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LEADING YOUR COMPANY TO THE WEB
Ned C. Hill, Dean
Marriott SchoolBrigham Young University
Electronic Commerce: A Quick Overview
What’s wrong with the old paradigm? What is e-Commerce? How large is the market? How is e-commerce (and the Web) changing business? Should my company enter Web-space? What we are doing in the Marriott School and at BYU
What’s Wrong with the Old Paradigm?
The Paper-based Commercial Transaction
Seller
Buyer
CarrierBankingSystem
Req
uest
for
Quo
te
Quote
Pur
chas
e O
rder
Invoice
Bill of Lading
Che
ck a
nd R
emitt
ance
Adv
ice
Check
Keying in the Paper World
Keying Keying
Keying
Keying Keying
KeyingKeying Keying
Postal System
Seller’s Computer System
Buyer’s Computer System
What’s Wrong with this Picture? Labor intensive Slow Error prone Uncertain Excessive inventory (and cash) Bottom Line: IT’S EXPENSIVE
What Can We Do? Option 1: Make paper work harder Option 2: Get rid of the paper altogether
Definitions of e-Commerce
Simple: “The selling of products and services using the Internet.”
More General: The use of computer and communication technology to facilitate the information exchange between two parties in a commercial transaction.
Primary Types of e-Commerce Paperless:
– Application to application Electronic data interchange (EDI) Financial EDI (firm to bank) File transfer
– Manual to application Web applications Electronic order entry E-mail
Additional Types of e-Commerce Physical media assisted by computers:
– Facsimile transmission– MICR, OCR, ICR– Bar coding– RF– Voice recognition
Map of e-CommerceAll Electronic
All Paper
EDI, FEDI, FTP
Traditional Paper Transactions
FAX
MICR, OCR, ICR, Bar Coding
Internet, E-mail, E-trade
Pay
men
t and
Rem
ittan
ce A
dvic
e
An e-Commerce Transaction
Seller
Buyer
CarrierBankingSystem
Req
uest
for
Quo
te
Quote
Pur
chas
e O
rder
Invoice
Bill of Lading
Goods
Manual Processes in an e-Commerce World
Keying
Keying
Computer Network (VAN, Internet)
Seller’s Computer System
Buyer’s Computer System
Translation Translation Translation
TranslationTranslationTranslation
P.O. Invoice RA
F.A. F.A. F.A.
Benefits of e-Commerce Lower personnel costs Reduced error rates Faster cycle time Improved customer service Reduced inventory Fewer stock-outs Reduced paper handling costs Faster payments Better control over information
What is the Size of the U.S. e-Commerce Market?
Accurate data is hard to find Three measures
– Number of online households– Revenues from Web advertising– Dollar volume of transactions through the Web
This is NOT the entire e-commerce market– EDI market is even higher than Web market
Online Households
0
10
20
30
40
50
60
70
1997 1998 1999 2000 2001 2002
From Net Profit by Peter S. Cohan
Million
Web Ad Revenues
0
500
1000
1500
2000
2500
3000
1996 1997 1998 1999 2000
From Net Profit by Peter S. Cohan
$ Million
Business Through the Web
0
200
400
600
800
1000
1200
1996 1997 1998 1999 2000 2001 2002
Est. from the U.S. Department of Commerce
$ Billion
Cost Curves
Labor costs Paper costs Building costs
vs. Computer costs Telecommunication costs
Faster and Faster!Time Required to Transmit the 32 Volume
New Encyclopedia Britannica 1200 bps modem……………………..…28 days 28.8 Kb modem………………………..28 hours Basic Rate ISDN…………..……….…6.3 hours T-1 line………………….……….….31 minutes T-3 line………………………………..1 minute ATM-SONET (OC-3)……………....17 seconds ATM-SONET (OC-12)………….....4.7 seconds Newly proposed technology…… .005 second
How the Web Changes Business
Broadcast: 1 to N Network: N to N
Sellers more powerful Buyers gain more power
Customer loyalty Less customer loyalty
High barriers to entry Low barriers to entry
Speed: slow Speed: very fast
Charge for each product Often give away products
Transactions costs: high Transaction costs: low
Traditional Web
Should My Company Enter Web-Space?
Do we have $100,000 to $200,000 to invest in launching a Web site? (And are we willing to invest in maintaining it?)
Are our competitors involved in the Web? Do our customers demand Web services? Do we have customer service opportunities that could
be improved via the Web? Is a significant portion of our customer base under the
age of 30? Do we want to be in business 2-5 years in the future?
