Selected Topics

1
Selected Topics

• Dr. Ken Cosh
• Lecture 1

2
Selected Topics

• The Brief
• Study interesting topics on current trends,
  concepts and technologies concerned with
  information systems. The topics must be
  consented by the department.
• In this case
• Web Entrepreneurship

3
The Description

• The internet, and the opportunities it affords is
  an important application theme for a degree in
  Computer Information Systems. In an e-Business
  course students study the theory around running
  an electronic business, and in Web Programming
  students learn to create web pages. However,
  this leaves an important knowledge gap, in terms
  of how to practically set up a web based
  enterprise.

4
The Definition

• Web
• A system of extensively interlinked hypertext
  documents a branch of the Internet.
• Entrepreneurship
• (From Entrepreneur)
• A person who organises and manages any
  enterprise, esp. a business, usually with
  considerable initiative and risk.
• Dictionary.com

5
So, what is this about?

• A practical experience in setting up a web
  enterprise.
• Examining web business models.
• Preparing and presenting a business plan to
  venture capitalists.
• Studying (or developing) web skills.
• Marketing Websites
• Search Engines
• S.E.O.
• Social Media Marketing and Web 2.0
• And maybe a chance to earn a bit of money! )

6
Considerable Initiative!

• While were going to be talking about all the
  skills youll need to set up your web enterprise,
  itll take considerable initiative for you to
  be successful!
• So, what do I mean by Successful?
• In the course?
• Or, in the enterprise?
• The two are inextricably linked!

7
Grading

• Project - 30
• Based on the quality of the site that you
  produce.
• Midterm oral exam - 30
• No written oral exam, but you will have to make 2
  presentations to a team of venture capitalists
  first to present your business plan, and second
  to present your progress.
• Final exam - 40
• A written exam testing what youve learnt during
  the course.
• Needless to say, I think you can get a very good
  grade if you get into this (show considerable
  initiative).

8
Initiative

• The power or ability to begin or to follow
  through energetically with a plan or task.
• American Heritage Dictionary.

9
So were going to start a business?

• If were going to start an online business, we
  need to cover the basics of business.
• This isnt IBM100, its simpler than that!
• Our Business is about

10
Making Money

• Simple Question
• How do we make money in business?

11
Business for Beginners

• Businesses make money by
• 1) Adding value to a product or service.
• OR
• 2) Gaining economies of scale or scope.

12
A Business Model

• The method of doing business, such that an
  enterprise can generate revenue and sustain
  itself.
• Business Models can be simple
• I buy something and sell it for more.
• Or Complex
• I broadcast my radio show, and the record
  producer pays me to play their songs...
• In each case, the enterprise operates in some
  position within a Value Chain.

13
The Value Chain
R D
Marketing Sales
After Sales Service
Procurement
Production
Support Activities e.g. HRM, I.T.
14
The Value Chain 2
Data
Information
Information
Knowledge
R D
Core Operating Activities
Marketing Sales
After Sales Service
Procurement
Production
HRM, I.T.
Infrastructure
15
Evolving Business Models

• With the introduction of the web (and related
  technologies), there has been a lot of discussion
  about the way business models have been changed.
• Consider the music and film industry?
• Consider Airline and Hotel bookings?
• Consider Auctions vs Online Auctions?
• Lets take some time to investigate generic
  business models.

16
Classifying Pre Web Business Models

• Each business chooses a position within the value
  chain, which leads to certain recurring business
  models.
• 2 Key Business Models
• Producer
• Build Products / Services to meet the market
  demand
• Distributor
• Link Buyers to Sellers

17
Producers

• Designers and Makers of Products and Services
• Manufacturers
• Service Providers
• Educators

18
Producers Manufacturers

• E.g. Ford, Proctor Gamble
• Physical product producers (and designers)
• Effects of Web
• Improvements in streamlining, integration and
  co-ordination of the physical production lines.
• Both within firm, and extending to suppliers and
  customers.
• E.g. SCM / CRM / ERP systems.
• Facilitating direct access to end users.

19
Producers Service Providers

• E.g. American Express, THAI airways
• Provide a service
• Effects of Web
• For Physical Service Providers (such as car
  rental agencies or restaurants), the effect is
  the same as for Manufacturers.
• For Information Based Service Providers (such as
  Banking), the effect is to digitise service
  delivery.
• Consider the value of digitised information.

20
Producers Educators

• E.g. Payap University
• Create and deliver education programs
• Effect of Web
• E-Learning potential
• Distance Learning potential
• Consider the value of face-to-face education
  mediums.

