1. Electif 621 E-Business and m-Business Antoine Harfouche

2. Session 1 Pillars of the e-Business and m-Business models

3. Agenda New Business models Impact on the management infrastructure -Crowdsourcing -Crowdfunding -Collaboration with suppliers -Collaboration with competitors Impact on the relation with competitors Impact on the customer relation and on the cost structure -Customization -Pricing

4. BUSINESS MODEL

5. A Business Model A business model can best be described through nine basic building blocks that show the logic of how a company intends to make money. The nine blocks of the following model cover the four main areas of a business : 1.Customers 2.Offer 3.Infrastructure 4.Financial viability The business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems. Source: Business Model Generation, Osterwalder and Pigneur 2010

6. Pillars of Business Model

7. THE IMPACT OF E&M-BUSINESS ON THE PILLARS OF THE BUSINESS MODEL Impact on the management infrastructure

8. Key Resources The most important assets required to deliver our value proposition, distribution channel, and customer relationships  Physical  Intellectual  Human  Financial  Production  Platform

9. Key Activities [Capabilities] The most important activities a company must do, in order to deliver its value proposition, and makes its business model work.  Marketing  Engineering  Managing  Selling  Logistics  Problem solving  Managing

10. Key Partners Partnerships can be motivated by needs to acquire knowledge, licenses, or access to customers. Example: Mobile phone companies that license Android, or insurance companies that rely on independent brokers. Partnerships can be motivated by needs to acquire knowledge, licenses, or access to customers. Example: Mobile phone companies that license Android, or insurance companies that rely on independent brokers. Who are key partners in terms of suppliers and intermediaries between the firm and its end-users? Which key resources are we acquiring from partners? Which key activities do partners perform?  Motivations for Partnerships  Optimization and economy  Reduction of risk and uncertainty  Acquisition of particular resources and activities

11. Crowdsourcing The recruitment and coordination of piece- meal work across the internet to achieve a goal. 1.Speeds up content creation 2.Gets clients and collaborators involved 3.Gets target audience involved 4.Offers diversity and creative choice 5.Drives development of scalable processes (Bratvold, 2012)

12. Wisdom of the Crowds Utility # of Contributors Expert $$$$ Masses $ 10 100 1000 10,000+ Equivalent, or greater, utility under the Curve

13. Crowdfunding

14. Crowdfunding is an approach to raising the capital required for a new project or enterprise by appealing to large numbers of ordinary people for small donations Social Media Crowdfunding examples Kiva.org - $325m funding raised, >777,000 lenders, ~800,000 entrepreneurs Kickstarter.com – >24,000 projects funded, > $250m pledged to-date, 2m people have pledged

15. 15 Examples of the Different models

16. Different sectors Business Community and voluntary sector Public services’ Education and research Arts

17. 17 The search for collaborative advantage THE IMPACT OF E&M-BUSINESS ON THE PILLARS OF THE BUSINESS MODEL

18. 18 The search for collaborative advantage Seek out opportunities for horizontal as well as vertical collaboration Co-operate to grow the cake, compete on how to slice it Leveraging capabilities and knowledge through collaboration Share assets in the supply chain where appropriate

19. Collaborative Relationships A company Customers Risk-sharing contracts Collaborative transactions Competitors Trade associations R&D Consortia Standard-setting bodies Industry lobbying co-epetition Suppliers Risk-sharing contracts Collaborative transactions Horizontal partners Benchmarking Collaborative logistics Joint MRO procurement

20. Collaboration with suppliers

21. Electronic data interchange (EDI) based collaboration –Buyer-side solution –Hub-and-spoke system –Serve vertical markets Internet based collaboration –Net marketplaces –Private industrial networks Collaborative Supply Chain

22. Example of EDI

23. Collaboration in the Supply Chain Internet based collaboration

24. Topics 1.Net marketplaces: E-distributors E-procurement Exchanges Industry consortia 2.Private industrial networks:

25. Two Main Types of Internet-Based collaboration 1.Net marketplaces: –Bring together potentially thousands of sellers and buyers in single digital marketplace operated over Internet –Transaction-based –Support many-to-many as well as one-to-many relationships 2.Private industrial networks: –Bring together small number of strategic business partner firms that collaborate to develop highly efficient supply chains –Relationship-based –Support many-to-one and many-to-few relationships –Largest form of B2B e-commerce

