Internet Studies

New technologies keep changing business plans so our business plan should be clear, concise and well thought out plan in a dynamic changing market.

“Thus, many … were particularly concerned with leadership, people problems and team spirit.” - Many times your project success–traditional or e-business–depends on the leader and how he/she leads their team. It’s all basically human management or “psychological methods of people manipulation.”

In a traditional business, managed teams are limited by physical, geographic locations. This is different on the web. And we now enter the age of un-managed teams.

“If you can find a way to explain how you will control project costs using a bottom-up approach then it would be easy to convince not only entrepreneurs but big corporations also.”

“…the chasm between Industrial Age thinking and Information Age thinking…How will you control project costs using a bottom-up approach?…you needn’t worry about monitoring and controlling costs with the Information Age solution.”

I just understood that because your production costs are minimal with digital media.

A paradox: “You control the costs in an Information Age solution by not controlling the costs.”

And another:

“…Industrial Age projects have a reasonably predicable environment to work in. There may be constant change…intense competition but systems are designed to work within a known or estimated range of predictability where there are adequate tools, techniques and methods to cope with the variables….In the Information Age, chaotic and disruptive changes cannot be avoided; they are the norm rather than the exception.”

So, how can you have solid plans when the environment constantly changing and is dynamic?

And one last quote:

“In the fast-changing chaotic environment of the Internet, the controlled and regulated systems of the Industrial Age are like the Titanic.”

They will sink if they are not ready for the changes.

Resource:

Small, P., (2000), The Entrepreneurial Web: First, think like an e-business. Great Britain: Pearson Education. (pp 246-251)

The Internet allows quicker feedback on experiments with specific strategies in a very controllable market segments. With e-business, a very high market transparency exists. Everything happens quicker, with higher quality and bigger transparency.

Market Analysis Questions:

• Who are your competitors?
• What’s their value proposition?
• How fierce is their competition?
• Regions
• Languages
• Multimedia
• Partners
• Customer interaction or self-service
• Cost structure
• What market segment?
• How big are they?
• What’s their marketing budget?
• Strengths/Weaknesses
• How do they differ?
• Approach: “Me Too” or are we going to provide an improved value proposition?

Analysis of the various dimensions of the competition:

• Communication Speed—Check if the competitor is faster, more convenient or more complete
• Costs—direct sales can eliminate the middle man and his commission. If the competitor’s structure is leaner, copy his approach or improve it to make efficiency gains
• Freebies—before you offer anything for free, there should be a good idea of how to generate revenues
• Changing boundaries—if you can join them as allies instead of competing with them to expand the network and contribute to your propositions.

Positioning

• Specific and focused presentation
• Immediate confirmation and sometimes immediate delivery
• Quality offering and flexibility
• Specific added-value services
• Targeted loyalty programs
• Speed, convenience and price

Gaining Market Share by using Internet Tools

• Search engines registrations and techniques
• Mailing lists and offers
• Free Offerings
• Infotainment

Compiling competitive data:

Top-down approach: refer to publicly available information and pragmatically pick the available data that comes closest to your needs.
Bottom-up approach: focus on a small number of direct competitors and estimate their market share.

“Initially, a one- or two-year planning should be sufficient” and try to “get big fast”

Market Position:

Pioneer/Leader vs. Follower
Market Leader—you should anticipate how much it takes a competitor to build up a similar organisation…you either have to have the next improvement to your own offering ready or your margins will be under pressure.
Follower—you can build on the experiences of the first player…avoid some of his mistakes…with a clear focus on expenditures, costs and streamlined back office processes. And you need to be ready for price fights.

Points to consider:

• Languages
• Legal requirements
• Payment habits
• Permanent risk assessment
• Continuous business re-design for higher effectiveness and better convenience
• Be pro-active and drive your innovations based on your strengths

A price fight: streamline your operation…but if you are proactive in making your sales and production more and more effective, you have reserves you can use once a competitor challenges you.

…it doesn’t pay off to fight competition everywhere.

Marketing Mix

• Differentiate yourself from the competition—have few solid selling points
• Decide whether a quality leader or a price leader
• Test your story with some prospects
• Pilot a small test market
• Ask your customers

Maintain Awareness

• Encourage risk identification
• Implement loyalty—“Gold Club Members Only”—allow only your good customers to access some specific added value information
• Perform regular assessment of the competitors

Resource:

Morath, P. (2000). Chapter 5 “Know your competitor” in Success @ e-business: profitable internet business and commerce. London: McGraw-Hill. (pp 79-96)

Questions to ask:

• Customer service and future needs - does it meet customer’s needs for today and tomorrow
• Value proposition - what capabilities needed to create rich experiences?
• Resources - internal or outsource?
• Organisation structure
• Function or process oriented?
• Selling method - sales force, reseller or direct sales?
• Distribution channels
• How do we go once we decided?

