Electronic Commerce Strategy An Introduction Richard T. Watson The University of Georgia...

Electronic Commerce Strategy

An IntroductionRichard T. Watson

The University of Georgiarwatson@terry.uga.edu

Capitalism, Socialism, and DemocracyJoseph Schumpeter

“The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumer goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalism creates.”

The new …

Consumer goodsInformation-based services

Methods of production and distributionThe Internet

MarketsGlobal information and services

OrganizationsObject-oriented firms

The object-oriented firm

physical flow

electronic flow

Bookwholesaler

inventoryorder

book

Parcel service deliverytracking

servicerequest

Customereditorial

sales

book

editorial

sale

Affinity groupsales

sale

check

credit card statement

creditauthorization

order

Bankpayment

Authormarketing

Amazon.comsales

marketingIS development

editorial

credit cardaccount details

The new organizationBryne, J. A. Business Week August 28, 2000, 84-96

Characteristic 20th Century 21st CenturyOrganization Pyramid The networkFocus Internal ExternalStyle Structured FlexibleSource of strength Stability ChangeResources Physical assets Information

The new organization

Characteristic 20th Century 21st CenturyOperations Vertical integration Virtual integrationProducts Mass production Mass customizationReach Domestic GlobalFinancials Quarterly Real-timeInventories Months HoursStrategy Top-down Middle-out

The new organization

Characteristic 20th Century 21st CenturyLeadership Dogmatic InspirationalWorkers Employees Employees &

free agentsJ ob expectations Security Personal growthMotivation To compete To buildImprovements Incremental RevolutionaryQuality Affordable best No compromise

Creative destruction

Private enterprise is continuallydestroying the oldcreating the new

The drivers of the revolution

Moore's LawThe power of computing doubles, while the

cost halves, roughly every eighteen months

Gilder's LawThe total bandwidth of the communication

system triples every 12 months

Metcalfe's LawThe utility of a network is exponential to the

number of nodes in the network

The revolutions

Agricultural

Industrial

Information

Food

Goods

Services

Continuing the revolution

Household network

Household server

Informationserviceprovider

National InformationInfrastructure connection

The principles of the network economy

MatterSpaceTimePeopleGrowth

ValueEfficiencyMarketsTransactions Impulse

Matter

Processing bits is more profitable than processing atoms

People and knowledge are the strategic resource

High/unrealistic capitalization of bits businesses

ProblemHow do you manage knowledge?

Space

The overthrow of the tyranny of distance In the last three years, Amazon has sold books to 1.5

million people in 160 countries

Far fewer local monopolies US Telecos are competing with Internet telephony

startups in Israel

Nano markets emergeProblem

What happens to marketing?

Time

Fast response is criticalBuild to order is the coming expectationConstant changeUbiquitous connectivityHomogenization of timeBusiness continuity is criticalProblem

When does work stop?

People

People are the only resourceCritical skills shortageThe new millionaires

The options handcuffHalf-life of knowledge is decreasing Problem

How do we solve the the digital divide?

Growth

The land grabBrand buildingNetwork effectsViral marketing

Hotmail was able to grow a subscriber base of 10 million within two years

ProblemHow do you make each new customer add

value to existing customers?

Value

Free goods create value networksNetscape NavigatorRealPlayer

Value comes from plentifulness not scarcity

Network effectsProblem

What do your customers value?

Efficiency

Low friction economyEDIInternet and XML

DisintermediationInfomediaries

TravelocityMove to auctionsProblem

Where is your revenue management system?

Markets

Markets move towards perfectionSearch engines and shopping agents

Customers move towards perfect choiceBuild to order

Consumers empoweredAuto-By-TelEdmunds.com

ProblemWhat are the limits to choice?

Transactions

Information adds value to products and servicesInformation is serviceInformation is a significant part of the productStaples creates customized supply catalogs that

contain only those items and prices negotiated in contracts and retains lists of previously ordered items

Information is easier to customizeMass customizationProblem

How do you use information to differentiate?

Impulse

Massive choiceOversupplySophisticated and wealthy

consumersBuying is effortlessDay tradingProblem

How to market for impulse flow?

The power of the new economy

15 billion invoices are mailed in the US each year

$US13.5 billion a year savings

Postal Electronic1.25 .35

What’s next?

U-commerceUbiquitousUniversalUniqueUnison

Metamorphosis

Peter Drucker Innovation begins with

abandonment It’s not what you start It’s what you stop that counts

What can you creatively destroy to ensure success in the new economy?