26. Pure Types of Net Marketplaces

27. E-distributors Most common type of Net marketplace Electronic catalogs representing products of thousands of direct manufacturers Typically, independently owned intermediaries Offer industrial customers single source to purchase indirect goods on spot basis Typically, horizontal Usually, fixed price—discounts for large customers Example: W.W. Grainger

28. E-distributors

29. E-procurement Net Marketplaces Independently owned intermediaries Connect hundreds of suppliers of indirect goods Firms pay fees to join market Long-term contractual purchasing of indirect goods Revenues from transaction fees, licensing consultation services and software, network fees Offer value chain management (VCM) services Many-to-many market Example: Ariba

30. E-procurement Net Marketplaces

31. Exchanges Independently owned online marketplaces Connect hundreds to thousands of suppliers and buyers in dynamic, real-time environment Vertical markets, spot purchasing in single industry Charge commission fees on transaction Variety of pricing models Tend to be buyer-biased Suppliers disadvantaged by competition Many have failed due to low liquidity

32. Exchanges

33. Industry Consortia Industry-owned vertical markets Purchase of direct inputs from set of invited participants Emphasize long-term contractual purchasing, stable relationships, creation of data standards Ultimate objective:  Unification of supply chains within entire industries through common network and computing platform Revenue from transaction and subscription fees  Many different pricing mechanisms Can force suppliers to use consortia’s networks

34. Industry Consortia

35. The Long-Term Dynamics of Net Marketplaces Pure Net marketplaces moving from “electronic marketplace” vision toward more central role in changing procurement process Consortia and exchanges beginning to work together in selected markets E-distributors joining large e-procurement systems and industry consortia as suppliers Movement from simple transactions for spot purchasing to longer-term contractual relationships involving both direct and indirect goods

36. Net Marketplace Trends

37. Private Industrial Networks Private trading exchanges (PTXs) Web-enabled networks for coordination of trans- organizational business processes (collaborative commerce) –Direct descendant of EDI; closely tied to ERP systems –Manufacturing and support industries –Single, large manufacturing firm sponsors network Range in scope from single firm to entire industry Example: Procter & Gamble

38. P&G’s Private Industrial Network

39. Collaboration with competitors

40. Co-opetition: a definition 40 A business strategy based on a combination of cooperation and competition, derived from an understanding that business competitors can benefit when they work together. A “non zero sum” scenario, in which the sum of what is gained by all players is greater than the combined sum of what the players entered the scenario with. Source: D. Meyer, 15 th March 2011 and istockphoto

41. Co-opetition 41 Source: D. Meyer, 15 th March 2011 Cooperative Competition Co-opetition occurs when companies work together in parts of their business where they do not believe they have competitive advantage and where they believe they can share common costs. Basic premise: - Co-opetition strategy and value creation leverage the alliance - Partner with other shippers (even competitors) to control logistics and transport costs - Load consolidation

42. Co-opetition

43. Co-opetition Partners 43 Source: D. Meyer, 15 th March 2011 Producers, Customers, Consumers who drive producer demand and determine product eco-footprint Shippers and Terminal Operators who generate the freight flows and provide the critical infrastructure for product flow Logistic Service Partners (3PLs) who can design and implement optimised solutions and move the freight Fourth Party Providers who can facilitate partnerships, referee blockages, find common ground Governments who can assure that legal and regulatory arrangements are in place to support seamless collaboration

44. Co-opetition = Value Creation 44 Source: D. Meyer, 15 th March 2011, and reubenmiller.typepad.com Co-opetition does not simply emerge from coupling competition and cooperation issues Co-opetition implies that cooperation and competition merge together to form a new kind of strategic interdependence between firms, giving rise to a co-opetitive system of reciprocal value creation.

