estimate the beginning of cable as an entertainment / advertising medium

30. Estimated Savings from e-commerce
If Microsoft and Oracle are already claiming from 50% to 90% savings in procurement costs within their organizations, how can others compete with a much higher overhead?
Recall the BetaMax/VCR competition. BetaMax was a superior design, superior resolution, superior sound. But, in the end, two items: length of tape recording capability and hardware/blank tape distribution won. Major factors are critical.
If one is in business beyond a totally local product, B-2-B, B-2-C, C-2-B, and
C-2-C must be a major factor in the way companies do business.

31. E-Commerce Decision-making Process
Identify:
 Customer groups to serve
 Compelling set of benefits, differentiating “value proposition”
 Communication effectiveness
 Content
Look and feel
Level of community
Personalization
 Organization structure
Business services
Application services
 Potential partners
Capabilities
 Shareholders
 Metrics
 Customer groups to serve
 Compelling set of benefits, differentiating “value proposition”
benefits to targeted customers
“value proposition” vs. online and offline
 Communication effectiveness
 Content
Look and feel
Level of community
Personalization of Website
 Organization structure
Business services
Application services
own, lease, partner, outsource, ASP
 Potential partners
Capabilities
 Shareholders
value
 Metrics
used to judge business progress
valuing the business

32. E-Commerce Strategy Managerial task of e-commerce strategy
 Framing the market opportunity
 Business model
 Customer interface
 Market communications and branding
 Implementation
 Metrics
 Valuation
Managerial task of e-commerce strategy
 Framing the market opportunity
customer, competitor, potential business partners
 Business model
1) value proposition or “cluster” to offer to the segment
2) specific offering
3) associated resource system, delivering the benefits
 Customer interface
How will customer’s perceive my business/
 Market communications and branding
online and offline , branding, capturing all assets, providing value to customer
 Implementation
How do we go to market?
 Metrics
charting performance, delivery of system, innovation, return customer rates, financial ratios
 Valuation
How do we create value for he stakeholders or shareholders?
Emergence of click ‘n mortar (on and offline), private and public

33. Exhibit 1-5: Where to Play On-Line and Off-Line
Customer Interface
Yahoo!
McDonalds
Egghead
BN.com
Interface and fulfillment systems compared. One’s own company can be easily placed within the above competitive framework (shades of Dr. Michael Porter!) to ascertain where the company lies with its competitors.
Fulfillment Systems
Amazon.com

34. Market Infrastructure
Opportunities and constraints
Network infrastructure
Media infrastructure
Two Forms of Convergence
Publics and Policies
Opportunities and constraints
Network infrastructure
basic electronic devices and connectivity circuitry
communication systems (telephone, cable, broadcast radio and TV, wireless)
topology (bus, star, ring)
distance (LAN, WAN)
protocol (TCP/IP, SNA, other)
signal type (vice, data, consolidated such as VoIP)
physical link (fiber, cable, twisted-pair)
network service providers (telcos, cable-providers)
internet service providers (EarthLink, ATT Worldnet)
electronic subcomponent (Intel, Motorola)
hardware providers (Dell, Compaq, IBM)
software companies (Microsoft, Oracle, Corel, Adobe)
ASPs (application service providers - Marimba, Novell)
Middleware (SAP, PeopleSoft, Ariba)
Media infrastructure
news, information, entertainment
text, images, audio, video
Two Forms of Convergence
Network and media infrastructure merge due to digital convergence
Publics and Policies
Public policy and legal concerns - privacy, taxes, public access, and critical to international Internet development, the reconciliation of complex, differing standards, laws, and practices

35. Exhibit 1-6: Media Convergence to a Digital Platform
Network
Infrastructure
Media
Infrastructure
Print
(Newspapers and Magazines)
Telephone/DSL
Cable
Television
Digital
Convergence
Broadcast Radio & TV
Radio
Satellite
Music
Faster, better, quicker, more reliable.
Wireless
Motion Pictures

36. A Framework for Electronic Commerce
Evaluation:
Metrics
and
Valuation
Framing the Market Opportunity
Market Communications and Branding
Implementation
Business
Model
Customer
Interface
e-commerce
Strategy
Media Infrastructure
Market Infrastructure
Network Infrastructure
Six interrelated, sequential decisions:
Framing the market
Defining the business model
Customer interface
Market communications
Branding, implementation, and evaluation
Decisions made in context of changing market-level infrastructure
Vertical boxes and analysis and decisions are made inside boundaries of the firm - controllable
Horizontal boxes - forces outside - noncontrollable
Apply to all firms competing online in the world, not competing only locally
Publics and Politics

37. Point Counterpoint: Who will win? Online vs. Offline
On-line Will Win
Off-line Will Win
Schwab has become a leading player in the on-line brokerage industry
Companies with established market leadership have key assets such as relationships with customers, suppliers, deep industry knowledge and experienced management
Established companies have deep pockets
Off-line companies have established and trusted brands
Off-line companies can create spin-out businesses with new culture, processes, funding, etc.
Off-line companies can’t easily cannibalize their own businesses
Off-line companies stock does not allow them to adequately incentivise key new economy talent
Off-line companies move too slowly
Key elements of business (e.g. business design, strategy, value proposition) are different in the New Economy
“innovator’s Dilemma”: Focusing on current customer needs causes companies to divert focus from new technologies
Market will not tolerate blue chip companies running loss-making businesses
Off-line companies may face a channel conflict
Comparison of the dynamics building between online and offline issues.
There have been other technology revolutions
From 1894 to 1903, there were 20,000 telephone companies that started in the U.S.

38. “The Rest...of the Story” Organization of the Book Ch 1: Overview
Ch 2: Framing the Market Opportunity
Customers, competitors, partners
Ch. 3: Business Models
Value proposition, “marketspace” offering, resource system, financial model
Ch 4: The Customer Interface
Seven C’s of the Customer Interface
Ch 5: Market Communications and Branding
Awareness and traffic, customer targeting
Ch 6: Implementation
What to do and how to get the job done
Ch 7: Metrics
Performance Dashboard metrics
Delivery system
Ch 9: Network Infrastructure
Enabling “railroad” of H/W, networks. S/W, servers
Ch 10: Media Convergence
Digital