What is E-Business and does it matter?

Definitions and Emerging E-Business Models

Professor Feng Li The Business School University of Newcastle upon Tyne E-Mail: Feng.li@ncl.ac.uk

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What is E-Business?

Where do you draw the line?

Software; Book Car Mortgage

Measuring E-Business depends on how far you stretch the rubber band!
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What is E-Business?

E-Commerce electronic transactions conducted by business partners (narrow definition) E-Business: buying and selling, servicing customers, collaborating with business partners, and conducting electronic transactions within an organisations Turban, Efraim, David King, Jae Lee and Dennis Viehland (2004) Electronic Commerce: A Managerial Perspective 2004. Pearson Prentice Hall, New Jersey
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What is E-Business? 2

E-Commerce as digitally enabled commercial transactions between and amongst organisations and individuals E-Business refers primarily to the digital enablement of transactions and processes within a firm, involving only the information systems under the control of the firm E-Business are those activities other than buying and selling via electronic channels Laudon, Kenneth C & Carol Guercio Traver (2003) E-Commerce: Business, technology and society. 2nd edition. Pearson Addison Wesley, Boston

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What is E-Business 3

For this module, a broad definition of EBusiness is adopted It encompasses all internal and external electronically based activities and processes. E-commerce is part of E-Business, which focuses on the electronic commercial transactions between and amongst organisations and individuals

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What is E-Business? continued

E-business is all about time cycle, speed, globalization, enhanced productivity, reaching new customers and sharing knowledge across institutions for competitive advantage -Lou Gerstner, ex CEO of IBM

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What is E-Business continued.

Not just about dot coms and Internet only companies Transform existing businesses through the Internet and related technologies Integration within and between organisations break down barriers and boundaries Enabling new possibilities new ways of doing business - not possible in the past Origin go back several decades A wealth of knowledge already available through large research programmes
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Dot Com Crash End of E-Business?

Underlying rapid growth has never stopped even during the dot com crash The Web has become an increasingly important part of consumers' everyday lives - shopping, banking, amusing, education Part of mainstream business culture, fulfilling its promise as a medium that can connect consumers and enterprises and cut red tape from transactions Pure plays versus multi-channels - Web sites are necessary for any business - even if the online arm loses money E-Commerce still only a small section of the economy (e.g. e-commerce < 5% of retailing) big bang yet to come Not the end the fun has just started !
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E-Business: Classification

Business to Business (B2B) Business to Consumers (B2C) Consumer to Consumers (C2C) Consumer to Business (C2B) E-Government (B2G, C2G etc.) Intra-Organisation E-Business Others P2P etc.

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Why E-Business? Why Now?

Demand Pull The New Economy

Technological Push the ICTs Revolution

Information economy - Information content & labour over 60% New economics of information Convergence of computing, telecom & media Exponential growth of the Internet Mobile communications Mass, public infrastructure Individuality, interactivity, mobility & consumer experiences

Rapid development of the Internet

Government Initiatives & Targets Others

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Context for E-Business

All industries became information-intensive Information and communication are crucial to success of industrial & commercial operations Fast growing ICTs & information industries Profound Impacts on what activities locate where, how territories administered, markets served, linkages maintained between customers & suppliers Need for new strategies, business models & organisational designs

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E-Business Models

E-Shops web marketing or a shop (B2C) E-Procurement E-tendering & procurement of goods and services E-Shopping Centres/E-Malls a collection of E-shops E-Auctions E-implementation of bidding mechanisms
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E-Business Models .. continued

Virtual Communities members with common interests Collaboration Platforms tools & infor. environment for members to collaborate Third-Party Marketplaces leaving web marketing to third party Value-Chain Integrators
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E-Business Models .. continued

Value-Chain Service Providers support part of value chain (e-logistics, e-payments) Information Brokerage, Trust and other services business information and consultancy; trusted third party services Others (e-betting/gambling; syndication )

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Implications of E-Business:
Fundamental and Pervasive transformation

New strategy & business models New organisational designs New inter-organisational relations New work organisation and new ways of Working Others

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Organisational implications

Two ways to beat competition and succeed in the market:

Product/service innovations Organisational/managerial innovations

Organisational innovations essential to efficiency and competitiveness Internet enables new organisational designs/new ways of doing business often in ways impossible in the past Within AND between organisations the entire value/supply chain/network
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De-Construction of Integrated Businesses

What does your company really do?

Customer relationship business scope Product innovation and commercialisation businesses - speed Infrastructure management businesses - scale

Unnatural Bundle everything operate at sub-optimal level

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Customer Relationship

Driven by scope economy Customer service-oriented culture Customisation developing relationship with them and understand their needs Offer as many products as possible to maximise selection for customers Tailor bundles of products and services to capture a larger share of wallet

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Product Innovation & Commercialisation Driven by speed the faster the better Using all possible distribution channels to reach customers Organisational culture geared to attract and retain creative talents Operations tailored to serve the needs of creative talents for breakthrough innovations

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Infrastructure Management

Driven by scale economy pumping as many products through it as possible Full utilization of facilities & low cost operations Culture cost reduction & standardisation

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Already Happening ... Transformational outsourcing

J.P. Morgan - IBM will take over most of the bank's computing operations - $5bn over 7 years Ford spin off Visteon computing on demand deal with IBM - $2bn over 10 years Telecom Italia HP will provide IT management services worth 225 million euros, or about US$243 million over 5 years Other functions and entire business processes increasingly being outsourced too

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Organisational Design:
When is Virtual Virtuous?

