Electronic Commerce: Business Models, Strategies, and Implementation

in the Network Economy

Minder Chen, Ph.D.Professor of Management Information Systems

Martin V. Smith School of Business and EconomicsCSU Channel Islands

E-Mail: minder.chen@csuci.eduCourse Web site: http://faculty.csuci.edu/minder.chen/mis310/

EC - 2 © Minder Chen, 1996-2014

Electronic Commerce: Introduction

E-Business

E-Commerce

Internet Commerce

Commerce

•Before 1995, the term “E-Commerce” meant Electronic Data Interchange (EDI).

•The Internet was commercialized in 1995

TravelocityMicrosoft ExpediaPriceline.com

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Priceline.com•P

riceline (PCLN) was recognized in 2010 for being the single best-performing stock in the S&P 500 over the past five years.

•Name your price Reverse auction, customer-driven e-commerce

•Products/services sold are all perishable goods/services

•Competitors: Orbitz.com, Kayak.com, Hotwire.com, Expedia, Travelocity, etc.

•Dis-intermediation direct sales from producers to consumers, i.e., Cutting out the middleman, e.g., Apple and Dell

•Re-intermediation Reintroducing the new middleman, e.g., Amazon, eBay

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Market Capitalization

Market Cap (4/16/99)

$11.6 Billion

$ 4.3 Billion

$ 2.5 Billion

$ 2.5 Billion

Who Can Afford Not to Play in the Internet EC Space?

Cap: 9.771B Share: $57 7/16

As 6/28/2011

Symbol Price Chg Chg % Market Cap

PCLN 495.40 8.30 1.70% 23.94B

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Priceline Tops $1,000 (Sept. 18, 2013)•B

etween April 1999 ~ Oct. 2000, a period when many dot-com companies failed, Priceline lost 97 percent of its market value.

•The dot-com bubble burst, numerically, on March 10, 2000, when the technology heavy NASDAQ Composite index, peaked at 5,048.62. The Nasdaq Composite lost 78% of its value as it fell from 5048.62 to 1114.11.  (March 10, 2000 to Oct. 9, 2002)

•Priceline’s gains have been fueled by its surging international business through two units, Amsterdam-based Booking.com (acquired 2005) and Bangkok-based Agoda.com (acquired 2007).

•To diversify its business, Priceline also acquired travel search-engine Kayak Software Corp. for $1.8 billion in a deal that closed in May 2013. Kayak lets travelers compare prices and make reservations for hotels, flights, cars and vacations.Priceline Tops $1,000 (Sept. 18, 2013) on

Growing Demand for Web Bookings [Ref]

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The Rise and Fall and Rise of Priceline.com•B

y October 9, 2002, in the aftermath of 9/11 (2001), Priceline's stock fell from nearly $1,000 to only $6.60 a share, while its market value shrunk from $24.1 billion to $0.25 billion. 

Source: The rise and fall and rise of Priceline.com

“irrational exuberance”

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The Low-Friction Market and E-Commerce Opportunities

• "[The Internet] will carry us into a new world of low frictionlow friction, low-overhead capitalism, in which market information will be plentiful and transaction costs low."

-- Bill Gates, The Road Ahead

• "Where there is a frictionfriction, there is opportunity!"

-- Net Ready.

• “Nearly 100% of Innovation – from business to politics – is inspired not by market analysis, but by people who are supremely pissed off by the way things are."  - Tom Peters

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EC Business Opportunities

New business models and ideas are driving EC initiatives.

Internet technologies are enablers.

• Innovative Ideas, Business models, and Business strategies

• Funding

• Business and technical talents

• Technological enablers

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The Cycle of Electronic Commerce

Customers Online Ads Online Orders

Standard Orders

Access

SearchesSurfing

Distribution

Online: soft goodsDelivery: hard goods

Electronic Customer Support

Follow-on Sales

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EC and Business Processes Seller Buyer

Co

rpo

rate

Dat

abas

es

Provide Info

Get customer

Provide info

Fulfill order

Support

Identify need

Find source

Evaluate offerings

Purchase

Operate, Maintain, Repair

Phone, fax, e-mail

Web site

Newsgroups

Net communities

Web site

EDI

Web site, phone, fax, e-mail, e-mailing list

Credit cards, e-cashP.O.s

Demos, reviews

Send info

Data sheets, catalogs, demos

Request info

Web surfing

Web searches, web ads

Deliver soft goods electronically

Selling Process Procurement Process

Customer Feedbacks/ReviewsCustomer Feedbacks/Reviews

Dis/Re-intermediation

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Study ZipRealty.com

•Findability: Identify needs Search Criteria

•Result list: Sorting attributes, default sorting attribute

•Show partial information in the result list.

