1. business and industrial

Presentation to UBC
Commerce Faculty
April 28, 2000
www.SierraSystems.com
UBC: eComm Boom-Agenda








What is eCommerce?
The Business Value Chain
The Impact on Developers and Engineers
Business Change & New Skills
Market Positioning
Supply-side Metrics
Sell-side Metrics
Summary and Questions
www.SierraSystems.com
Business Drivers for Future Growth in
Internet E-Business Applications
Global Mergers
and Acquisitions
Growth Outside
“First World”
Massive Dislocations
in Value/Power in
Supply Chain
Ubiquitous
Customer
Connectivity
More Power to
the Customer
© 2000 Giga Information Group
Reinvigorated
IT Competitive
Environment
Massive Changes
in Value Licensing
Economic Models
Continued Productivity
Growth in the Global
Economy
Think E-business, Not E-commerce
 E-commerce is the Cause, E-Business is the Effect
 E-Business is about Structural Transition and Business
Transformation from Old Business Models to New Business
Models
 E-Business Requires Effective Inter-Enterprise Integration
Processes and Technology
 E-Business is not a Technology Issue; It is a Serious Top
Management Strategy
 Success is all about Execution
© 2000 Giga Information Group
www.SierraSystems.com
Let’s have a Guess at the Size
 B2B in 1998 - US$ 43 billion
 Forecast for 2003 - US$ 1.3 trillion
 Perspective in terms of total B2B trade:
– Only 9.4% of total
– Forrester Research
www.SierraSystems.com
Five Main Categories of Business
 Price Discovery - matching buyers and sellers
– eBay, eTrade, Letsbuyit.com
 Needs matching
– Grand and Toy
 Innovation
– Linux development, Business Objects
 Product design and delivery
– Manufacture and assembly
 Distribution (Transmission Services)
– Banks networks, gas distribution networks
Don Tapscott
www.SierraSystems.com
The eCommerce Matrix
Business
Business
Consumer
Source: The Economist
Consumer
B2B
GM/Ford
EDI networks
B2C
Amazon
Dell
C2B
Priceline
Accompany
C2C
EBay
QXL
Lessons From Big Pioneers
Where U.S. Fortune 500 Companies Are in E-Commerce
Phase 3: Low Will
We’ve Got
a Lot of
E-Commerce
Stuff Going on
but Where’s
the Pay-Off?
High Will
Low Skill
High Skill
3 of 16
10 of 16
We Know
E-Commerce
Is Critical and
We’ve Started
Phase 1:
Phase 4:
E-Commerce
Is Giving Us
Competitive
Advantage
Phase 2:
1 of 16
High Will
High Skill
2 of 16
Low Will
Low Skill
I Guess
We Should
Do
Something
With
E-Commerce
Opportunities
New ways for
sellers to
move products and
services into the
market?
New
products?
Production Roles
Suppliers
Revenue
from organizing
reducing, selling
information?
Sellers
New
exchanges
for bidding
and trading?
Transactor
Seller’s
Agent
Consumption Roles
Buyer’s
Agent
Buyers
Information Provider
Infrastructure
Revenue
from taking on
online market
risk?
New ways for
buyers to
find products
and services?
Market Trust
Supporting Roles
New ways
to provide market
infrastructure
Stages of Web Functionality
LEVEL 4 - Leading
Personalized content ~ Secure commerce ~
Advertisement serving ~Advanced searching ~
Custom usage reporting ~ Custom Java
applets ~Advanced user management and
access control
LEVEL 3 - Advanced
User profiling ~ Authentication ~ Access control ~
Electronic Commerce ~ Online support ~ Basic
Advertisement serving ~ Legacy integration
Chats and Forums ~ Dynamic publishing ~
Imported partner content ~ Advanced reporting
LEVEL 2 - Standard
Basic Profiling ~ Content Management ~Basic
searching ~ Personalized Email ~ Electronic
catalog
LEVEL 1 - Entry
Static content ~ Simple animation effects/Java
Script ~ “Stock” usage reporting
Getting Started With eCommerce
Identification
Assessment
Do we need to do
something?
Are we already
involved in a
project?
Are the things
we’re doing today
the right things?
If not, what are the
right things?
Supply Chain
How do we best
deploy our limited
resources and
focus on our real
objective?
Implementation
Directed Discovery
eCommerce Affects the Entire Business
Where Do You Start?
