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Strategies for an EC Environment

Richard A. Scudder, Ph.D.

Daniels College of Business

University of Denver

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Outline of Presentation

• Setting the Context

• Macro Trends

• Surprise-free projections

• Opportunities and Threats

• Conclusions

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Electronic Commerce – A Little History

• Traditional EDI and CALS

• Supply Chain Partnerships

• Advent of the Internet

• Advent of the World Wide Web

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How the Web Changed Things

• It’s Ubiquitous

• It’s Graphic

• It’s Global

• It’s “Free”

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Three Key Words

Chaos

Confusion

Leverage

-McCubbrey, 2000

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Chaos

Rapid Rate of Change

Multiple Business Models

Entrepreneurial Frenzy

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Confusion

Security

Information Overload

Technical Infrastructure

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Leverage

Customers

Suppliers

Strategic Outsourcing

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IT Drivers

• Almost all US workers have a networked pc on their desk.

• The daily users of Yahoo! outnumber the viewers of the most popular show on television.

• 140 million people world-wide can access the Internet. By 2005 this will grow to 1 billion.

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Moore’s Law

• The number of transistors on a chip double every 18 months. Tenfold increase every five years.

1950 2000 2050

Gordon Moore, Intel

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Moore’s Law, amended

• Storage space is increasing at an even higher rate than chip density – doubling every six months.

• Communication capacity is exploding. Total bandwidth in the US is tripling every year.

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Metcalf’s Law

• Utility= (number of users) 2

• Each new user adds more than just simple value• The Internet with millions of users has achieved

critical mass• The value of your e-commerce site grows

exponentially with each new userRobert Metcalf, 3-com

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IT Strategy

The information superhighway is the wave of the future.

The strategy of the organizationshould be linked absolutely to the Information Technology strategy

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Electronic Commerce Today

• Corporate “Production” Purchasing

• Corporate MRO Purchasing

• Business to Consumer

• Government to Business, Consumer

• Consumer to Consumer

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EC Techniques

• EDI and CALS• Electronic Catalogs• Auctions, Marketspaces• Intelligent Agents• Mass Customization• Disintermediation• Global Reach

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What is Electronic Commerce?

• It is a Business Issue, not a Technical Issue

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What is Electronic Commerce?

• It is using information technology for competitive advantage “in spades”.

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Using IT for Competitive Advantage

• Surfaced in the early 1980’s

• Theorists:

– Michael Porter

– Warren McFarlan

• Value Chain

• Five forces model

• Lots of examples

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-Haag 2000

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Talbot Company

-Haag 2000

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Examples: Using IT for Competitive Advantage

• American Airlines

• American Hospital Supply

• Merrill Lynch Cash Management Account

• Wal-Mart

• Federal Express

• Singapore

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Common Characteristics

• CEO support and involvement

• Bridged the “two-cultures” gap

• Creative systems design

• Tended to be inter-organizational systems

• Developed in secrecy

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What’s Different with EC?

• Technological changes are profound

• The pace of change is extremely rapid

• The pace of business is extremely rapid

• New business models are emerging

• “If you snooze, you lose!”

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Macro Trends

• Most EC will be business to business

• Integration of web to back-end processes

• New ways to relate to supply chain

• Strategic alliances are the norm

• Telecommunications options

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Surprise-free projections

• EC will bring new winners and new losers

• Winners will be bigger winners

• There will be more losers

• Foreign competition will come

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Searching for Opportunities

• Understand the business• Understand the technology• Demand creativity • Look for new ways to relate to customers and

suppliers• Remember mass customization, disintermediation

and global reach• “Hire the children”

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Landmines

• Usage drop• Disinterest• Community of value fragmentation• Selling of the Net• Lockout and Duplication

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An Action Plan

• Think big

• Start small

• Test quickly

• Scale fast

– Diamond Technology Partners, 1999