EC Strategy and Implementation Plan Copyright Guy Harley

EC Strategy and Implementation Plan Copyright Guy Harley 2004

Growth in US e. Commerce Copyright Guy Harley 2004

IBM’s E-Business’s Strategy – 4 Goals § To lead IBM’s strategy to transform itself into e-business and to act as a catalyst to help facilitate that transformation. § To help out business units become more effective in their use of the Internet/intranet, both internally and with their customers. § To establish a strategy for the corporate Internet site. This would include a definition of how it should look, ‘feel’ and be navigated. In short, to create an online environment most conducive to customers doing business with IBM. § To leverage the wealth of e-business transformational case studies there are within IBM to highlight the potential of e-business to IBM’s customers. Copyright Guy Harley 2004

IBM’s E-Business’s Strategy – Key Initiatives § e-commerce— selling more goods via the Web § e-care for customers— providing all kinds of customer support on-line § e-care for business partners— dedicated services providing faster, better information for these important groups Copyright Guy Harley 2004

IBM’s E-Business’s Strategy – Key Initiatives § e-care for employees— improving the effectiveness of IBM employees by making the right information and services available to them § e-procurement— working closely with IBM’s customers and suppliers to improve the tendering process and to better administer the huge number of transactions involved § e-marketing communications— using the Internet to better communicate IBM’s marketing stance Copyright Guy Harley 2004

Internet Business Value Extranets e. Commerce Internet Presence Corporate Intranet Internet Access Integration of Tecnology Copyright Guy Harley 2004

Strategic Planning for EC Industry and competitive analysis Strategy Implement-ation formulation plan Copyright Guy Harley 2004 Strategy reassessment

Industry and Competitive Analysis § Monitoring, evaluating, disseminating of information from the external and internal environments § SWOT Analysis Strengths Weaknesses Opportunities Threats Copyright Guy Harley 2004

Industry and Competitive Analysis (cont. ) INTERNAL FACTORS Strengths (S) Weaknesses (W) Opportunities (O) SO Strategies Generate strategies here that use strengths to take advantages of opportunities WO Strategies Generate strategies here that take advantage of opportunities by overcome weaknesses Threats (T) ST Strategies Generate strategies here that use strengths to avoid threats WT Strategies Generate strategies here that minimize weaknesses and avoid threats EXTERNAL FACTORS Copyright Guy Harley 2004

Strategy Formulation § Strategy formulation § Development of long-range plans § Organization’s mission § Purpose or reason for the organization’s existence Copyright Guy Harley 2004

Strategy Formulation (cont. ) § 3 main reasons for establishing Web site § MARKETING § CUSTOMER SUPPORT § SALES § Products with good fit for EC § Shipped easily or transmitted electronically § Targets knowledgeable buyers § Price falls within certain optimum ranges Copyright Guy Harley 2004

Pure versus partial EC Virtual Product Electronic Commerce Areas Pure EC Virtual Process Digital Product Digital Process Physical Product Traditional Commerce Physical Process Virtual Player Physical Agent Copyright Guy Harley 2004 Digital Agent

Cost Curves Digital Products Cost Physical Products Quantity Copyright Guy Harley 2004 Quantity

White Collar Blue Collar Service Farming Copyright Guy Harley 2004

4 4 4 4 EC Critical Success Factors Special products or services traded Top management support Project team reflecting various functional areas Technical infrastructure Customer acceptance User friendly Web interface Integration with the corporate legacy systems Security and control of the EC system Competition and market situation Pilot project and corporate knowledge Promotion and internal communication Cost of the EC project Level of trust between buyers and sellers Copyright Guy Harley 2004

EC CSF’s - Value Analysis (cont. ) § Value chain § a series of activities a company performs to achieve its goal(s) § Value added § contributes to profit and enhances the asset value as well as the competitive position of the company in the market § to create additional value using EC channels, a company should consider the competitive market and rivalry in order to best leverage its EC assets Copyright Guy Harley 2004

EC CSF’s - Value Analysis (cont. ) § Representative Questions for Clarifying Value Chain Statements § Can I realize significant margins by consolidating parts of the value chain to my customers? § Can I create significant value for customers by reducing the number of entities they have to deal with in the value chain? Copyright Guy Harley 2004

EC CSF’s - Value Analysis Questions § Representative Question for Creating New Values § Can I offer additional information of transaction service to my existing customer base? § Can I use my ability to attract customers to generate new sources of revenue, such as advertising or sales of complementary products? Copyright Guy Harley 2004