•Questions:

– What will be the role of real estate agent in light of emerging real estate web sites such as ZipRealty.Com?

– How does ZipRealty make money?

– Where does ZipRealty get its data from? Example: http://www.ziprealty.com

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Changes in the Net Economy •B

usiness environment – Local / Physical Global /Virtual

•Business assets

– Tangible Intangible

•Business change

– Periodic Continuous

•Business production

– Mass Production Mass Customization Mass Personalization

• Customization is under direct user control: the user explicitly selects between certain options such as ticker symbols for the stocks you want to track.

• Personalization is driven by the computer which tries to serve up individualized pages to the user based on user's needs.

Source: http://www.useit.com/alertbox/981004.html

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•Mass customization and market making

Source: http://www.squidoo.com/zazzle101

Source: Zazzle Marketplace http://www.zazzle.com/sell/more/faq

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Mass Customization: http://www.zazzle.com/

•The unfulfilled need of a user again was the mother of invention: The two brothers, Bobby and Jeff Beaver, wanted to create a cool t-shirt to advertise a party at their fraternity (in order to "draw in plenty of nice girls"). They realized how difficult it was at that time to get high-quality custom t-shirts without having to order larger quantities at a promotions company or to rely on the low quality of heat-transfer at the local copy store.

•Unique digital custom printing technologies

•Zazzle is not a technology company – it is a “market maker ” - How to make a profit on Zazzle

•“Niching the niche” - a mass customization ecosystem

Source: http://mass-customization.blogs.com/mass_customization_open_i/sneaker/

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Network and Information Economy•I

nformation is costly to produce but cheap to reproduce. – Price information according to its value not its cost.

•Managing intellectual property.

– Maximize the value of your intellectual property, not the terms and conditions that maximize the protection.

•Information as an “experience good”

– Consumers must experience it to value it. How does Zappos.com (sells shoes etc.) manage to sell “experience goods”?

– Brand and trust building is critical.

•The economics of attention

– A wealth of information creates a poverty of attention.

Source: Information Rules

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Attention Economy (Eyeball, Stickness)•T

he attention economy is increasingly one where the consumer product costs nothing to reproduce and the supplier need to add valuable intangibles that cannot be reproduced easily. He identifies these intangibles as:

– Immediacy - priority access, immediate delivery– Personalization - tailored just for you– Interpretation - support and guidance– Authenticity - how can you be sure it is the real thing?– Accessibility - wherever, whenever (mobile devices)– Embodiment - books, live music– Patronage - "paying simply because it feels good",– FindabilityFindability - "When there are millions of books, millions of songs,

millions of films, millions of applications, millions of everything requesting our attention — and most of it free — being found is valuable."

•Source: http://edge.org/conversation/better-than-free

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PageRank, Traffic, and Ads

•“Attention economy” and “reputation economy” are too fuzzy to measure.

•But, because of Google (and other search engines), we can now convert from reputation (PageRank) to attention (traffic) to money (ads).

Adapted from: [PDF]why $o.oois the future of business  (free) Chris Anderson

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Popularity Adds Value in a NetworkV

alu

e to

Use

r

Number of Compatible User

Vicio

us cy

cle

Virtuous cycle

Networks• Real: LAN, Internet, Fax • Virtual: Virtual community, Chat

room, Instant messenger, Skype, FaceBook

Positive Network Externality

(Network Effects)

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Benefits to the Merchants (Sellers)

•Expanded marketing channels and global reach to increase sales of existing products to generate additional revenues

•Target marketing: Use the web to target their offers to a niche market

•"The store is always open!"

•Establish better relationships with customers.

