Business Models and Web Site Design

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Business Models and Web Site Design
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Todays Class

• Business models
• Components
• The ICDT framework
• Classifying models
• Web site design
• Dominant design
• Technical sophistication
• Aesthetics and content
• Interactivity and personalization

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Objectives

• Discuss concepts that are common to all forms of
  e-commerce over the Internet
• Business models
• Web site design
• Discuss and classify the different types of
  business models to help analyze e-commerce
  initiatives more thoroughly
• Foundation for future topics
• Study and understand the main aspects of Web site
  design and their progression over time

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Business ModelsThe Basics

• Business models are fundamental to successful
  e-commerce initiatives
• Interestingly, they were both over-hyped and
  ignored (and poorly defined) by a large number of
  companies
• An appropriate business model specifies four
  choices
• A value proposition (key benefits for target
  market)
• An offering (product, service, or information
  good)
• A resource system (capabilities, partnerships,
  etc.)
• A financial model (primarily revenues)
• Arguably, the most important source of failure

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The Four Choices

• Value proposition needs to clearly identify
• The key benefits of the business
• The main target market (s) the firm will serve
• The key differentiating attributeshow the firm
  will differentiate from competitors
• The offering focuses on the specific product,
  service, and/or information good
• The more important issue is the scope of the
  offering (s)

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The Four Choices

• The resource system deals with the firm resources
  required to deliver the value proposition
• HR and skills
• Partnerships and supply chain
• Technologies
• The financial model describes how the firm plans
  to support its business
• Revenue models (sales, advertising, subscription
  fees, etc.)
• Off-line support

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ICDT Framework

• The ICDT framework focuses on the main
  purposes/objectives of e-commerce ventures
• InformationCommunicationDistributionTransaction
  
• The framework is extremely useful for several
  reasons
• Relatively comprehensive yet simple
• Clearly defined categories (with little overlap)
• Applicable to all forms of e-commerce (B2B and
  B2C)
• Highlights a clear and logical progression in the
  level of involvement in e-commerce
• Can be directly linked to the broader firm
  strategy

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ICDTThe Basic Objectives

• Information increase the visibility and improve
  the perception of products and services through
  Internet-based marketing
• Communication increase the visibility and
  improve the perception of products and services
  by influencing stakeholders
• Distribution reduce the cost, improve the
  quality of products and services by distributing
  via the Internet
• Transaction reduce the cost, improve the quality
  of products and services by exploiting
  Internet-based transactions

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Information

• The information category focuses on the use of
  the Internet to disseminate large amounts of
  information to stakeholders
• Information about products and services including
  catalogs and technical specifications
• Information about the company
• This is, by far, the most utilized strategy since
  its relatively low risk and low cost
• A relatively easy and logical first step into
  e-commerce
• Can easily be totally outsourced
• The primary mistake has been to simply replicate
  what the firm was doing off-line (e.g., catalogs,
  advertisements, brochures, etc.) on-line
• This approach does not make full use of the
  Internets capabilities
• This strategy is used in both B2C and B2B
  e-commerce initiatives (though more so in a B2C
  environment)
• B2B tends to rely more on human interaction

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Communication

• The communication category uses the 2-way
  communication capabilities of the Internet to
  enable the firm to exchange ideas and collaborate
  on-line
• Creation and use of virtual communities
• Support of different lobbying activities
• On-line collaboration between businesses
• This strategy is primarily used in B2B
  environments
• Collaboration is increasingly becoming an
  important aspect of e-commerce
• Virtual communities (including Blogs to a certain
  extent) are also playing a role in B2C
• The primary mistake has been a general lack of
  use (most underutilized of the categories)

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Distribution

• Distribution makes use of the Internet as an
  efficient and inexpensive distribution channel
• This is exclusively for goods (or parts of goods)
  that can be fully digitized
• Music and news have been the dominant products
  but videos and books are becoming more common
• Also used extensively for support purposes (i.e.,
  customer service)
• The most controversial and disruptive strategy
  given the problems with piracy
• Most industries have yet to design an effective
  financial model
• This strategy is primarily used in B2C, but also
  increasingly in B2B for activities such as
  training and support
• A number of firms (especially media firms) have
  pulled back

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Transaction

• The transaction category focuses on the exchange
  of formal business transactions
• Purchase orders
• Invoices
• Payments
• This is used in both B2C and B2B environments
  (with B2B transactions accounting for about 90
  of the total)
• The primary challenges of the transaction
  strategy have been with the underdeveloped legal
  and security frameworks for on-line transactions
• Requires robust infrastructure for transaction
  processing (especially electronic payments)