Value Chain Analysis Human Resource Management Technological Development Procurement M A R G IN Marketing & Sales Outbound Logistics Operations Information Systems Inbound Logistics Primary Activities Firm Infrastructure N IIN G G R R A A M M Support Activities identifies which resources and capabilities can add value ce vi er S

Value Chain Analysis Human Resource Management Technological Development Procurement e. Sales ERP/Supply Chain Applications M A R G IN CRM Apps Marketing & Sales Production Control & transaction systems Warehouse & logistic systems Outbound Logistics e. Procurement Operations Information Systems Inbound Logistics Primary Activities Firm Infrastructure N IIN G G R R A A M M Support Activities identifies which resources and capabilities can add value ce vi er S

Functional Business applications Strategic Systems Management Systems Knowledge Systems Operational Systems Sales & Production Copyright Guy Harley 2004 Marketing Accounting Human resources

Transaction Cost e. Commerce & transactions costs Firm Size (Employees) Copyright Guy Harley 2004

EC Critical Success Factors (cont. ) “What criteria determine who will be our most profitable customers? ” Customers Selection Customers Acquisition Relationship Marketing “How can we acquire this customer in the most efficient and effective way? Customers Retention “How can we increase “How can we keep this Customers the loyalty and the customer for as long as Extension profitability of this possible? ” customer? ” Copyright Guy Harley 2004 Gartner’s Model of Customer Interaction

EC Critical Success Factors (cont. ) Return on Investment and Risk Analysis § A ratio of resources required and benefits generated by an EC project § Includes both quantifiable items (cost of resources, computed monetary savings) and non quantifiable items § Some intangible benefits § effective marketing channel § increased sales § improved customer service Copyright Guy Harley 2004

Return on Investment & Risk Analysis Generic IT values & risks fall into the following 5 categories Values 1. Financial values— measurable to some degree 2. Strategic values— competitive advantage in the market and benefits generated by business procedures 3. Stakeholder values— reflections of organizational redesign, organizational learning, empowerment, information technology architecture of a company, etc. Risks 4. Competitive strategy risk— external, due to joint venture, alliances, or demographic changes among others 5. Organizational risk and uncertainty— internal to company Copyright Guy Harley 2004

Electronic Commerce Scenarios Open, Global Commerce Scenario Members-Only Subnets Scenario IT Events : Internet standards, new media, proprietary solutions marginalized, intranets, highly distributed, fat-client architectures prevail Business Events : Global trade, logistics on the Internet, pay bills electronically, digital cash widely used, smart cards, and fewer wholesaler/salespeople IT Events : Standards vary between industries, objective measures of Internet security, EDI standards widely adopted Business Events : High-performance information networks, cumbersome global EC Electronic Middlemen Scenario New Consumer Marketing Channels Scenario IT Events : Transaction processing and interface, distributor drive EC, EC activity expands rapidly, and transaction security deeply embedded Business Events : One-stop shopping popular, professional services popular with smaller enterprises 2004 Copyright Guy Harley © Prentice Hall, 2000 IT Events : Activity oriented to consumers, price of wireless drops, and growth of networked multimedia Business Events : Online transactions seen as less convenient, security not widely trusted, basic international norms accepted, and wireless links increase sales productivity

Supply Chain § Upstream Supply Chain § 1 st tier suppliers § 2 nd tier suppliers § Etc. to origin of materials § Internal Supply Chain § Downstream Supply Chain § Distribution § Warehousing § Transportation § After sales service Copyright Guy Harley 2004

Traditional Supply Chain Integration Copyright Guy Harley 2004

e. Commerce Supply Chain Integration Copyright Guy Harley 2004

E-Supply Chains § The ability of all supply chain partners to view partner collaboration as a strategic asset § Trust generates speed, agility & lower cost § Information visibility along the entire supply chain § Strict management of information § Speed, cost, quality and customer service § The metrics by which supply chain is measured § Integrating the Supply Chain more tightly § Within the firm and across an extended enterprise Copyright Guy Harley 2004

E-Supply Chains Components: § Supply chain replenishment § E-procurement § Collaborative planning § Collaborative design & product development § E-logisitics § B 2 B exchanges and supply webs Copyright Guy Harley 2004

E-Supply Chains Tools: § Extranets § Intranets § Corporate portals § Workflow systems & tools § Groupware and other collaborative tools Copyright Guy Harley 2004

E-Supply Chains Problems: § Incorrect demand forecasting § Lack of logistics infrastructure § Quality control § Production delays § Bullwhip effect § Incomplete & inaccurate information Copyright Guy Harley 2004

