1. MIS625 Session #3

2. Outline Porter paper –Note process orientation via competitive forces and value chain –Tie to Peter Keen slides Information Economy pricing chapters Lands End case

3. Why eCommerce is about Processes Retailing – winners characterized by repeat business and trusted relationships, losers by high customer acquisitions costs and late delivery and poor response Financial services – winners offer multiple channels, losers undifferentiated relationship and bare bones transaction

4. Process Blindness Survey – Conference Board and Pricewaterhouse- Coopers –Most companies see e-commerce as detached from their mainstream business –Most companies don’t see e-commerce as about process Reasons for process blindness –Companies think of Internet business as “technology” –Managers don’t understand how processes integral to web business impede or enhance customer relationships

5. Value Network The value network is all the resources behind the ‘click’ that the customer doesn’t see, but that creates the value in the customer-company relationship. The enterprise at the center makes some promise to the customer that is fulfilled via the value network

6. Information Place Order Browse, select, specify, customize capture authorize VAN Customer info Product info Payment info Logistics info Buy PayConfirm Ship Deliver Customer Shop Make purchase recipient, profile, credit card Complete order inventory, privacy, security, receipt Fulfill order pick & pack, on-demand ship parcels, track parcels Repeat

7. The Importance of Relationships Difficulty of building relationships Pure transactions = zero relationship The more specific the tailoring of content, the more the shift from commodity to relationship Compare an ATM with Lands End

8. Strategy and the Internet Distortion during the dot.com boom Business whether pre-Internet or post- Internet is about creating economic value Two factors determine profitability –Industry structure –Sustainable competitive advantage

9. Competitive Forces Model

10. How does the Internet affect Switching costs Network effects Complements and outsourcing Intermediaries

12. Principles of Strategic Positioning Start with the right goal – economic value added Value proposition Distinctive value chain Trade-offs Fit Continuity of direction

13. Process Capability Matrix (Keen) TypeAssetLiability Identity Priority Background Mandated

14. eProcess Choices Embed process rules in the software interfaces Out-task processes and capabilities electronically In-source new capabilities electronically Be exceptional in handling exceptions

15. How to Price Information Cost of production – high fixed costs, low variable costs  economies of scale Costs and competition –Information as a commodity –The importance of differentiation

16. Differentiation Personalization Collecting customer information –Through registration –Privacy backlash

17. Personalized Pricing Fare classes Auctions Special offers based on past behavior

18. Group Pricing Price sensitivity Network effects Lock-in Sharing

19. Versioning Versions tailored to the needs of different customers Versions to accentuate the needs of different groups of customers

20. Product dimensions used to create versions Delay User interface Convenience Image resolution Speed of operation Formatting Capability Features Comprehensiveness Annoyance Support

21. Versioning Choices How many versions? –Depends on product and market –Three is a magic number Customizing navigation and content Bundling

22. Rights Management Copyright law –‘Information wants to be free’ Digitalization reduces reproduction costs and distribution costs

23. Distribution Costs Giving away content Similar but not identical products – e.g. Playboy Complementary products

24. Cheap Copying The video industry IPod