•Low distribution cost of product/service information

•Increased speed to market

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Benefits to the Consumers•C

onvenience: no driving around and no long wait times at checkout counters

•Informative and engaging presentation

•Value presented upfront: Demo and free download (experience the experience goods)

•Easy flow and navigation

•Search capabilities

•Constant updates

http://www.extremetech.com/mobile/99033-virtual-stores-help-shoppers-save-real-time

Homeplus in Korea (Tesco)Homeplus in Korea (Tesco)

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Moving Your Business Online•C

ompanies are motivated by either fear or greed to move to their businesses to the net. To .com your company is becoming an imperative. Companies have to transform their current business models to an innovative business model.

•Be aware of internet tax law and (1998 Internet Tax Freedom Act & 2013 The Marketplace Fairness Act).

•Interstate/international commerce laws Your competitor is just

one-click away

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Showrooming at Retail Stores

Source: http://online.wsj.com/article/SB10001424052702304587704577334370670243032.html http://www.cnn.com/2012/06/17/opinion/greene-showrooming/index.html

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Technology-Fit: Customer and Product

Cu

sto

me

r N

ee

d fo

r P

rod

uct

Info

rma

tion

High

Low

Customer Demographics MatchPoor High

Earlier AdopterSecond Wave

Second WaveWeb Laggards

TideDenny's

AAFedExpMicrosoft

NikePepsi

Jenny CraigChrysler

Source: Forrester Research

Co

mp

as

sio

n a

bo

ut

the

pro

du

ct

(SM

M)

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Is EC Appropriate for You?

Industries who set up virtual storefronts

NetFlix: Atoms to Bits[ Video Nicholas Negroponte ]

Asset-Light Generation From Hand to Cloud & Back…Rise of the Sharing Economy[ See Internet Trends & eBook, airbnb.com ]

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Business Models Based on the Value Chain in the Market Place

Raw material producer

Manufacturer

Distributor

Retailer

Consumer

ExchangeExchange

Examples: • B2B: alibaba.com• B2C: Amazon.com

• C2B: Priceline.com• C2C: eBay.com,

craiglist.com

C2B

B2C

B2C C2CNew Middleman

• Independent market operators

• Consortia

Service Providers: • Logistics• Financial

Channel Conflict

Online Procurement

Buyer-side EC Model

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• No vendor loyally• No switching costs• Time-insensitive• Short-term• Casual• Many vendors• Products differentiated

on price, image

• Relationship-based• Very high switching costs• Extremely time-sensitive• Long-term• Mission-critical• Few partners• Partners differentiated on

reliability, flexibility

Business-to-ConsumerBusiness-to-Consumer Business-to-BusinessBusiness-to-Business

Business-to-Business vs. Business-to-Consumer

<

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Business Channel: Multi-Channel Presence

Buyer Seller

• Brick-and-mortar – Face-to-Face

• Mail order– Mail – Printed catalog

• Phone order – Telex– Phone– Fax

• Electronic commerce • EDI• Email• Web

Multi-channel plays will have extraordinary power if companies elegantly blend and synchronize those channels.

Pure Play

Cli

ck a

nd

Mo

rtar

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The B2C Business Models – Bricks, Clicks, Revolution and Evolution

Bricks Clicks

Bricks & Clicks

• Sat on the sidelines for the explosion • Evolved to online commerce• Online services are incremental• Not huge differentiators for clients• Source of convenience• Took advantage of lessons learned• Assets CHEAP from Click failures

• Mergers or sales of assets to Bricks• Folding bricks ventures into portfolio• Narrow focus of offerings

eBay, Amazon, Webvan, Wingspan Bank, Yahoo

Gap, Safeway, Wallmart

• Bricks organizations set up separate click organizations to give the required freedom to operate in the fast moving Click environment

or• Clicks organizations were created through VC capital

Wells Fargo, Safeway, Barnes and Noble

Virtual Store/Pure PlayerPhysical Store

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The Long Tail

http://en.wikipedia.org/wiki/Long_Tail

Source: Chris Anderson, “The Long Tail”, Wired, http://www.wired.com/wired/archive/12.10/tail.htmlReference: From Niches to Riches: The Anatomy of the Long Tail (lnk)

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Niche Gets Richer Online

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Recommendation System

Amazon

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Changing “Demand Curve”•T

he total volume of low popularity items exceeds the volume of high popularity items.