Target’s Extranet Connection via Public Internet GE Private VAN VPN, encryption Global reach Private line secure Web Applications Customer services Portal services Inventory management Quality assurance Supply chain Process design New products Budget control E-procurement Copyright Guy Harley 2004 Security GE Inter. Business Partner Extranet Legacy Systems EDI ERP Access control Registration Authentication Digital signature Certification

Architecture of an Intranet Client (browsers) ERP Servers Internet Legacy System Intranet Web Publishing Firewall Web Servers and Email Copyright Guy Harley 2004 Databases (products, customers)

Competitive Strategy § Offensive strategy Usually takes place in an established competitor’s market § Defensive strategies Takes place in the firm’s own current market position as a defense against possible attack by a rival Copyright Guy Harley 2004

Offensive Strategies § Frontal Assault— attacker must have superior resources and willingness to persevere § Flanking Manoeuvre— attack a part of the market where the competitor is weak § Bypass Attack— cut the market out from under an established defender by offering a new type of product that makes the competitor’s product unnecessary § Encirclement— greater product variety and/or serves more markets § Guerrilla Warfare— use of small, intermittent assaults on different market segments held by the competitor Copyright Guy Harley 2004

Defensive Strategies § § Lower the probability of attack Divert attacks to less threatening avenues Lessen the intensity of an attack Make competitive advantage more sustainable Copyright Guy Harley 2004

Cooperative Strategies § Collusion— active cooperation of firms within an industry to reduce output and increase prices in order to get around the normal economic law of supply and demand (illegal) § Strategic Alliance— partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial § Joint Venture— a way to temporarily combine the different strengths of partners to achieve an outcome of value to both § Value-Chain Partnership— a strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage Copyright Guy Harley 2004

EC Strategy in Action What questions should a strategic plan answer? § How is Electronic Commerce going to change our business? § How do we uncover new types of business opportunities? § How can we take advantage of new electronic linkages with customers and trading partners? § Will intermediaries be eliminated in the process? Or do we become intermediaries ourselves? Copyright Guy Harley 2004

EC Strategy in Action (cont. ) What questions should a strategic plan answer? § How do we bring more buyers together electronically (and keep them there)? § How do we change the nature of our products and services? § Why is the Internet affecting other companies more than ours? § How do we manage and measure the evolution of our strategy? Copyright Guy Harley 2004

Steps to Successful EC Programs § Conduct necessary education training § Review current distribution and supply chain models § Understand what your customers and partners expect from the Web § Reevaluate the nature of your products and services § Give a new role to your human resources department Copyright Guy Harley 2004

Steps to Successful EC Programs (cont. ) § § Extend your current systems to the outside Track new competitors and market shares Develop a Web-centric marketing strategy Participate in the creation and development of virtual marketplaces § Install electronic commerce management style Copyright Guy Harley 2004

Internet Competitive Intelligence Using Push Technology for Competitive Intelligence § Allow users to request updates of topics and have the latest records automatically delivered to users’ e-mail address § Provide corporate snoopers with lots of information, save search time and monitoring time § Several ways push models can provide competitive intelligence information: § § broadcast model selective pull model distributed push pull model interactive push model Copyright Guy Harley 2004

Implementing the EC Plan § Starts with organizing a project team § Undertake a few pilot projects (help discover problems early) § Implementing EC § Redesigning existing business processes § Back-end processes must be automated as much as possible § Company must set up workflow applications by integrating EC into existing accounting and financial back-ends Copyright Guy Harley 2004

Uncovering EC Opportunities § Understand: § How digital markets operate § How Internet customers behave § How competition is created and what infrastructure is needed § What are the dynamics of EC § Map opportunities that match current competencies and markets § Many opportunities to create new products and services Copyright Guy Harley 2004

EC Opportunities § Matchmaking— matching buyers’ needs from seller without a priori knowledge of either one § Aggregation of services— combines several existing services to create a new service § Bid/ask engine— creates a demand/supply floating pricing system § Notification service— tells you when the service becomes available, or when it becomes cheaper Copyright Guy Harley 2004

EC Opportunities § Smart needs adviser— if you want it then you should… § Negotiation— price, quantity or features are negotiated § Upsell— suggests an additional product or service § Consultative adviser— provide tips on using the product Copyright Guy Harley 2004

Finding IT Applications § Brainstorming by a group of employees § Soliciting the help of experts, such as consultants § Review what the competitors are doing § Ask the vendors to provide you with suggestions § Read the literature to find out what’s going on § Use analogies from similar industries or business processes § Use a conventional IS requirement analysis approach Copyright Guy Harley 2004

