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SuccessfulE-Business
Prepared for AWC
September 19, 2000
James Wong, President & Founder
www.focitech.com
Agenda
A Little Background Answer 5 questions:
Why E-Business? How does E-business Fit with Current
Business? What are the economics of E-Business? What are the risks? How do you prepare for E-business
Market Challenges Why Foci (Of Course) Question & Answer
Backgrounder
Met at Arthur Andersen Largest bond scandal investigation Pioneered real-time online extranet Every business needs this in 1996
Yeah right Mom’s banana bread
I. Why E-Business
Currently less than 1% of US Economic Activity Implications: Disrupt the Basic Rules of
Competition Manufacturing and Supply Chain Companies
with E-Business ½ the overhead of median competitors 40% to 60% lower working capital per unit of
sales 5% - 10% lower costs of goods & services Corresponding levels of productivity & efficiency
E-business a waste of money. Not!!! IBM and Cisco savings of $500 to $750
Million a year. Dell Computer, Intel & dozen other
leaders are selling well over $1 billion a year.
Enterprises that have implemented e-business solutions saw their client base increase by 8%
Financial Services & Securities Trading Online trading a danger to US economic
health Within a year, it became an online
player 1/3 of all trades now occur online 70% of all Charles Schwab trade online World wide explosion of online trading
Car Dealer Market
Relatively small numbers of cars directly bought online
> ½ buyers research online before hand Dealers facing 10% to 15% price cuts as
a result
II. How does e-business fit with current business? “Must do” list for companies
1. Perfect you long-term customer relationships
2. Harmonize all your channels on behalf of the customer
3. Perfect your logistics
4. Position yourself to be a power brand
5. Seek to become a value-adding intermediary Why is it important?
Customers, channels, logistics, brands and differentiation
1. Customer Relationships
Death of transaction economy Cutting price for online and offline
enterprises by 10% to 15% Key to success is repeat business
Amazon 70% repeat business Spends 20% on customer acquisition
Established business is at an advantage ~ $200 for services ~ $30 to $50 for products
2. Channel Harmony
Original premise: “channel conflict” Channels must complement and mesh
with existing channels Now it’s “clicks and bricks” or “click and
mortar” instead of “clicks vs. bricks and mortar”
Compaq having problems trying to bypass distributors
3. Logistics
Critical to the competitive game Amazon spending millions on
infrastructure Dell and WalMart won through logistics
4. Branding
Erosion of product brand equity to relationship brand equity Amazon, AOL, Yahoo!
Established brands have advantage Walmart, Dell, Toys R Us
Create a brand on the Internet – how much?
Took AOL $??? Million to create it’s brand
5. Value-Adding Intermediaries IT traditionally been disintermidiation
I.e. Touch tone phone and cash machine B2B supply chain mgmt hubs
Ariba handled $70 B supply chain transaction within 6 weeks, $120 B in a year
Well defined vertical hubs reducing supply chain costs by 20% Chemdex charges 5% to 10% vs 40% to 80%
commissions
III. What are the New Economics of E-business Today’s accounting rules are distorting
real economics of e-business Marketing / Customer acquisition costs
should be depreciated. It’s really R&D. Repeat business generate much higher
margins. Yahoo!, eBay & Amazon generate 70%
to 85% margins on digital services
IV. What are the Risks?
Business model risks Many don’t appear to have a real business
model just Internet “strategy” and web-site plan Industry boundary risks
Autobytel – locate, negotiate, arrange financing and insurance, and deliver car
Is it a car dealer? A banker? A shipper? Economic risks
Many costs – cust. acq, technology, mktg Organizational risks
How to think like an ebusiness? Speed? Talent?
V. How to prepare for E-Business Spinoff
Mix results thus far for BN.com, P&G (reflect.com)
Spinoff is appropriate if: Unrelated business Requires different value discipline Address new and different market Will deliver a different product range
V. How to prepare for E-Business (continue) Build an e-business culture within the
enterprise – best results mandated by upper mgmt led by marketing department Schwab, Wells Fargo, Dell & Cisco
successful Speed – must move quickly, tolerance
for risks If e-business team cannot than must
move aside
B2B Versus B2C
B2C Consumer focus Substitute for retail Low value added
“Wham bam give me your credit card man” B2B
Business-to-business focus Extending existing relationships with customers,
employees, suppliers and partners About increasing revenue, and reducing costs
Small vs Mid vs EnterpriseEnterprise 1-to-1
Complex
Integration
Custom Built
BroadVision, Vignette, Ariba, CommerceOneMarchFirst
Mid Market 1-to-1
Complex
Integration
Foci, Allaire, Xuma, Webridge
Small 1-to-Many
Simple
No Integration
One Size Fits All
YahooStore, iCAT, zShops
Enterprise Market Challenge
Complex products Complex pricing Legacy systems integration 1-to-1 relationships Unified commerce interface
Foci Well Positioned as E-business Solutions Provider Focus on mid market businesses In business since 1996 Proven methodology Established client base Validated solutions
Summary
E-business is about extending business on line Empowering your customers
E-business is about increasing revenue & reducing costs
It’s about survival!
Question & Answer
Contact Information
[email protected] To learn more visit www.focitech.com Address: 1808 Bellevue Avenue, Suite
200, Seattle, WA 98122 Phone: 206.320.9868 Fax: 206.320.9866