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Classifying Business Models

• There are lots of ways to classify business
  models
• The key to a useful classification scheme
  (typology) is the relevance of the dimensions
  used to group the models
• Very similar to market segmentation
• Need dimensions that enable the formation of
  groups that are internally (within the group)
  homogeneous and externally (between the groups)
  heterogeneous
• A good typology is useful since it greatly
  simplifies
• The comparison of different models (fewer models
  to compare)
• The identification of success factors and reasons
  for failure
• The identification of gaps (i.e., opportunities)

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Some Useful Dimensions

• Market served (consumer vs business)
• Click and mortar versus pure-play
• Relational objectives (direct access vs network
  development vs corporate communications)
• Value-based objectives (financial improvement vs
  product/channel enrichment)
• Nature of offering (tangible good vs service vs
  information good)
• Competencies (reach, richness, and range)

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Web Site DesignThe Basics

• The Web site is important since it is the primary
  interface with users
• A badly designed site is the equivalent to a
  badly designed retail outlet, bank, manufacturing
  facility, or office in the physical world
• In the early days of e-commerce, sites were
  poorly designed, overly complex, too large and
  unstable
• Site design has evolved dramatically and is now
  strongly tied to business objectives, user
  behavior, psychology and user interface research,
  and empirical evidence (including log analysis)
• This has led to a significant improvement in the
  quality and usability of commercial Web sites

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Layout, Structure, and Dominant Design

• An important concept to explain the evolution of
  Web site design is dominant design
• A dominant design is the one that wins the
  allegiance of the marketplace
• It is not necessarily the best design
• Examples abound (cars, computers, televisions,
  etc.)
• The establishment of a dominant Web site design
  has several important implications for e-commerce
  
• In effect, it limits (greatly) the number of
  design options available to firms, which has both
  positive and negative implications
• The dominant Web site design has been extended to
  Intranetsdemonstrates a high level of acceptance
• First, some examples

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AmazonThe Source of the Dominant Design?
www.amazon.com
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RetailDirect Competitor
www.bn.com
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RetailEven the Biggest
www.walmart.com
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RetailLocal Vendor
www.techbuy.com.au
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Corporate SiteHealthcare
www.maynegroup.com
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Corporate SiteMining
www.bhpbilliton.com
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CorporateSteel
www.bluescopesteel.com
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MBS
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What Were They Thinking?
www.riotinto.com
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Corporate SiteMining
www.bhpbilliton.com
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Benefits and Weaknesses of Dominant Design

• Benefits
• Improved usabilityusers understand the layout
  and can efficiently use the site
• Lower customer support costs
• Higher customer satisfaction levels
• Greater stability
• Lower design and maintenance costs
• Weaknesses
• Lack of differentiation
• Noticeable slowdown in innovativeness of site
  design
• Lower novelty impactbecoming mainstream

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Technical Sophistication

• The technical sophistication of sites (in terms
  of innovative features) used to be prominently
  displayed
• Animated graphics, Java applets, etc.
• Attracted visitors for novelty reasons not for
  the basic purpose of the site
• These sites tended to crash more, were more
  expensive to develop and maintain, and took
  longer to download (lower performance)
• Most of the technical sophistication of sites is
  now hidden from users
• Search engine capabilities, transaction
  processing capabilities, integration with the
  firms internal systems (e.g., to check
  inventory), etc.

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Aesthetics

• Aesthetics do matter
• Colors and color schemes, pictures, graphics,
  etc.
• Important attributes have emerged through trial
  and error and based on sound research
• High contrast for text (versus background)
  mostly black text on white background (dominant
  design from other media)
• White space (not too busy) to focus attention on
  specific parts of the site
• Prominent logo and branding
• Clear and intuitive navigation aids

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Content

• The nature of the content is critical it is
  after all a communication medium
• A few key aspects
• Logical organization based on categories that are
  useful to the user (e.g., simplifies the primary
  objectives of the site)
• Freshness and quality are important research
  shows users are more likely to return to a site
  with fresh content
• Dynamic content can be a powerful tool, but
  technical problems can mitigate the benefits
• Links to related sites create a more satisfying
  user experience

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Interactivity and Personalization

• Interactivity (2-way communication) is one of the
  most important features of the Web (Internet)
• It gives companies the ability to personalize
  their site and communicate directly with users
• The level of interactivity of a site has a
  positive impact on performance, especially in
  turbulent markets
• Interactivity comes in many forms
• E-mail and chat room capabilities
• Market research capabilities (feedback forms,
  surveys, etc.)
• On-line transaction capabilities
• Interactive purchase aids (e.g., virtual models)

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My Virtual Model
www.sears.com
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Summary

• Business models and Web site design have evolved
  dramatically since the early days of e-commerce
  (95-98)
• A large variety of business models has emerged
  with a stronger emphasis on the soundness of the
  model (especially financial)
• Web site design has become more standardized
  (dominant design) and more focused on supporting
  the primary objectives of the site

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After the break Amazon2002