e-Business

Discussion with UW Students

Agenda (from Abstract)

e-Business vs e-Commerce vs Internet What makes e-Business different from business? The rise and fall of the dot.com economy Successful models for e-Business The drivers of benefit for e-Business applications The value of Brand with e-Businesses The potential for e-Business in Insurance and high quality on-line Financial Advice

e-Business vs e-Commerce

E-Business: E-Commerce:
marketing selling buying of products and services on the Internet

Improving business performance through low cost and open connectivity:

New technologies in the value chain Connecting value chains across businesses in order to : Improve service/reduce costs Open new channels Transform competitive landscapes

e-Business is more than selling and marketing online!

e-Business vs Business
ReAssess ReAssess

Traditional:

Implement

E-Business:

Implement

Implementation Planning
Opportunity Analysis

Implementation Planning
Opportunity Analysis

Understand Business

Understand Electronic Business

Traditional business organization develop step by step:

Definitions are clear No change in the business and technology environment High time pressure Continuous learning

Characteristics of an Electronic Business journey:

Definitions of the future are fuzzy Permanent and unpredictable change in the business and technology environment Time to market and speed are major competitive factors Continuous learning & fast adaptation is required

E-Business is not a project - but rather a journey that requires vision and non-linear procedures

Experimentation and Learning

Short Strategy Formulation loops

awareness

Product development

Emerging e-Strategy

Being a Supplier network Customer network Connected Enterprise

Procurement Marketing Inbound logistics Outbound logistics Production Customer service Sales

Continuous experimentation through specific Solutions Prototyping

1997-1999 - e-Business Mania Strikes!

E-Business becomes a major economic force

NASDAQ hits 5,000

Venture capital in abundance Focus on new economy, new business models, growth potential

no attention to traditional fundamentals bricks and mortar viewed as liability

Traditional businesses shake in their boots at the threat of new non-traditional nimble bold competitors Dot.Com start-ups in every field Dot.Com multi-millionaires made over night

B2B and B2C - Huge Potential

The Projected Canadian Electronic Commerce Market

100 80
Cdn $ Billion

The Projected US Electronic Commerce Market

800 600
US $ Billion

Business to Consumer Business to Business

Business to Consumer Business to Business

60 40 20 0
1997 1998 1999 2000 2001 2002 2003

400 200 0
1997 1998 1999 2000 2001 2002 2003

Source: IDC

Source: IDC

Online Retail Sales - Likewise!

Growth of Online Retail Sales (US)

$25,000 $20,000
$ US MM
Books & Music Travel Entertainment Ticket Event Sale PC Hardware & Software Apparel & Footware Financial Services
CAGR 42.9%

53.7% 44.9% 124.3% 73.5% 83.4% 63.0%

$15,000 $10,000 $5,000 $0 1997

2001
Source: Forrestor

2000 - The Dot.Com Bubble Bursts!

The Demise of Dot Com Retailers. Weak financials, intense competition, and investor flight will drive many of today's online retailers out of business in 2000. Those that survive must refocus funding on building hard assets to achieve scale, service, and speed. Wall Street will run out of patience. Financial markets exasperated with non-existent online profits will turn a deaf ear to persistent "investment mode" rhetoric and soundly punish merchants who bleed red ink. Recent stock disasters like Value America and eToys -- whose market caps as of January 11, 2000, are down $3.1 billion and $7.7 billion respectively from 1999 highs -- serve as bad omens for online stores that lack a unique approach or technology. The revenge of the brick-and-mortars will begin. The narrowing of the playing field in 2000 will rationalize but not resolve online retail competition. It will usher in a new era characterized by a few large players that exploit deep customer relationships and a presence across multiple channels to entrench themselves. To measure their success, these firms will ditch new economy platitudes in favor of unfashionable old metrics like margins, profits, and customer retention costs.
Forrester Research, 1999/2000

Valuations Plummet
Amazon.com - AMZN Pets.com - IPET

Priceline.com - PCLN

eBay.com - eBay

Same Trend in Canada

1-year trend

Lessons Learned

Fundamentals important, bottom line important Traditional bricks and mortar assets can represent significant competitive strengths

logistics, inventory, distribution choice in terms of customer access strength and brand

e-Business becomes an element of overall business strategy - not the total business strategy e-Business still widely seen as a way of transforming business operations and thinking

Bricks and Clicks - A Hybrid Model

Traditional

Pure Web - Dot.com

Bricks and Mortar

Clicks

Combines strengths Hybrid from traditional and pure Web approaches Bricks and Clicks

Emergence of the Hybrid Strategy

Phases of e-Business Development

Four stage model in E-Business maturity relates business value to e-business leverage

Convergence
Cross-Industry Supplier/Customer convergence

Business Value

Over 50% are in the channel phase of E-Business development with a web presence but no infrastructure tie-in.

Just under 15% are in the integration phase. Connections to suppliers and customers are fully EBusiness enabled.

Transformation
Industry transformation, achieve competitive advantage

Integration
Integrate with customers and suppliers

Channel
Brochureware and buying /selling

E-Business Leverage
Source: PricewaterhouseCoopers

Phases of e-Business Development

The Journey Requires Investment

Significant multi-year investment predicted

The Journey Requires Investment

Significant multi-year investment predicted

The Benefits of e-Business

Generate additional Revenues

New markets New products New customers Process efficiency Reduce IT variety and -complexity Synergies with other initiatives Know more about your customers Integrated channel management Proactive and personalized offerings Applying innovative technologies Leadership enterprise Address younger customer segments Keeping options open Acquire know-how Focused investments

Reduce Costs (Integration and Collaboration)

Customer Retention (Added Services and Virtual Community)

Improve Image / Position Brand

Not to miss the boat

e-Business and Brand

Research from Mainspring

Online financial services customers are initially motivated by price sensitivity, but that influence declines as they realize the benefits of convenience Brand is more important online than offline

When researching insurance purchases online, 56% of customers went straight to name-brand sites as compared with 32% for aggregation sites. When initiating a purchase online, 60% went to namebrand sites as compared to 32% for aggregation sites.

Online Insurance

Growth of Internet-Enabled Insurance (US) 1200

1000 800
US $ MM Other Auto Homeowners Life

600 400 200 0 1997

1998

1999

2000

2001

Source: Forrestor

Online Advice

When will you offer financial advice online?

Why will you offer financial advice online?

To improve our online offering Customers want online advice

Don't know

> 3 years

1 to 2 years

Enhance customer relationships Help customers make decisions

< 1 year

Now

Competitive pressures
0 10 20 30 % 40 50 60

0 Source: Forrestor

10

20 %

30

40

50

Source: Forrestor

Online Advice vs Face to Face

Forrester: Few financial companies believe that online advice will replace the human advisor. Except for a small group of low-end, selfdirected customers, consumers are expected to continue to seek advice from financial advisors. More than half of our respondents believe that online advice solutions will never be a compelling alternative to working with one of their advisors, even as the technology improves. Almost half of financial institutions believe that online advice will enable advisors to deliver additional value to their customers. As automated advice vendors piece together the elements of the new advice creation process,we believe that use of online advice will surge. Customers don t care about the data-entry and number-crunching aspect of advising -- they pay for the conversation they have after the analysis is done. These online solutions will enable our advisors to spend more time with their customers. (Insurer)