EBusiness Models

1
E-Business Models

• Making Sense of the Business Landscape Enabled by
  the Internet

Note This presentation references the work of
Ms. Applegate (Harvard Business School)
2
Overview

• eBusiness defined
• Models and their properties
• Classification of Network Business Models
• Business model evolution
• E-Business Models Lessons from the field

3
eBusiness

• Gateway to a deal
• Transaction that may (does not have to) lead to
  the delivery of a physical product or service
• eCommerce
• Buying/selling of goods
• Flow of associated info and funds
• eTrade
• Supplier to supplier transactions

4
eBusiness

• Technical aspects
• Hardware, software, networks
• Connects a community of interest
• Enables exchange of information
• Business models
• How businesses interwork
• How this influences the way the are established
  and the ways IT is deployed

5
Technology Capabilities(Traditional vs. Internet)

• Closed standards
• limit participation to those with access to
  proprietary software
• Proprietary ownership of the platform
• owner sets commerce standards/policies
• Rigid design
• limits business functionality/flexibility
• High cost, long time frame, specialized expertise
  to develop business solutions
• barriers to conducting business

• Open standards
• Global connectivity to anyone with a browser and
  Internet access
• Shared ownership of the network
• Commerce is defined and managed through
  collaborative relationships
• Modular, flexible software and infrastructure
• Enables business flexibility
• Lower cost, shorter time frame to develop
  business solutions
• Enables new business opportunities

6
Industrial vs. Networked Economy

• Harnessing the power of Internet requires the
  invention of new models
• Industrial Economy models may no longer be viable
  in the Networked Economy
• Best inventions built off old paradigms
• Components and relationships are not new
• Rules and assumptions that guide decision making
  and action taking steps are new

7
Industrial vs. Networked Economy Models

• Vertically integrated
• Built to manage complexity by minimizing it
• Standardized products to mass markets
• Standardized, highly specialized jobs
• Assembly-line model
• Supplier processes - distributors

• Vertical/horizontal integration
• Use of IT to exploit complexity
• Highly customized, personalized products/services
  
• Teams of experts (inside/outside) innovate
• Digital business infrastructure
• Streamline operations
• Complex tasks performed anytime/anywhere
• Real time data for self-learning and adopting

8
Networked Economy Assumptions

• The distinct separation between producers of IT
  (e.g., IBM, Intuit, Microsoft) and the business
  that use IT as a core component of their strategy
  and operations (e.g., FedEx, Charles Schwab) is
  going away.
• Dot-com businesses are starting to look and act a
  lot like established brick-and-mortar companies
  and vise-versa
• Seamless transition between the online and
  offline worlds is the key

9
Networked Economy Assumptions

• Shift of gravity of firms economic resources
  from tangible assets (property, inventory,
  plants, equipment) to intangible assets
• Goodwill
• Intellectual property
• Relationships
• Knowledge and expertise
• Agility and responsiveness
• Strengths of brand

10
Models and Their Properties

• What is a model?
• Physical world
• A small object built to scale represents a
  larger, more complex object
• Business world
• Succinct description of a complex business

11
Model Properties

• What are the properties of models?
• Enable study of
• business structure, relationship between
  structural elements and how it will respond in
  the real world
• Can be built before the real system to help
  predict systems behavior if structure,
  relationship and assumptions change
• Provide a baseline for evaluation progress

12
Classifying Network Business Models

• Value chain roles
• Producers vs. Distributors
• Digital businesses vs. digital infrastructure
  providers

13
Value Chain Roles

• Producers
• Design/build products/services
• May function as suppliers to other businesses
• Parts/components/services
• May function as OEMs
• Distributors
• Enable transaction stakeholders to
• Connect, communication and complete business
  transactions

14
Digital Business Models - Distributors

• Focused Distributors vs. Portals
• Focused Distributors
• Provide products and services related to a
  specific industry or market niche
• Portals
• Early portals gateways to web content and tools
  (e.g., CompuServe, Netscape, AOL)
• Destination for shopping, learning, conducting
  business

15
Digital Business Models

• Differentiating factors
• Producers
• Focused Distributors
• Portals

16
E-Business Models Lessons from the field1

• Successful e-businesses shape and are shaped by
  customers and the business community
• New e-business models are emerging through the
  process of evolution and adaptation
• Value webs are replacing value chains

1 Source IT and the Future Enterprise by
Dickson and DeSanctis, Prentice Hall, 2000