21
Distributors

• Link Buyers and Sellers, with different levels of
  involvement
• Retailers
• Market Places
• Aggregators
• Infomediaries
• Exchanges

22
Distributors Retailers

• E.g. Tesco Lotus, Big C.
• Assume control of inventory, setting a
  non-negotiable price with consumer.
• Effects of web
• Provides an alternative distribution channel.
• Brick n Mortar, moves to Bricks n Clicks.
• Consider difference between the University
  Bookstore and Amazon.

23
Distributors Marketplaces

• E.g. Orbitz, InsWeb.
• Marketplaces facilitate purchases entirely, but
  without taking control over the inventory.
• Effects of web
• Purchasing process can be hidden from customer,
  with the marketplace integrating their systems
  with their suppliers.

24
Distributors Aggregators

• E.g. Autoweb
• Aggregators provide information about products or
  services, but the customer completes the purchase
  elsewhere, relying on referral fees and
  advertising. Consider the Affiliate model.
• Effect of web
• Enables model to generate money through
  advertising or referrals.
• Extends producers distributions channels to
  neutral experts.

25
Distributors Infomediaries

• E.g. Online news, stock reports.
• Similar to the aggregation model, except here the
  product is information based, such as news,
  weather, sports etc.
• Effects of web
• Information when digitised loses value the
  information is available elsewhere (perhaps for
  free!)
• To generate money, infomediaries often charge
  subscription fees if they can persuade
  customers to pay for it.
• Normally infomediaries have to provide some
  unique value added content, or analytical tools
  to keep customers.
• Often the model is linked with other business
  models.

26
Exchanges

• E.g. Ebay
• With exchanges the price is not set it is
  negotiable between the buyer and seller at time
  of purchase.
• Effects of web
• The auction model gets popular!
• Sellers can reach a global market physical
  presence is not necessary.
• Anyone can be a buyer, anyone can be a seller!

27
Other models

• As well as the producer / distributor models,
  other models have emerged importantly the
  Portal model.
• Horizontal Portals
• Vertical Portals
• Affinity Portals

28
Portal Horizontal Portal

• E.g. Yahoo!
• Provides a gateway to the vast array of content
  on the web. They often provide tools for
  searching or cataloguing the content.
• Horizontal Portals will normally generate
  revenues from advertising, or by building
  relationships with ISPs.

29
Portal Vertical Portal

• E.g. Covisint or WebMD.
• Provide more content focussed towards a specific
  industry or topic. As well as searching tools
  these sites may provide the tools required to
  communicate or do business.
• Vertical portals often generate revenues by
  creating a combination of business models.
• Quicken.com is an example of how companies can
  create vertical portals to direct traffic to
  their core business model.

30
Portal Affinity Portal

• E.g. Realtor.
• Affinity Portals take the vertical portal model a
  step further, by targeting their site to a more
  specific market or market segment.
• Therefore the revenue generation model is similar
  as for the vertical portal.

31
Community Models

• Another key business model existing on the web,
  is a community model.
• Examples include Open Content communities, like
  wikipedia, or Open Source communities like Red
  Hat.
• Social Networking services, like Flickr,
  Del.icio.us, Facebook, myspace are popular
  community sites
• But how do they make their money?

32
Overview of the Effect of Web

• Traditionally (pre web) the power base was with
  the producers.
• With the advent of the web, many thought that the
  distributors could regain power by utilising the
  new distribution channel.
• Gradually the producers have regained their
  power, by directly accessing their customers
  through the web.

33
Evolution

• There has been a lot of changes as enterprises
  have discovered how the web can function.
• New Business Models attempted
• Some successful, some failed, some attempted too
  early, and retried later.
• Existing Business Models evolved
• Some traditional models struggle to transfer into
  an electronic environment (consider record
  producers).

34
Business Model Evolution

• Its likely that your business model will change
  over time
• Enhance
• Add functionality or features to current
  product/service offerings or improve performance
  of existing business.
• Extend
• Enter a new line of business and/or add new
  business models.
• Expand
• Add new product/service offerings or enter new
  geographic markets.
• Exit
• Exit a business or market or drop a
  product/service offering.

35
Amazon.com

• Launched an online Bookstore in 1995
• Enhance
• Continuous enhancement, adding features such as
  1-Click shopping, sophisticated personalisation,
  wish lists, greetings cards, wireless shopping.
• Extension
• Launched a couple of auction stores, also entered
  partnerships with a variety of retailers, such as
  Drugstore.com. More recently has developed an
  ASP business model.
• Expansion
• New product categories including music, DVDs,
  Videos. Also entering new markets, such as
  Europe.
• Exit
• Living.com declared bankrupcy

36
Evolution Note

• Although we should accept that evolution will
  happen
• we still need a starting point!