•Why? Search Cost, Carrying Cost, Niche

•Changing demand curve: Recommendation systems

Recommendation System•Amazon: Collaborative filtering•NetFlix: CineMatch

Joe Simpson, Touching the Void

Jon Krakauer wrote Into Thin Air

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Product Variety Comparison for Internet and Brick-and-Mortar Channels

Product Category Large Online Retailer

Typical LargeBrick-and-Mortar Store

Books 3,000,000 40,000 – 100,000

CDs 250,000 5,000 – 15,000

DVDs 18,000 500 – 1,500

Digital Cameras 213 36

Portable MP3 players

128 16

Flatbed Scanners 171 13

http://www.heinz.cmu.edu/~mds/smr.pdf

The unlimited “shelf space” of the Internet. Free:The Future of a Radical Price, Chris Anderson

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Long Tail: Pure Players vs. Physical Retailers

http://www.wired.com/wired/images.html?issue=12.10&topic=tail&img=1http://www.wired.com/wired/archive/12.10/tail_pr.html

Profit threshold

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The Real Cost of Music: Physical vs. Digital

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EC Strategies: 4 Cs

CommerceCommerce

ContentContentCommunityCommunity

CustomersCustomers

Case Study: The $250 Neiman Marcus Cookie Recipe Story

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Customers•O

bsess over your customers

•Remember that the Web is an infant

– What do you have to offer that the physical world cannot in order to attract customers?

•If you make one customer unhappy, he won't tell five friends -- he'll tell 5,000 on newsgroups, list servers, and so on.

– "Word of mouth" (WOM) factor gets amplified on the Net

•The shifts of balance of power away from business and toward customer.

-Jeff Bezos

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Amazon Story•S

pring 1994, Jeff Bezos observed that Internet usage was increasing by 2,300 percent a year.

•Choose books to start with because …. Bezos reviewed the top 20 mail order businesses methodically, and asked himself which could be conducted more efficiently over the Internet than by traditional means, and ……

•Choose Seattle as HQ because …..

•Name it Amazon because …..

•The 4Cs at Amazon.com …

Source: http://www.achievement.org/autodoc/page/bez0bio-1

Another Example:

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WOM and Viral Marketing: Good, Bad, and Ugly•W

OM: Words of Mouth

•eWOM: Yelp.com, Amazon User Reviews, eBay Buyers and Seller rating.

•W

atch United Break My Guitar at

https://www.youtube.com/watch?v=5YGc4zOqozo and be ready to answer the

following questions:

– Who benefited (companies, individuals, products) from this video?

– Why this video went viral?

– How can you create a viral video?

•Anger is more influential than other emotions such as joy through social networks. [ref]

http://en.wikipedia.org/wiki/United_Breaks_Guitars

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Self Assessment: Customer Caring

What do your customers need? What requests do they make of you?

How do you respond to customer’s requests?

What kind of information can they get from you?

What process do they go through? How do you produce and distribute it to them?

What are the steps that your customers have to take

to complete a purchase transactions?

How do they get shipment status?

How are exceptions handled?

What do you need from customer? What do you know about customer preferences?

What information could you use to better target your

product and service offerings?

What to build relationships? How can you engage customers in an ongoing dialog?

How can you continue to provide information, products,

and services to reinforce your ongoing relationships?

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Virtual Communities

Virtual Community

Users

• Money

• Content• Demographics

Providers

• Content• Hard goods• Games• Services

Other Websites

Advertisers

• Advertising

• User generated

contents

• Crowdsourcing

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www.parentsoup.com

http://www.ivillage.com/pregnancy-parenting/ -- Community Web Site

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Groupon Business Model: Group Buying