45. THE IMPACT OF SIS ON THE PILLARS OF THE BUSINESS MODEL ISI impact on the customer relation and on the cost structure

46. Customization Pitfalls of Customization SIS can Blend the BOS Framework with the BMC Topics

47. Customer Segments & targets For whom are we creating value?  Who are the most important customers?  Mass Market  Niche Market  Segmented  Diversified  Multi-sided platform

48. Channels of communication and Information strategy Value Propositions are delivered to customers through communication, distribution and sales channels.  How a company communicates with and reaches its customer segments to deliver a value proposition.  Which Channels do our Customer Segments want to be reached? How are we reaching them now? Which are working best (or not working)?  Enabling customers to evaluate a firm’s products  Allowing customers to purchase  Providing post-purchase customer support

49. Channel TypesChannel Phases Own Direct Sales force Web sales 1. Awareness2. Evaluation3. Purchase4. Delivery5. After Sales How to raise awareness about the product? How to help customers evaluate the product's value proposition. How do we allow customers to purchase specific products and services? How do we deliver a Value Proposition to Customers? How to provide post-purchase customer support? Indirect Own stores Partner Partner stores Partner web sales Wholesaler Channels

50. Customer Relationships, Trust and Loyalty The types of relationships the firm establishes with its customers. What types of relationships does our customer expect and how much does this cost? How does this support the value proposition?  Personal Assistance  Dedicated Personal Assistance  Self-service  Automated Services  Communities  Co-Creation

51. Customization

52. Augmented Product

53. Customization Pure standardization Segmented standardization Customized standardization Tailored customization Pure customization

56. Customized standardization Kickers :

57. Tailored customization Longcha mp bag :

58. Pure customization

59. Modularity

60. Pitfalls of Customization

61. Although some consumers express an interest in customized products, other large groups view them as costly distractions. Some companies believe they can increase profits margins and customer loyalty by customizing products, but they must be careful to monitor the market to figure out which customers do and which do not. SoC406

62. Pitfalls of Customization Customization can be off-putting and an inefficient use of scarce resources. –The British Broadcasting Corporation discontinued the option to customize the BBC Web site because users do not have the time to customize it and found it more annoying than a generic Web site is. It also caused BBC technical complications, copyright and legal issues, and advertisement integration problems. –Some consumers believe customization has a negative impact on the environment and prefer conservation –An increasing number of consumers participate in community rentals and leases of products and sharing, in order to avoid the personal monetary cost and time consumption in the ownership of some personal items

63. Conclusion Technology will change how people create, innovate and compete. Globalization will bring new competitors and new partners. Competitors will try every approach, explore every opportunity, exploit every weakness. No single approach to innovation will guarantee success. Each change reminds us that the future is uncertain; Scan provides early alerts to potential change. Opportunity Discovery, Scenarios, and Roadmapping help each competitive challenge to have an optimum approach and a strategic fit.

64. IMPACT THE PRICING

65. Revenue Streams For what value are our customers really willing to pay?  Asset sale [product sale]  Usage fee  Subscription fee  Lending / Renting / Leasing  Licensing  Brokerage fees  Advertising  Service

66. Pricing Mechanism Fixed Menu Pricing Predefined prices are based on static variables Dynamic Pricing Prices change based on market conditions List Price Price set by product, service, or other Value Propositions Negotiation Price determined by bargaining skills and leverage Product Feature Price depends on the number and quality of Value Proposition features Yield Management Price depends on inventory and time of purchase Customer Segment Price depends on the type and characteristic of a Customer Segment Real-time-market Price is determined dynamically based on supply and demand Volume dependent Price as a function of quantity purchased Auctions Price determined by outcome of competitive bidding Revenue Streams

67. Cost Structure Some business models, are more cost-driven than others. “No frills” airlines, for instance, have built business models entirely around Low Cost Structures. What are the most important costs inherent in delivering the value proposition? Which key resources are most expensive? Which key activities are most expensive?  Is our business model more Cost driven or Value driven?  Types of costs  Fixed  Variable  Economies of scale  Economies of scope

68. Revenue Management Set of techniques use to manage –Constrained, perishable inventory (time) When customer willingness to pay increases towards departure Applications: –Airlines, Hotels, Car Rentals, News Vendors Main techniques: Open and close certain rate categories (rate fences) based on historical probabilities and forecasts of future demand

69. Fixed Prices Consumers Surplus Dead Weight Loss MC

70. Get a little more revenue

71. Maximize the Revenue ! Perfect (1 st degree) Price Disc.

72. Case study

73. OPENING CASE QUESTIONS 1. What is Amazon ’ s e-business model? 2. How can Amazon use m-commerce to influence its business? 3. What are some of the business challenges facing Amazon?

74. OPENING CASE QUESTIONS Amazon http://www.youtube.com/watch?v=YlgkfOr _GLY http://www.youtube.com/watch?v=zknLfU7 GJIw