Supply Side
Internal Operations
Suppliers
Sales and Marketing
Agents
R&D / Knowledge Mgmt
End User
Finance
Sales Reps
Supply Chain Mftg
Distributors
HR
Retailers
Vendors
Market Facing
Start Here!
Start by understanding and getting closer to the customer!
Value Chain of a Differentiator
Firm
Infrastructure
Corporate’s support in sales and marketing
Superior management information system
Technology
Development
Proprietary
Process
Unique
Equipment
HR
Management
Effective
Training
Career
development
for staff
Procurement
Handling of inputs
that minimizes
damage
Delivery on time
Inbound
Logistics
Facilities that enhance the firm’s image
Team work
Application eng
support
Advanced
Unique vehicle
Most repeat
testing/evaluation
response to
scheduling
techniques
customer’s
quotation
Extensive training on
application and
marketing
Highest quality
incoming parts
Transportation
suppliers that
minimizes
damage
Statistical
process control
Reliable & high
quality products
Short cycle
time
Flexible labour
Rapid timely
delivery
Handling that
minimizes damage
Accurate and
responsive order
processing
Operations
Margin
Outbound
Logistics
Highest quality
replacement parts
Superior technical
literature & sales
aid
Latest trade &
product seminar
High customer
face time
Marketing
and Sales
Extensive buyer
tracking
Complete field
stocking of
replacement parts
Service
Margin
The Internet Reshapes the Value Chain
The new Internet value chain
Customer
Acquisition
Customers found
through
•Affiliate networks
•Shopping bots
•Portals/hub sites
•Ad networks
© 2000 Giga
Information Group
Ordering/
Payment
In B2C:
•Direct sales by
manufactures
•Retailers pass
orders and
payment to
supplier, take a
commission.
In B2B:
•Hub Sites facilitate
orders
•End users buy
directly with
purchasing cards
Production
•Build to order
becomes more
common
•Orders sent to
component makers
for just-in-time
assembly
•Suppliers take on
greater role in
building quick-toassemble modules
Delivery
•Manufacturer ships
to customer
•Shippers like FedEx
move into home
delivery business
•Suppliers take on
greater role in
building quick-to
assemble modules
Service
Relationship
Management
•Retailer takes on
more service &
support
•Service becomes a
new sales
opportunity
•Customer
relationship
management
becomes a
reality, not just
an aspiration
Rebuilding the Value Chain
Manufacturer/
publisher
Wholesaler/
distributor
E-retailer
Reintermediation
Portal/
aggregator
Sources: Benchmark Capital; The Economist
Consumer
Disintermediation
Re-engineering the Customer Experience
Purchase Criteria
Customer Anger
Preferences
Power
Decision-Making Process
Purchase Occasion
Buyer Behavior
Functional Needs
Systems Economics
© 2000 Giga Information Group
Customer
Priorities
Content
&
Experience
Channel
Integration
Content
&
Transaction
Assets
The Evolving Value Chain
The Internet is blurring traditional boundaries between what companies,
customers and suppliers do and what services they offer.
Traditional Roles
Customer
& Retailer
Buying:
•Research
•Decision
•Order
•Payment
© 2000 Giga Information Group
Customer
Manufacturer
& Suppliers
Producing:
•Source
•Buy
•Build
•Assemble
Manufacturer
Distributor
& Retailer
Retailer &
Customer
Delivering:
•Distribution
•Shipping
•Pick-up
•Set-up
Supplier
Servicing:
•Questions
•Problem
•Resolution
•Repair
Distributor
Internet Roles
Manufacturer
& Retailer
Reselling:
•Identify Need
•Match Need
with Product
•New Order
Retailer
The Internet Reshapes the Value Chain
Potential Impact of Internet on Business Processes
(0-2 = Small; 3-4 = Some; 5-6 = Medium; 7-8 = A Lot; 9-10 = Major)
Customer-Oriented Processes:
Acquiring customers
Taking order/billing/getting paid
Making the product
Delivering the product
Serving the customer
Deepening relationship
Internal Processes:
Developing the product
Procuring supplies
Hiring/retaining employees
Raising capital
Tracking/managing money
Managing risk
© 2000 Giga Information Group
0
2
4
6
8
10
Positioning in a Mind
 You see what you expect to see
– Past conditioning
 Build a leadership position in the prospect’s terms
– NOT YOUR terms!!!