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Group Buying Sites

Site Name Number of Cities

Rewards for Sharing With Friends

Type of Deals iPhone App

Groupon.com 42 $10 for you if new invitee joins and buys a deal

Hip city locales and activities

Yes

LivingSocial.com

13 Free deal if 3 friends buy it; $5 to invitees who sign up; $5 to you if they buy a deal

Hip city locales and activities

Yes

Tippr.com 1 Deal gets better as more people buy it

Hip city locales and activities

No

Woot.com online None Technology gadgets

Yes

Gilt.com online $25 for each invitee who buys

High fashion Yes

Ideeli.com online $25 for each invitee who buys

High fashion No

Source: http://online.wsj.com/article/SB10001424052748704896104575139692395314862.html

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Revenue Streams•T

ransaction

•Subscription / Listing Fee

•Value-added services

•Donation and Sponsorship: KhanAcademy.org

•Advertising – Google Ad Words

– Google Ad Sense

Twitter's estimated advertising revenue:2012: $288.3 million; 2013: $582.8 m.2014: $950 million; 2015: $1.33 billion Google revenue: 2012: $50.2 billion; 2011: $37.9 billionFacebook revenue: 2012: $5.1 billion; 2011: $3.7 billionYahoo revenue: 2012: $5 billion; 2011: $5 billionSource: eMarketer Inc.(source: Link, 9/12/2013)

EC - 48 © Minder Chen, 1996-2014

FreemiumFreemium Model and Monetization Monetization •C

onsumers: Everything on the Internet should to be free.

•Merchant: How can I make a profit if everything is free.

•Monetization is a buzzword for adapting non-revenue-generating assets to generate revenue. 

•Examples:

– Free web browsers: Netscape Communicator and Internet Explorer

– Free email: Juno, mail.yahoo.com, hotmail.com, gmail

– Free web hosting: Geocities, Angelfire, Zoom

– Free ...

Pri

ce

Year

$250

$0

1930 1999

Cost of a 3-minute Long Distance Call

Gilder's Law

All tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve.

Anticipate this cheapness in your pricing strategy and product/service development strategy

All tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve.

Anticipate this cheapness in your pricing strategy and product/service development strategy

Source: http://en.wikipedia.org/wiki/Freemium

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[PDF]why $o.oois the future of business  (free) Chris Anderson[PDF]FREE: The Future of Radical Price

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Providing Free Services: Is There a Free Lunch?

•Facebook/Google and You

If you are NOT paying for it,

you’re not the customer.

You are the product being sold.*

*Andrew Lewishttp://www.metafilter.com/95152/Userdriven-discontent#3256046** See a counter argument at http://powazek.com/posts/3229

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Multifaceted Model for Web-Based EC Design•A

TTRACT: Hits– Communities of interest

– Changing topics for repeat customers

– Features that encourage customers to explore

•ENGAGE: Leads

– Special areas encourage customer to register (i.e. selection of articles customized for visitors interests)

•PARTICIPATE: Sales revenue

– Free download (video, audio, & software)

– Shopping– Chat and News

– Subscription

•JUMP: Advertising revenue

– Other products of interest to customer– Other sites of interest to customer

Adapted from Netscape Communications Inc., 1996.

Attract

Engage

Participate

Jump

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TransactTransact

Man

age

Man

age

PaymentPayment

AdvertisingAdvertising

Order processingOrder processing

FulfillmentFulfillment

MerchandisingMerchandising

Lead generationLead generation

CustomerCustomerserviceservice

End-to-End Process of An E-Commerce SiteEnd-to-End Process of An E-Commerce Site

Engage

Engage

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Opening an Online Business•I

dentify a need and a niche

•Determine what you have to offer (products/services)

•Set your business goals

•Design your EC architecture

•Assemble your EC teams

•Build your web site

•Set up a system to handle sales

•Provide customer services

•Advertise/promote your online business (online and offline)

•Evaluate site performance & improve continuously

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EC Site Life Cycle

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Web Metrics•H

it – any Web server request that generates a log file entry. A page has many elements (html, gifs), each generating a hit.

•Page – Web server file that is sent to client user agent, usually a browser.

•Session – all actions (i.e. requests, resets) made in single visit, from entry until logout or time out (e.g., 20 minutes of no activity).

•Visitor – a user or bot/spider/crawler that makes requests at a site. Can be new, returning, registered, anonymous.

