Electif 621

E-Business and m-Business

Antoine Harfouche

Session 1

Pillars of the e-Business and m-Business models

Agenda• New Business models• Impact on the management infrastructure- Crowdsourcing- Crowdfunding- Collaboration with suppliers- Collaboration with competitors• Impact on the relation with competitors• Impact on the customer relation and on the cost

structure- Customization- Pricing

Business Model

A Business Model

• A business model can best be described through nine basic building blocks that show the logic of how a company intends to make money.

• The nine blocks of the following model cover the four main areas of a business:

1. Customers 2. Offer 3. Infrastructure4. Financial viability

• The business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.

Source: Business Model Generation, Osterwalder and Pigneur 2010

Pillars of Business Model

The impact of e&m-business on the Pillars of the Business Model

Impact on the management infrastructure

Key ResourcesThe most important assets required to deliver our value proposition, distribution channel, and customer relationships

Physical

Intellectual

Human

Financial

Production

Platform

Key Activities [Capabilities]The most important activities a company must do, in order to deliver its value proposition, and makes its business model work.Marketing

Engineering

Managing

Selling

Logistics

Problem solving

Managing

Key Partners

Partnerships can be motivated by needs to acquire knowledge, licenses, or access to customers.

Example: Mobile phone companies that license Android, or insurance companies that rely on independent brokers.

Who are key partners in terms of suppliers and intermediaries between the firm and its end-users? Which key resources are we acquiring from partners? Which key activities do partners perform?Motivations for Partnerships

Optimization and economy

Reduction of risk and uncertainty

Acquisition of particular resources

and activities

Crowdsourcing

• The recruitment and coordination of piece-meal work across the internet to achieve a goal.

1. Speeds up content creation2. Gets clients and collaborators involved3. Gets target audience involved4. Offers diversity and creative choice5. Drives development of scalable processes

(Bratvold, 2012)

Wisdom of the CrowdsU

tility

# of Contributors

Expert$$$$

Masses$

10 100 1000 10,000+

Equivalent, or greater, utility under the Curve

Crowdfunding

Crowdfunding• Crowdfunding is an approach to raising the capital required for a new

project or enterprise by appealing to large numbers of ordinary people for small donations

• Social Media• Crowdfunding examples

• Kiva.org - $325m funding raised, >777,000 lenders, ~800,000 entrepreneurs

• Kickstarter.com – >24,000 projects funded, > $250m pledged to-date, 2m people have pledged

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Examples of the Different models

Different sectors

Business

Community and voluntary sector

Public services’

Education and research

Arts

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The search for collaborative advantage

The impact of e&m-business on the Pillars of the Business Model

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The search for collaborative advantage

• Seek out opportunities for horizontal as well as vertical collaboration

• Co-operate to grow the cake, compete on how to slice it

• Leveraging capabilities and knowledge through collaboration

• Share assets in the supply chain where appropriate

Collaborative Relationships

A company

Customers •Risk-sharing contracts•Collaborative transactions

Competitors•Trade associations•R&D Consortia•Standard-setting bodies•Industry lobbying•co-epetition

Suppliers •Risk-sharing contracts•Collaborative transactions

Horizontal partners•Benchmarking•Collaborative logistics•Joint MRO procurement

Collaboration with suppliers

• Electronic data interchange (EDI) based collaboration– Buyer-side solution– Hub-and-spoke system– Serve vertical markets

• Internet based collaboration– Net marketplaces– Private industrial networks

Collaborative Supply Chain

Example of EDI

Collaboration in the Supply Chain Internet based collaboration

Topics

1. Net marketplaces: • E-distributors• E-procurement• Exchanges• Industry consortia

2. Private industrial networks:

Two Main Types of Internet-Based collaboration

1. Net marketplaces: – Bring together potentially thousands of sellers and buyers in single

digital marketplace operated over Internet– Transaction-based– Support many-to-many as well as one-to-many relationships

2. Private industrial networks: – Bring together small number of strategic business partner firms that

collaborate to develop highly efficient supply chains– Relationship-based– Support many-to-one and many-to-few relationships– Largest form of B2B e-commerce