Roadmap Steps

1. Self Diagnosis
   • New ways to do business?
   • Be aware of changing customer expectation
   • Challenge industry assumptions to create innovative product
   • Is the plan flexible and adaptive enough under current market conditions?
   • Can we get low operating costs while making complex applications?
2. Reversing the Value Chain—by understanding customer needs and making them a priority. Decide what they need and then make it happen. “In an outside-in approach, the strategy revolves around the customer.”
3. Choosing a Narrow Focus—choose excellence among the following:
   • Service—to give superior value to a small niche market and making a concerted effort to serve them well. Trying to anticipate target customer’s needs.
     Strive for: Self-service, relationship marketing and value
   • Operations—quick, error-free and cheap.
     Strive for: customised solutions, outsourcing and process effectiveness.
     Key principles:
     • Efficient use of resources
     • Speedy transactions
     • Sales intelligence - know what’s selling
     • Monitoring all processes
     • Meeting customer expectations
   • Continuous Innovation—push performance boundaries. Results in product leadership.
     Strive for: culture of innovation, market education and constantly delight the customer.
     Key principles:
     • Risk oriented
     • Acquisition of new products (example: Google and Yahoo!)
     • Educating the market/users
     • Reward experimentation (example: Google)

“…established firms can be early adopters and compete successfully with small, fast-moving innovators.”

Sounds like the writers are on the big firms’ side. I would rewrite it to:
Small and big companies can compete successfully by being early innovators.

The Internet and within it e-business = “…the biggest stories in modern times: the transformation of society.”

I liked that sentence:

“…in its heyday refused to believe consumers would prefer air transportation to railcars.”

Without getting into the debate of Microsoft vs. Apple, I believe it is Apple that tries to understand what the customers’ needs and then Microsoft copies Apple inventions.
But in regards to word and office applications, Microsoft have won the battle with other competitors are not even close to its market share and reach.
But anyway …

“The creation of an e-business is inextricably linked to the management of change.”

Resource:

Kalakota, R., Robinson, M., (1999), e-Business, Roadmap for Success, Addison-Wesley

“…Amazon’s string of losses (which touched $1.4 billion in 2000) only turned to profits in 2003.”

Another article that mentioned amazon as a business that loses or profits example.

“All successful online sites have had to reinvent themselves continually,…”

Does that mean the business model life expectancy will be short? Yes. We have to keep change, evolve, adapt to new conditions.

“…not the sort of strategic planning that traditional boards like to hear.”

“Two features of this new business environment have been surprisingly helpful in creating value: the sheer variety of products and services that can be offered online; and the extent to which online communities help each other for free.”

Friends Reunited charges for a fee – not in Israel. Israel’s equivalent is hevre.co.il (means buddies), which is offered for free. I looked at Friends Reunited site and I couldn’t see any fee request. ???

“What might drive the next round of e-commerce business models?…mobile access to the Internet and RFID tags, which enable the non-stop monitoring of the whereabouts of goods.”

I completely agree with the first one, know nothing about the second one. A quick search on Google came up with: Radio-frequency identification. An RFID tag is an object that can be attached to or incorporated into a product, animal, or person for the purpose of identification using radio waves. There are three types of RFID: passive, semi-active and active. An interesting recent use for them is in passports – just like the new e-passport offered by Australia. RFID can also be used as a replacement for barcodes or ID badges, or are being used for building access control, airline baggage tracking, apparel item tracking and microchip implants and not only in animals. I can’t believe so many kinds of RFID have infiltrated our lives without being aware of the fact that the technology is the same.

Resources:

Business: Happy e-birthdays; Internet Businesses
The Economist. London. Jul 233, 2005. Vol.376, Iss. 8436; pg. 62

Wikipedia, Radio-frequency identification

What is e-commerce?

A working definition of e-commerce would describe it as the conducting of business activities using the Internet platform and in particular the Web.

Two types of e-commerce

B2B and B2C

The Mercer Framework

Four factors that determine a technology’s acceptance: affordability, convenience, stable platform and platform availability. Each of these dimensions can be plotted against a four-dimensional system with the zero rating as “poor” and one as “excellent.” The bigger the perimeter, closer to the outer limits of the diamond, the more likely the technology will succeed in the marketplace.

Demographic (social) and technological drivers:

Proportion of college-educated people, percent of computers in households…
1. Increasing quality at a decreasing price
2. Computers become ubiquitous
3. High bandwidth connection
4. Compression technologies

Activities in B2C e-commerce:

Promotion - Ordering - Delivery - After-Sales Service
Limitations of the web:
1. High bandwidth - small segments of advertising
2. The web surfer is still a mouse click away
3. Advertisements effectiveness evaluation is not established for the web
Business should focus on developing a relationship with the consumer via interactivity (or available activities on the web).
Advantages of the web:
1. Interactive
2. Instantaneous
3. More client-focused - the web experience can be tailored to each user. It can be converted to a micromarketing tool. This is often done by bribing the user to part with personal information…in exchange for free goodies.
After-sales support: electronic support has been found to be a good complement to telephone-based support
Establishing e-community
The use of web-based arrangements to allow customers to support each other is not only good public relations move, but it also takes a considerable load off the company’s support staff. By providing users and developers with information and contacts, it builds loyalty to its brand name and promotes collaboration between its customers.
Establishing a popular e-community involves several formidable tasks. The challenge is to develop a meaningful community based of relationships that engender not only personal involvement but also loyalty to the hosting company and its products. Done successfully, the benefit to the company of a virtual community of users is several times the costs of hosting a web site.
Interactions:
• One-to-one - example dating sites
• One-to-many - task driven environment when users log onto to receive information from the host
• Many-to-many - discussion boards