•Buyer – visitor that purchases something

•Customer – a visitor that registers (sometimes defined as buyer)

•Conversion rate – rate at which visitors transition to desired state (buyers, customers, registered, started checkout)

•Host – remote machine, identified by IP address, used for visit.

•Referrers – Page that provides a link to another page. Can be internal or external

•Web logs, Google Analytics, and Alexa

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EC Hosting•Y

ahoo!Small Business– http://smallbusiness.yahoo.com/ecommerce/

•Ebay

– http://pages.ebay.com/help/sell/sell-getstarted.html

•Amazon Marketplace

– http://www.amazon.com/gp/help/customer/display.html?nodeId=1161232

•Drupal.org

– http://drupal.org/hosting

• Wordpress: Open source solution for a web site.

– http://wordpress.org/ 

•Webs.com: Webs’ point-and-click Site Builder requires no technical skills.

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The Elements of User Experience

Source: Jesse James Garrett, The Elements of User Experience, http://jjg.net/elements/pdf/elements.pdf

The Elements of User Experience

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Site Elements•H

ome page: Menu-driven, News-oriented, Path-based, etc.

•Graphics and texts

•Submenus pages & subsites (alternative home pages for special audiences)

•Tables of contents, site indexes, site maps

•Product/service/information pages

•"What's new" pages

•Search features (Findability): Search criteria and sorting order of the results

•Contact information

– Street address, phone number, fax numbers, maps, travel directions, parking information

•User feedback and virtual community pages

•Bibliographies and appendixes

•FAQ (Frequently Asked Questions) pages

•Customized server error pagesSource: Web Style Guide at http://webstyleguide.com/wsg3/index.html

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Web Site Architecture Design: Website Navigation Diagram

See http://webstyleguide.com/wsg3/index.html for Web Style GuideAnd http://webstyleguide.com/wsg3/3-information-architecture/index.html for Information Architecture

Navigation Map

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Site Structure Choices

Choose the right site structure for your audience and content.

Source: http://webstyleguide.com/wsg3/3-information-architecture/3-site-structure.html

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Browsing vs.Searching

Large sites are just too large to depend solely on browsing. Heavily used pages are likely to appear on browsing menus pages, but obscure pages deep within the site will only be found and read through web search technologies.

Source: http://webstyleguide.com/wsg3/3-information-architecture/3-site-structure.html

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Designers vs. Users

Source: Steve Krug, Don’t Make Me Think, 2006.

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Sample Page Layout/Structure

Source: http://webstyleguide.com/wsg3/6-page-structure/3-site-design.html

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Cross-Selling and Up-Selling

Amazon’s Collaborative Filtering/Recommendation system

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Personalization

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The Evolution of EC Implementation

Maturity

Fu

nct

ion

alit

y

Publishing (Brochure-ware)AdvertisingMarketingInformation

Customer Interactivity Registration / FormsEmailGames / Chat room / eForum

Web-based TransactionProduct database queries / SearchElectronic PaymentsFund transfer

Process IntegrationFulfillmentSettlementWorkflow

ExtensioneCRMeProcurement / SCM eMarketplace / Auction

1:1 Relationship

Real-time organizations

Communities of Interests

Marketplace creator

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Future EC Trends•B

roadband internet connection: i.e., ADSL/Cable modem, 3G/4G•S

treaming media and web-based learning (e.g., MOOC)•M

ore interactive virtual community (e.g., Second Life)•C

ustomization and personalization•S

oLoMo: SOcial networks, LOcation-based services, MObile commerce and apps (SoLoMo) (link; link2)

•Affiliate partners (e.g., Amazon Associate)

•Multiple-channel integration

•Affordable EC software and hosting service for small-medium-size companies

•Standards such as XML to enable B2B E-commerce

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The End

•Backup Slides on Business Models

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Elevator Pitch  

Our business [list name] will deliver [list key deliverables] to [list key beneficiaries] to enable them to [list key benefits]. The business is headed by [list founder and key executives, investors, and advisors] that have [list key background and qualifications]. The business [will launch/was launched] on [date] and we [will begin/began] delivering [first product or service] on [date]. We expect to prove our business model and achieve profitable growth on [date] and anticipate that the terminal value of the business will be [list anticipated value], which represents a [list return] to investors. The total cost to achieve this goal will be [total cost], which includes the following key cost categories [list]. We have currently received [list dollars of funding secured to date] from the following sources [list]. We anticipate receiving the remainder of the funding by [date] from [list sources]. The key risks for the project are [list risks]. These risks will be managed by [list key approached to managing each risk].