Organization and Staffing § Define the roles and responsibilities of: § Senior management § Gatekeepers § Web champion § Web team § Webmaster Web Page Design Marketing Finance Accounting Information Technology P P P Copyright Guy Harley 2004 Building System Infrastructure Business Process Reengineering P P EC Project Team P P Security and Control P P P

Evaluating Outsourcing § § § § Ease of configuration and setup Database and scripting support Payment mechanism Sample storefronts Workflow management Documented database support Integration into existing accounting and financial back ends Copyright Guy Harley 2004

Web Hosting Internally Vs. Hosting Using ISP § System Cost § bandwidth § capabilities and specifications § firewall system § wireless delivery § buy, rent, or lease § maintenance, upgrade, and service of the equipment Copyright Guy Harley 2004

Web Hosting Purchase a suite of software that claims to integrate storefront functions into a single box § i. Cat Corp. ’s Electronic Commerce Suite and Commerce Publisher § Open Market’s Transact and Live. Commerce § Microsoft Corp. ’s Site Server Commerce Edition § IBM Corp. ’s Net. Commerce Pro § Saqqara Systems’ Step. Search Professional § AT&T Copyright Guy Harley 2004

Web Hosting Making a Web catalog into a multimedia extravaganza § Not easy and expensive § Lower end systems : begin at $25, 000 § High end systems : $250, 000 to $2 million Copyright Guy Harley 2004

Web Content Design § Content takes many shapes § Will change dramatically § More robust, comprehensive, and usable medium § Challenges in developing a successful online storefront § Choosing the right software solution for your site § 3 options § build your own software § purchase a commercial software product § rent from a Web host Copyright Guy Harley 2004

Web Content Design Considerations § The services wanted § How much your company can contribute to the site, from manpower to electronic content § The time to design your site § The time to create and program your site § Extra fees for software development § Fees for off-the-shelf applications tools § The size of the site § The amount of traffic the site generates Vs. flat rate Copyright Guy Harley 2004

Web Content Design Considerations § § § § Training requirements Installation and server maintenance Programming On corporate site hosting Vs. off-site Secure Server for financial transactions Your bandwidth needs Your server capacity needs Location of your server at the Web company or ISP company location Copyright Guy Harley 2004

Web Application Features § Electronic shopping mall § Unique URL § Electronic commerce/ financial transactions § Shopping cart software § Online catalogs § Direct order procedures § Dynamic databases § Static databases § Multimedia § Telephony § Chat rooms Copyright Guy Harley 2004 § § § § Audio Video FTP Forms VRML Statistics Customer tracking E-mail response and forwarding § Java applications § Animation § Security

User Profile Home User Logs On Home Page Catalogue Legacy Systems Copyright Guy Harley 2004 Purchase Order & Information Transaction Processing Legacy Integration Payment Options Bank

Security and Control in EC § 80% of all computer crimes reported involve the use of the Internet to break into computer systems § Effective guidelines would be needed § Address the Internet features that must be monitored for developing policy on access and use § Disclosure of information through the Internet Copyright Guy Harley 2004

Strategy Reassessment § Webs grow in unexpected ways § Reasons for a not having a worthwhile project § The goals were unrealistic § The web server was inadequate to handle traffic § The actual cost savings were not as much as expected § Important § Develop a checklist § Project Team compiles statistics that can be tracked § CIOs and other executives are trying to extract the business value from their investment in information technologies Copyright Guy Harley 2004

Assessing Project Effort and Outcome Did unanticipated problems occur? What were the goals? What products and services did If so, how were those handled? your company want to offer? What were the expectations? Did you intend to reduce What costs did you hope to reduce? distribution costs? Did other costs increase unexpectedly? What were the sales objectives? Were your expectations Were those goals realistic? reasonable? Did you intend to reduce travel Are Web and Internet expenses for corporate staff? communications reducing Did you intend to improve traditional communication costs? customer relations? How can those errors be If you did not, what went corrected? wrong? Copyright Guy Harley 2004

Revisit Each Phase of EC Project § Is each needed service performing as expected? § Is each needed service still relevant? § What, if any, additional services are needed? § What do customers want that you are not providing? § What impact will they have on the infrastructure, from bandwidth to software? § What will the additional services cost? Copyright Guy Harley 2004

Revisit Each Phase of EC Project § What specific changes have taken place among your competitors that might affect what you are trying to accomplish? § Have your vendors provided adequate service? § Has training of employees been adequate, or is more required? § What new internal needs have arisen that need to be addressed? Copyright Guy Harley 2004

Management Issues § Considering the strategic value of EC § Conducting strategic planning § Considering the risks § Integration § Pilot project Copyright Guy Harley 2004