Not all the smart people work for you market gives you access to them Internal capability vs. partners Short-term vs. long-term Autonomous vs. Systemic innovations Integrated companies vs. SMEs

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Web/Cluster Strategy

Webs clusters of companies consolidate around a particular technology Examples Intel/Microsoft; SAPs integrated solutions; Spread risk, increase flexibility, enhance innovation, reduce complexity Conditions - technological standard & increasing returns Shapers and adapters choose your role Grow market share vs. grow the pie Unbundling & outsourcing
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Internet Banking:
Cheap channel VS new business model?

Internet as a new cheap convenient distribution channel New entrants challenge the integrated banking model De-construction of the integrated banking processes Future scenarios?

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Deconstruction of Telecom Value Networks

Boundaries increasingly eroded Traditional business model may not longer be sustainable Deconstruction of integrated value chains The emergence of new value networks Competing at multiple fronts
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E-Government and E-Public Services

After ecommerce and e-business, the next Internet revolution will be e-government The Economist, 28 June 2000 USA - $600billion annual procurement spending EU euro720billion combined Big private sector companies typically achieve 20% saving by procuring online Slashing purchasing and fulfilment cycles and lower admin costs by up to 75% and halve stocks Potential to fundamentally change the way people relate to government!

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Modernizing government in the UK

Better government, better policy making, better responsiveness to what people want and better public services by reforming the machinery of government in the UK- especially through the use of ICTs information age government Electronic service delivery to join up service provision across departmental boundaries, break down silo based delivery networks and allow citizens to interact with government whenever they choose Joined up working between different parts of government and provide new efficient and convenient ways for citizens and businesses to communicate with government E-Government targets - making 100% of services available electronically by 2005 almost achieved

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Emerging issues in E-Government

All existing research shows in the UK joint up government providing joint up services is not happening yet? Public services - People as citizens or customers So far 85% all public sector IT projects are deemed to be failures (IBM worldwide head of government services) Purposes of E-Government stated and real

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Emerging issues in E-Government (2)

E-Government and the redefinition of power structure and the buy-in from key stakeholders

Strong resistance from those negatively affected The practical feasibility of achieving joint up government ? efficiency gains could be translated into reduced employment in certain sections of the public sector (as many as 1 in 5 - 800,000!) clash with other strategic objectives of the Government such as full employment an issue that will need to be carefully addressed given that the public sectors are the biggest employers in many regions in the UK
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Potential Conflicts between strategic objectives

What Next ?

Old established corporations will not disappear The new energetic dot.coms would not necessarily survive A new class of firms would emerge All organisations need to go through profound changes Prahalad, C K & Venkat Ramaswamy (2004) The Future of Competition. Harvard Business School Press, Boston

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What is E-Business?
How the Internet Transforms Organisations

Chapter 1. Introduction Chapter 2. What is E-Business and Does It Still Matter? Chapter 9. Emerging E-Business Models in the Network Economy

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Suggested Reading

Jelassi, Tawfik & Albrecht Enders (2005) Strategies for E-Business: Creating Value through Electronic and Mobile Commerce. Pearson Education Ltd, Harlow Farhoomand, Ali (2005) Manageing (e)Business Transformation: A global perspective. Palgrave Macmillan, Basingstoke Turban, Efraim, David King, Jae Lee and Dennis Viehland (2004) Electronic Commerce: A Managerial Perspective 2004. Pearson Prentice Hall, New Jersey Laudon, Kenneth C & Carol Guercio Traver (2003) E-Commerce: Business, technology and society. 2nd edition. Pearson Addison Wesley, Boston Chaffey, David (2002) E-Business and E-Commerce Management. Pearson Education Ltd, Harlow Timmers, Paul (2000) Electronic Commerce: Strategies and Models for Business-to-Business Trading, Wiley, Chichester Rappa, Michael (2004) Managing the Digital Enterprise. http://digitalenterprise.org/index.html Especially chapter 5 Business Models on the web. http://digitalenterprise.org/models/models.html 100s of new books on e-business and e-commerce
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Suggested reading 2

Cabinet Office (2000) e-governmnent-A strategic framework for public services in the Information Age. London: HMSO Li, F (2003) Implementing E-government Strategy in Scotland: Current Situation and Emerging Issues. Journal of E-Commerce in Organisations 1 (2) AprilJune 2003:44-65 Cornford, J (2004) Understanding the Process of Implementing Electronic Local Government in England http://www.campus.ncl.ac.uk/unbs/sbi/Project2.asp ?ProjectID=3

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Readings 3

Hagel III, John and Marc Singer (1999) Net Worth: Shaping Markets When Customers Make the Rules. Harvard Business School Press, Boston (Chapter9) Li, Feng (2002) Internet banking in the U.K.: From new distribution channel to new business models. The CAPCO Institute Journal of financial transformation. http://www.capco.com/pdf/j06art10.pdf Christensen, Clayton & Michael Raynor (2003) Innovators Solutions, Harvard Business School Press, Boston (also Christensens earlier book on Innovators Dilemma and latest book Seeing what next?) Zuboff, Shoshana & James Maxin (2004) The Support Economy. Allen Lane, London Prahalad, C K & Venkat Ramaswamy (2004) The Future of Competition. Harvard Business School Press, Boston Peters, Tom (2003) Re-Imagine! Dorling Kindersley, London

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