Pure Types of Net Marketplaces

E-distributors

• Most common type of Net marketplace• Electronic catalogs representing products of

thousands of direct manufacturers• Typically, independently owned intermediaries• Offer industrial customers single source to purchase

indirect goods on spot basis• Typically, horizontal• Usually, fixed price—discounts for large customers• Example: W.W. Grainger

E-distributors

E-procurement Net Marketplaces

• Independently owned intermediaries• Connect hundreds of suppliers of indirect goods• Firms pay fees to join market• Long-term contractual purchasing of indirect goods • Revenues from transaction fees, licensing consultation

services and software, network fees• Offer value chain management (VCM) services• Many-to-many market• Example: Ariba

E-procurement Net Marketplaces

Exchanges

• Independently owned online marketplaces • Connect hundreds to thousands of suppliers and

buyers in dynamic, real-time environment• Vertical markets, spot purchasing in single industry• Charge commission fees on transaction• Variety of pricing models• Tend to be buyer-biased• Suppliers disadvantaged by competition• Many have failed due to low liquidity

Exchanges

Industry Consortia

• Industry-owned vertical markets • Purchase of direct inputs from set of invited

participants• Emphasize long-term contractual purchasing, stable

relationships, creation of data standards• Ultimate objective:

Unification of supply chains within entire industries through common network and computing platform

• Revenue from transaction and subscription fees Many different pricing mechanisms

• Can force suppliers to use consortia’s networks

Industry Consortia

The Long-Term Dynamics of Net Marketplaces

• Pure Net marketplaces moving from “electronic marketplace” vision toward more central role in changing procurement process

• Consortia and exchanges beginning to work together in selected markets

• E-distributors joining large e-procurement systems and industry consortia as suppliers

• Movement from simple transactions for spot purchasing to longer-term contractual relationships involving both direct and indirect goods

Net Marketplace Trends

Private Industrial Networks

• Private trading exchanges (PTXs)• Web-enabled networks for coordination of trans-

organizational business processes (collaborative commerce)– Direct descendant of EDI; closely tied to ERP systems– Manufacturing and support industries– Single, large manufacturing firm sponsors network

• Range in scope from single firm to entire industry• Example: Procter & Gamble

P&G’s Private Industrial Network

Collaboration with competitors

Co-opetition: a definition

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A business strategy based on a combination of cooperation and competition, derived from an understanding that business competitors can benefit when they work together.

A “non zero sum” scenario, in which the sum of what is gained by all players is greater than the combined sum of what the players entered the scenario with.

Source: D. Meyer, 15th March 2011 and istockphoto

Co-opetition

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Source: D. Meyer, 15th March 2011

Cooperative CompetitionCo-opetition occurs when companies work together in parts of their business where they do not believe they have competitive advantage and where they believe they can share common costs.

Basic premise:-Co-opetition strategy and value creation leverage the alliance-Partner with other shippers (even competitors) to control logistics and transport costs-Load consolidation

Co-opetition

Co-opetition Partners

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Source: D. Meyer, 15th March 2011

• Producers, Customers, Consumers who drive producer demand and determine product eco-footprint

• Shippers and Terminal Operators who generate the freight flows and provide the critical infrastructure for product flow

• Logistic Service Partners (3PLs) who can design and implement optimised solutions and move the freight

• Fourth Party Providers who can facilitate partnerships, referee blockages, find common ground

• Governments who can assure that legal and regulatory arrangements are in place to support seamless collaboration

Co-opetition = Value Creation

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Source: D. Meyer, 15th March 2011, and reubenmiller.typepad.com

• Co-opetition does not simply emerge from coupling competition and cooperation issues

• Co-opetition implies that cooperation and competition merge together to form a new kind of strategic interdependence between firms, giving rise to a co-opetitive system of reciprocal value creation.

The impact of SIS on the Pillars of the Business Model

ISI impact on the customer relation and on the cost structure

• Customization• Pitfalls of Customization• SIS can Blend the BOS Framework with the BMC

Topics

Customer Segments & targets

For whom are we creating value?Who are the most important customers?

Mass Market Niche Market Segmented Diversified Multi-sided platform

Channels of communication and Information strategy

Value Propositions are delivered to customers through communication, distribution and sales channels.