 Change dethrones leaders
– So, if you are not a leader, look for the hole
 Don’t trick the prospect, build trust
www.SierraSystems.com
The Internet’s Impact on Industries
Because the Internet allows assisted self-help, it affects industries
where self-help was not an option before — like brokerage
Percent of Customers
Distribution of Customers by Self-Help Preference
10
Distribution of Customers,
Pre-Internet
8
6
4
Internet Shifts
Curve This Way
Distribution of
Customers, PostInternet
2
0
No Self-Service
Mixed Self-Service
With Help When
Needed
No Human Help
The Internet’s Impact on Industries
It also affects industries where self-help has become the norm — like
books, computers or groceries
Percent of Customers
Distribution of Customers by Self-Help Preference
10
Distribution of Customers,
Pre-Internet
8
6
4
Distribution of
Customers,
Post-Internet
Internet Shifts
Curve This Way
2
0
No Self-Service
Mixed Self-Service
With Help When
Needed
No Human Help
E-Commerce for Small and Mid-Sized
Companies
Process
Solution
 Closing sale/taking order/getting
paid
 Connectivity with trading partners
 Acquiring customers
 Delivering the product
 Billing/getting paid
 Procurement
 Commerce service
providers
 IP-based EDI
 Competitive bidding
 Outsourcing logistics
 EBBP
 Hosted e-procurement
service
www.SierraSystems.com
Positioning in the Deeper Forest
 Do it the “Amazon way”
– have a button on every page searched
– whether relevant or not
 Tune the features to fit the search routines
– yeild a high level of returns for searches
– provide a repetitive recognition of name
 Structure the features to mirror the the touchpoints of
the complimentary community
– regular association with supportive businesses
– eCommunity - A Group of Common Interest
www.SierraSystems.com
Benefits of Integrating with your
eCommunity
 Example: BP Amoco (BP Chemicals)
– 7 million tons of production per year
– Manual collating of information from shipping brokers
– Implemented an Extranet linking brokers, BP units and
customers globally
– Resulted in a flexible system requiring minimal resources
– Global tracking efficiency
www.SierraSystems.com
Expectations of the Prospect
 Target your sector
– move from the local to the global view
 Once you have the interest
– don’t let go
– continue to build trust
– perform in your prospect’s terms
 People want instant reliable information
 Your Value Chain becomes your delivery key
www.SierraSystems.com
The Sell-Side E-Commerce Value
Cycle
Attracting customers, marketing products
Displaying
products
User
profiling
Pre-sales
support
Product
configuration
Advertising
User
feedback
Customer
Customer
service
Technical
support
User
authentication
Price
negotiation
Ordering & payment
Billing
Post-sales activities
Fulfillment/
distribution
Negotiating prices,
accepting orders
Impact of Internet on Sell-Side
Business Processes
0
2
4
6
8
External Customer Processes:
10
Attracting customers/
marketing products
1. Acquiring customers for products
2. Taking the order/billing
Billing
3. Making the product
4. Delivering the product
Customer service
5. Serving customer after sale
6. Relationship management
Relationship mgmt.
Internal Processes:
7. Developing the product
8. Procuring supplies and inventory
9. Hiring/retaining employees
10. Raising capital (debt/equity)
11. Tracking/managing money
12. Managing risk
0
2
4
6
8
10
(0-2 = Small; 3-4 = Some; 5-6 = Medium; 7-8 = A Lot; 9-10 = Major)
Innovations in Closing the Sale:
FreeMarkets
Source: FreeMarkets
Procurement
 Goal: most cost-effective management of procurement activities
 Situation: “When did you order it… ?”
– Procurement inundated with paper
– 70% of orders high-volume, low-dollar items (comprise only 3% of
accounts payable)
 Challenge: an intranet application to provide “one-stop shopping”
– Automated ordering & tracking, strategic procurement partner interface,
online hiring of outsourced services
www.SierraSystems.com
Solution: MS Market
 Online ordering and resources
– Order office goods, locate approved vendors, initiate purchase
orders, track vendor payments, and submit expenses
 Automatic transaction approvals
– Electronically routed, sent to approving authority when required
 Web app built on Microsoft platform
– Server: Windows NT & BackOffice Products (IIS, SQL Server, Site
Server Enterprise )
– Client: Windows NT Workstation (32-bit OS), Microsoft Office,
Microsoft Internet Explorer 4.0
www.SierraSystems.com
January 1998 MS Market Activity
 January MS Market activity
– $155M and 23,951 requisitions processed worldwide
 The number of year-to-date MSMarket users is:
– 9,494 requisitioners, 2,496 approvers who are not also requisitioners.