Creating Business Value

Three types or dimensions of business values:
• Operational excellence - low costs, low overhead, quick response, streamlined processes
• Customer intimacy - establishing lifelong relationships with customers and meeting their individual needs
• Product and service leadership - continuous innovation in product and service lines and investment in research and development

B2C Models

In short, it tells the what and how of business.
Retail merchants vs. portals
Pure-play vs. brick-and-mortar businesses

Few pure-play companies have survived to this point. Their business models did not prove viable. The strategies of “getting customers at any cost” did not work. The expenses required to establish a brand name proved too high and there was no commensurate revenue stream because of the excessive number of players in any market segment.

Business models for primarily brick-and-mortar companies expanding to the web can include several goals:
1. Establish new channels - disintermediation
2. Reinforce existing promotion efforts
3. Provide an alternate channel for ordering
4. Assist in customer support

B2B e-commerce

…the potential of the Internet to dramatically reduce costs across the supply chain. It is allowing them to reshape relationships with suppliers by integrating production and shipments.

Business and Technology Drivers

1. Competition - greater choice
2. Reduce prices vs. superior service - by eliminating a step in the supply chain you eliminate the additional markup associated with it.

A typical value chain: supplier - manufacturer - wholesaler - retailer - consumer
Advances in communication and processing technologies are enabling reconfiguration of value chain.

E-Business

IBM popularized the term e-business. E-business encompasses all the activities of a company that make e-commerce possible. IBM defines e-business as the “use of Internet technologies to improve and transform key business processes.” Basically, e-commerce activities are a subset of e-business activities.

Information technology Platform for E-Business

The Internet provides a new technological platform. It is more productive than a telephone, more interactive than a television, and more current than a newspaper. Businesses are still working out new business models that this platform makes profitable…Envisaging the potential of a new platform requires a deep understanding of the technological platform, its capabilities, and its limits.

Resource

Chaudhury A., Kuiwboer J., (2002) E-Business and e-Commerce Infrastructure: Technologies Supporting the E-Business Initiative, Boston, McGraw-Hill Irwin p.3-36

Internet company that doesn’t have a foot planted firmly in the real world—with experienced management teams, a physical presence, efficient distribution systems, and ability to make a profit—is domed to fail.

Now customers can bid on excess and overstock merchandise from its [JCPenny] stores and catalogue operations.

The species that continue to evolve and adapt to consumer-driven, technology-fortified forms will most likely survive in the future. That’s why we like to think of this era in business history as another evolutionary stage of commerce rather than a radical, revolutionary one.

Contrary to what financial types may believe, ultimately it is customers who create shareholder value, not financial analysts.

So what exactly is wrong with e-commerce today? For one thing, there is far too much emphasis placed on the “e” or technology component of the equation and not nearly enough on the “commerce” side of the equation.

…it is easy to see the potential for an alliance with Mail Boxes, Etc., with its three thousand plus stores… [or Kinko’s for Amazon or AOL].

Electricity and phones affected a company’s ability to serve its customers, not its need to do so. The need existed earlier. The technologies did not change why people buy products and services; they only changed the method of meeting those needs…

…new technologies rarely change the mission or values of the organization; they just offer new ways to carry out the strategies designed to fulfil company goals.

The concepts of customer service and profitability are constants in the game of commerce. As online pioneer Levi’s discovered, if selling your products online decreases customer satisfaction and profitability, don’t sell online.

…the Internet, though full of possibilities, is nothing more than a marketing tool—a new delivery system of ideas, information and relationships.

…strategy …that is technology-driven and customer-focused—one in which the customer shares center stage with the technology.

At the heart of any successful technology-based strategy is the motivation behind its development its development and implementation. … The best strategies are still those grounded in the principles of human behaviour…

Technology determines what can be offered; consumers determine what will be accepted.

…regardless of industry, understanding the Consumer Decision Process (CDP) model … in vital in evaluating the winner and looser applications in e-commerce.

…the Internet has as much capacity for increasing inequality as decreasing it.

The Internet and websites are not “e-commerce”; they are enablers of e-commerce.

For most firms, product categories, and consumer segments, the Internet is more important as a marketing tool and brand builder than as a sales channel. Customers will search for and evaluate products online more than they will purchase online.

It is more important for winning organizations to master the “commerce” rather than the “e” of e-commerce.

In the long run, the answer will depend on individual firms’ abilities to wed their “e” and “commerce” strategies and create a profitable union.

Resource
Blackwell, R.D. and Stephen, K. (2001), Customers rule: why e-commerce honeymoon is over and where winning businesses go from here, Chapter 1 The E-volution of Commerce. New York, Crown Business.