How a company communicates with and reaches its customer segments to deliver a value proposition.

Which Channels do our Customer Segments want to be reached? How are we reaching them now? Which are working best (or not working)?

Enabling customers to evaluate a firm’s products Allowing customers to purchase Providing post-purchase customer support

Channels

Customer Relationships, Trust and Loyalty

The types of relationships the firm establishes with its customers. What types of relationships does our customer expect and how much does this cost? How does this support the value proposition?

Personal Assistance Dedicated Personal Assistance Self-service

Automated ServicesCommunitiesCo-Creation

Customization

Augmented Product

Customization

• Pure standardization• Segmented standardization• Customized

standardization• Tailored customization• Pure customization

Customized standardization

Kickers :

Tailored customization

Longchamp bag :

Pure customization

Modularity

Pitfalls of Customization

Pitfalls of Customization

• Although some consumers express an interest in customized products, other large groups view them as costly distractions.

• Some companies believe they can increase profits margins and customer loyalty by customizing products, but they must be careful to monitor the market to figure out which customers do and which do not.

SoC406

Pitfalls of Customization• Customization can be off-putting and an inefficient use of

scarce resources.– The British Broadcasting Corporation discontinued the

option to customize the BBC Web site because users do not have the time to customize it and found it more annoying than a generic Web site is. It also caused BBC technical complications, copyright and legal issues, and advertisement integration problems.

– Some consumers believe customization has a negative impact on the environment and prefer conservation

– An increasing number of consumers participate in community rentals and leases of products and sharing, in order to avoid the personal monetary cost and time consumption in the ownership of some personal items

Conclusion

• Technology will change how people create, innovate and compete.

• Globalization will bring new competitors and new partners.• Competitors will try every approach, explore every opportunity,

exploit every weakness.• No single approach to innovation will guarantee success.• Each change reminds us that the future is uncertain; Scan

provides early alerts to potential change.• Opportunity Discovery, Scenarios, and Roadmapping help each

competitive challenge to have an optimum approach and a strategic fit.

impact the pricing

Revenue StreamsFor what value are our customers really willing to pay?

Asset sale [product sale] Usage fee Subscription fee Lending / Renting / Leasing Licensing Brokerage fees Advertising Service

Pricing Mechanism

Fixed Menu Pricing Predefined prices are based on static variables

Dynamic Pricing Prices change based on market conditions

List Price

Price set by product, service, or other Value Propositions

Negotiation Price determined by bargaining skills and leverage

Product Feature

Price depends on the number and quality of Value Proposition features

Yield Management

Price depends on inventory and time of purchase

Customer Segment

Price depends on the type and characteristic of a Customer Segment Real-time-market

Price is determined dynamically based on supply and demand

Volume

dependent

Price as a function of quantity purchased Auctions Price determined by outcome of competitive bidding

Revenue Streams

Cost Structure

Some business models, are more cost-driven than others. “No frills” airlines, for instance, have built business models entirely around Low Cost Structures.

What are the most important costs inherent in delivering the value proposition? Which key resources are most expensive? Which key activities are most expensive?Is our business model more Cost

driven or Value driven?

Types of costs Fixed Variable Economies of scale Economies of scope

Revenue Management• Set of techniques use to manage

– Constrained, perishable inventory (time)• When customer willingness to pay increases

towards departure• Applications:

– Airlines, Hotels, Car Rentals, News Vendors• Main techniques: Open and close certain rate

categories (rate fences) based on historical probabilities and forecasts of future demand

P

Q

P

Q

Fixed Prices

Consumers Surplus

Dead Weight Loss MC

P

Q

P2

Q2

P3

P1

Q1 Q3

Get a little more revenue

P

Q

Maximize the Revenue !Perfect (1st degree) Price Disc.

Case study

OPENING CASE

QUESTIONS

1. What is Amazon’s e-business model?

2. How can Amazon use m-commerce to influence its business?

3. What are some of the business challenges facing Amazon?

OPENING CASE QUESTIONSAmazon

• http://www.youtube.com/watch?v=YlgkfOr_GLY

• http://www.youtube.com/watch?v=zknLfU7GJIw