Three Stages of Web Involvement
Stage 1: “Brochure”– One-way information broadcast– Lowest cost, easiest to maintain– A holder for your place in e-commerce
Stage 2: “Basic Transactions”– Offer basic transactions: orders, payment– Requires significant maintenance, real-time
processing– May compete with existing business avenues
Three Stages of Web Involvement
Stage 3: “Complete Business Partnership”– Multiple transactions with customers– Integrated functionality– Builds customer loyalty, long-term
relationships– Involves major funding commitments
Three Stages of Web Involvement
Stage 1Stage 1
Stage 2Stage 2
Stage 3Stage 3
Cisco: Product Info. DesignOrders StatusCustomer service DeliveryPayment
LandsEnd:CatalogOrders
WSJ:News
Suggestions on Entering Web Space
Keep your focus on your customer--don’t get lost in the technology
Use EC to improve processes and information flow--don’t pave over old cow paths
Develop customer loyalty by providing multiple connections that add value
Partner when necessary to widen your ability to provide services
Can We Sell Through the Web?P
rodu
ct
Sim
ple
Com
ple
x
Unskilled Sophisticated Customer Knowledge Level
Web Applications
Difficult/Impossible
Web Applications
OKWeb Applications
OK
Web Applications OK but
Must Be Sophisticated
Can We Sell Through the Web?P
rodu
ct
Sim
ple
Com
ple
x
Unskilled Sophisticated Customer Knowledge Level
Cisco
Dell
Amazon.com
Term insurance
Estate planning
Groceries
Suggestion: Analyze the Timelines You Create for Your Customers
What processes do they go through to find us? How do we tell them about our products? How do they order from us? How do they contact us about customer service
problems? How do they pay us? What other information would they like to have
about status, payments, availability, etc., and how do they get it?
Determine Your Timelines
Seller
Buyer
CarrierBankingSystem
Req
uest
for
Quo
te
Quote
Pur
chas
e O
rder
Invoice
Bill of Lading
Che
ck a
nd R
emitt
ance
Adv
ice
Check
Time delays, internal processing, costs, bottlenecks
Want to Find an Internet Business Opportunity?
Hint: Study Possible Timelines
Consumer shopping Applying to college Buying a house Booking a flight Checking out a book from a library
Illustration: NetRoadshow Public stock and bond offerings Old timeline:
– Executive visits to possible customers– Extensive exchange of paper information
Innovation:– Create electronic roadshow– Customers get passwords to watch at leisure– Information exchanged electronically– Sales calls follow
Results– SEC approved– Over 400 shows in 1999, at $20,000 each– Goldman Sachs, DLJ, Bear Stearns use– Company acquired for $50M by broadcast.com
The University--As a Business
BYU located in Provo, Utah 31,000 students--largest private university
campus in U.S. 300,000 alumni 6,000 employees $300 million annual budget Cost structure: 80% salary
The Marriott Schoolof Management
110 faculty 5 masters programs, 2 undergraduate
– MBA, top 50 (tops in “payback”)– Masters of Accounting, number 2
2,300 undergraduate students 700 graduate students 1,100 graduating students per year
Why We Entered Web Space Marketing
– Competition uses Web extensively
– Image is important (rankings)
Desire to improve “customer” service– Prospective students
– Current students
– Alumni
– Recruiters
Desire to extend influence internationally Need to contain costs/positions
How We Did It
Used outside consultant to develop strategy– Brought together all programs and functions
– Developed list of priorities
– Coordinated with rest of university efforts
Formed a Web development team– Four students plus full-time staff member
Analyzed top Web sites from other universities and companies
Developed plan to phase in Web site over time
Marriott School Web Site Phase 1: Infrastructure and design
– Went online Aug. 30th– Primarily information (“Brochure Stage”)– Navigation tools developed
Phase 2: Database integration– Data base driven pages (Oracle)– Some transactions (applications)– Ease of maintenance– Online spring 2000
Phase 3: Transactions and customization– Multiple transactions and value-added services– My Marriott, My Courses, My Students, etc.– Online fall 2000
Other Uses of e-Commerceat Brigham Young University
Grade transcripts EDI Telephone bills EDI Inter-library loans EDI Applications Internet Student loan documents EDI Course registration Intranet Ordering supplies Internet Course delivery Internet, etc.
Technology Goals at BYU Permanent e-mail address for all students/alumni Moving towards use of Internet for 100% of applications
and registrations Apply EDI to purchasing, invoicing, prices, etc. Move 100 correspondence courses to Internet by Jan 2000
(then 200, 300, etc.) Intranet-based services for students, alumni, recruiters, etc. Increase electronic holdings for library Use of Internet to assess teaching, services, etc. Will soon require laptops for all students
Changing the Educational Paradigm
Utilize technology to help deliver course content Asychronous vs. synchronous Mixed-mode learning Use professors for what they do best
– Mentoring– Q & A– Discussion subjects
Use technology for what it does best– Exercises– Factual material– Objective testing
Examples of Computer-Assisted Courses
Chemistry Replaces lectures Rat Lab Decreases costs Bacteriological Lab Allows
experiments Engineering Technology Controls equipment Languages Adaptive learning Music Visualizing Bach Accounting Repetitive drills
Course Key Feature
Conclusions Technology is changing the business (and the
educational) paradigm Learn all you can about e-commerce Direct benefits of e-commerce are impossible to
measure--but can you measure the value of your telephone?
You will be doing e-commerce sooner or later--might as well get started now!
References on e-Commerce
Peter Cohan, Net Profit, Jossey-Bass, 1999--investing and competing in the Internet business world
Bruce Judson, Hyper W@rs, Scribner, 1999--good commentary on online business opportunities
Nicholas Negroponte, Being Digital, Knopf, 1995--one of the most insightful commentaries on the Information Age
Karen Southwick, Silicon Gold Rush, Wiley, 1999--strategies for developing a high-tech business
Don Tapscott, The Digital Economy, McGraw Hill, 1996--how the Information Age will impact the economy
Don Tapscott, Growing Up Digital, McGraw Hill, 1998--how the younger, computer-literate generation will change business and the world