•Source: Applegate and Saltrick, “Developing an Elevator Pitch for a New Venture.”

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Elevator Pitch • Elevator Pitch – What is it?

– In the time it takes to ride an elevator from the 1st to the 10th floor – explain the gist of your business idea to a stranger!

– An elevator pitch conveys the businesses’ key features and rationale in a clear, concise way so that it can be communicated easily to others

• Who is the primary audience?– Potential investors, customers, suppliers, partners, employees– Anyone who has or could have a stake in your business

• Why does it matter?– Communicate – What, why, how, where and when– Teaser to generate interest – the upfront hook!– Share a coherent vision of the firm’s goals and high level strategy

for achieving these goals– And, last but not least - Raise $$$!– Plus, it might be your only shot!

http://nuvc.innuvation.org/Elevator_Pitch_Workshop_v2.ppt

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Key Issues•O

verview of the problem your business will solve and opportunity it will address

– Why does this problem matter?

– How severe is it?

– How big is the opportunity?

– How fast is it growing?

– Why has it not been solved yet?

– Why can you solve it when others could not?

•What value is being created?

•Who are the primary beneficiaries?

– Think about who is capturing the value

– Consider that some groups may capture more than others – these represent the ideal first customers

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Products/Services and Competitors

•What are the products and services that you will deliver to solve the problem

•How do these products and services meet the unsolved market problem?

– Do they immediately solve the entire problem?

– Or what is the product and service “path” for getting there?

•Who are the competitors and why are your products and services superior?

– Focus on direct competitors

– Consider segmenting direct competitors by type

– Why, where and how does each competitor or type fall short?

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Revenues and Resources

•How do you plan to generate revenues

– Short term– Longer term if there is a twist or kicker

•Hit the high points of your business model

– Profitability – Leverage – As revenues and size increases, do gross and/or

operating margins improve?– Scale efficiencies - how do the mechanics and economics of

your business model scale

•What are the resources required?

– Money – Capital intensity?– Time – core development, unique product versions for different

customer types, distribution channel build, etc– Team background and expertise – what are the critical

competencies of the team?

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Teaser and Vision

•Teaser to pique interest

– Punchy, crisp and clearly articulated

– Incentivizes stakeholders to care by logically presented the case for how the business benefits them

– Delivered with confidence but not cockiness

– Should leave them wanting to hear more about the details at a later date

•Communicate a common vision and goals

– Everyone on the same page, working toward the same goal

– Minimize non-productive activities, speeds up time to market

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Raising Money

•Raise $$$

– Distilling the essence of your business idea into a few critical points reflects well on you

– Strong elevator pitch results in more favorable assessment of your talents by potential backers» VCs would rather back a Grade A management team with a

Grade B product than vice versa

– Decisions to proceed forward with due diligence are often made on the basis of the elevator pitch and the accompanying follow up conversation by seasoned VCs

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Cash Flow

How

What

Who

Source: Alexander Osterwalder & Yves Pigneur, Business Model Generation (Preview version), 2009.

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Describe a Business Model: 9 Building Blocks

OfferOffer

Cost Structure

Cost Structure

CustomerRelationships

CustomerRelationships

CustomerSegmentsCustomerSegments

Competencies, Activities, Resources

Competencies, Activities, Resources

Partner NetworkPartner Network

RevenueStreamsRevenueStreams

Distribution Channels

Distribution Channels

Key Issues To Solve

Key Issues To Solve

Source: Describe and Improve your Business Model

WhoWhatHow

How Much?

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Reverse Engineering Facebook’s Business Model with Ballpark Figures

http://www.businessmodelalchemist.com/

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Five Essential Elements Of Business

Source: Ram Charan, What the CEO Wants You to Know

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•Hit/page hit/ Referrers/ Host (location), domain, IP address/

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Information Architecture

http://www.pivotdigitalmarketingagency.com.au/websites/information-architecture/