– 11,990 People in the process
 Domestic activity:
– 16,638 requisitions
– $115M
International activity:
7,313 requisitions
$40.5M
 Current month volumes equate to an annual run rate of over
$1.6B.
www.SierraSystems.com
Results
 Rules removed, red tape reduced
– Can place order in 3 minutes or less
– No need to go through admin assistant
 Better business practices
– Uploads transactions directly into SAP
– Handled $1.6 billion in orders last year
– 12 employees redeployed to advantage
 Flexible deployment for IT
– Incremental changes to app without reloading each desktop
– Reliable, only 3% of orders require help
www.SierraSystems.com
Savings
 P.O. Costs reduced from $60/per to $5/per (saved 30
minutes/order by automating data entry)
 Requisition to P.O. time reduced from 2 weeks to 8 minutes
 $1.6M/yr in CP staff redeployment (12 FTEs)
 $4-6M in additional supplier price and payment discounts
 On track for 5-10% decrease in ~$2B/yr spend
 Scalability
 Time savings for employees
www.SierraSystems.com
Information Fragmentation
 On average, business information resides in 7 systems
 75% claimed lack of integration caused problems:
– Consistency and compatibility of data
– Extraction and collation of data
 Only 10% thought their automated processes
communicated well with the value chain.
© 2000 Giga Information Group
www.SierraSystems.com
E-Business Application Strategies


Buy vs. Build-&-Integrate, Buy and Build-&-Integrate
Loosely coupled plug ‘n’ play
–





Whether business units or companies
Customer-centered business process innovation
New and rapidly evolving business processes
Stick to the knitting…specialize in core competency
Form and break business relationships rapidly
Powerful content aggregator as central mover, vs. federated association of more
equal players
All require more flexible, business process-driven application
solutions, that can be sliced and diced in many ways
© 2000 Giga Information Group
www.SierraSystems.com
Build versus Buy
Internet
Client/
Server
M’frame
S
Y
S
T
E
M
M
A
N
A
G
E
M
E
N
T
Presentation
Services
Applications and Application
Development Tools
Packaged Applications
Object Oriented Tools
4GL Tools, 3GL API
Network
Computers
Web Browser
Application Enabling Services
Personal
Computer
TP Monitors
Work Flow
Event Services
Mail
Intelligent Agents Telephony
Terminals
Comm. Services
Conversational
Remote Proc. Call
Messaging
Object Services
COM/DCOM
CORBA
Data Access
Services
Desktop
Workgroup
Department
Division
Enterprise
Dist. Services
Directory, Time
Security,
Transactions
SNA
ATM
Channel
WAN
IPX
LAN
Physical Networks
• Presentation Services
• Application Packages
• Development Tools
• Application Enabling
Services
• Data Access Services
Common Transport Semantics
Transport Services
TCP/IP
NETBIOS
APPN
Common
architecture
Signaling
&
Control
Plane
• Comm. Services
• Object Services
• Distributed Services
Best-Practice SoftwareDevelopmentLifeCycle
7-Month Process
Purchase and
Play With Tool
Initiation,
Evaluation
Business Testing,
a.k.a. Requirements!
2nd Iteration
Deploy
0
Have Idea,
Buy Tool
© 2000 Giga Information Group
1
2
Training
3
Prototypes
4
5
Throw Out
First Iteration
6
7
Evaluate
Planning is everything, plans are nothing.
Lessons Learned
 BPR and outsourcing essential
– Senior management involvement
 Project successful because of teamwork
– Business, IT, consultant/vendor
– BUT, production support group wasn’t involved early enough
 Must design for all workflow exceptions
–
–
–
–
Some steps/issues left out of the process
Involve users in acceptance testing early on
Talk to workers, not just management
Dig deeper, longer
www.SierraSystems.com
Lessons Learned
• Look for integration points
- Workflow, E-Forms, Output
- Legacy renewal and workflow
• Hire necessary skills and experience
- Web development
- Client/Server
• Do not develop “homegrown” workflow within applications
- “workflow is at the heart of e-business”
• Deploy slowly (pilots & phased implementation)
• Involve business partners at the beginning
• Focus on bandwidth and security issues
© 2000 Giga Information Group
www.SierraSystems.com
Thank you UBC Commerce
Community
Questions?
[email protected]
604.891.6255
www.SierraSystems.com