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Internet Commerce Success

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Internet Commerce Success what does it take? GP Dhillon, PhD Associate Professor of IS School of Business, VCU – PowerPoint PPT presentation

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Title: Internet Commerce Success


1
  • Internet Commerce Success what does it take?
  • GP Dhillon, PhD
  • Associate Professor of IS
  • School of Business, VCU

2
Understanding where we are .Developing systems
to support the market - (a) service considerations
Type of service contract
Simple or limited domain
Complex or domain contingent
Patronizing the customer
Relationship based
Customized services
High production costs
Type of customer contact
Standardized services
High transaction costs and risks of errors
Transaction based
Mass transactions
Abandoning the customer
3
Understanding where we are .Developing systems
to support the market (b) channel considerations
Channel systems
Too heavy organization
Agency support systems
Out of pocket costs
Type of channel
Corporate mediator system
Opportunity costs
Market network
Substandard network
4
Understanding where we are .Developing systems
to support the market (c) service-channel matrix
Service Package
Exploiting the Customer
Focus
Consulting and Agencies
Costs vary according to volume of transactions
Differentiation
Delivery Channel
Universal Service
Differentiation
High fixed costs and risks, but low fees
Electronic Markets
Overwhelming the Customer
Low Cost
5
Sustaining technologies
  • A sustaining technology is the one that nurtures
    improved product performance. This is usually
    achieved by improving performance along
    dimensions that have traditionally been valued by
    the customers.

6
Disruptive technologies
  • A disruptive technology brings in a rather
    different value proposition. Disruptive
    technologies under perform established products
    in mainstream markets and has features that only
    a few customers value. The product or service
    emerging from a disruptive technology is usually
    cheaper, simpler, smaller and frequently easy to
    use.

7
Disruptive Technology Examples
The emergence of online investment and trading
may prove to be the technology that disrupts a
major portion of (if not the entire) U.S.
financial services industry. Full-service
brokerage firms have realized enormous benefits
from the increasing equity investments by
American households and the long-running bull
market. Discount brokerages, however, have made
significant attacks on the market share of the
full-service firms.
8
Disruptive Technology Examples
Although this is rare, but recent trends towards
customer relationship management tend to move us
in this direction. Good examples come from the
airlines, especially the way they deal with high
end customers.
9
Disruptive Technology Examples
Priceline.com especially with respect to
domestic airline travel
10
Disruptive technologies cont/-
  • A disruptive technologies is one that results in
    a bad product or service performance (e.g.
    advent of transistors relative to vacuum tubes
    emergence of health maintenance organizations as
    opposed to conventional health insurers)
  • Such technologies are disruptive since they fall
    short of improving the performance of products
    and services along the lines that have
    historically been valued by most customers in
    majority of the markets.

11
Conventional Technology S-Curve
  • Examples
  • First Technology incremental improvements to the
    original ferrite-head/oxide disk technology
    enabled manufacturers to grind the heads to
    smaller, more precise dimensions.
  • Second Technology thin-film photolithography
    displaced ferrite-heads in most disk drives
    between 1979 and 1990.
  • Third Technology magneto-resistive heads.

12
Emerging Technologies and Markets
13
Technological discontinuities Jumping the S-
Curve
14
Impact of sustaining and disruptive technologies
15
Disruptive technology S-Curve
16
Internet Commerce is a disruptive technology
  • Certain Internet based solutions are disruptive
    technologies within a given market (e.g.
    e-commerce solutions relating to selling books
    are disruptive technologies within the market of
    selling books).

17
Managing disruptive technology principles
  • Companies that utilize disruptive technologies or
    have a product or a service that is disruptive,
    should remember that their success depends on
    both the customers and investors for resources.
  • Since small markets don't solve the growth needs
    of large companies, the launch and sustainability
    of a disruptive product or service needs to be
    positioned accordingly.
  • Since disruptive technology products and services
    are novel, it is hard to analyze their respective
    markets, which do not exist.
  • Ability to create a business model, product or a
    service does not necessarily mean that there is a
    demand for such a product or service, i.e.
    technology supply may not equal market demand.

18
Companies depend on customers and investors for
resources
  • If a company has invested more than necessary
    into a disruptive technology and the customers
    seem to like it, but it has a negative cash flow
    and has a bad debt load, there is a strong
    likelihood that the investors (or venture
    capitalists) would not be as enthusiastic as they
    would have been.
  • In the B2B arena nearly 800 million was invested
    into 77 e-exchanges in early 2000 and another
    500 million in mid 2000 but the customers have
    not been too responsive.
  • E.g. Industrialvortex.com attempted to aggregate
    products from numerous suppliers, they faced
    stiff resistance since the suppliers felt that
    such an e-marketplace would give buyers an easy
    access to cheap suppliers

19
Small markets don't solve the growth needs of
large companies.
  • Companies that successfully leverage the
    disruptive technologies to their advantage, gain
    significant first mover advantages. However once
    these companies get entrenched in their specific
    market, then find it difficult to enter newer
    small markets, which could potentially be very
    profitable.
  • Amazon vs Barnesandnoble.com and Barnes Noble

20
Markets that don't exist can't be analyzed
  • Since research about future success can only be
    carried out for technological impacts that have
    already taken place, it is difficult, if not
    impossible, to analyze a market for disruptive
    technology. Such analysis can only be carried out
    for sustaining technologies.
  • It has been rather difficult for Amazon to
    adequately forecast demand for newer products.
    And on 676 million in sales for the fourth
    quarter (1999), Amazon had to write down 38
    million on inventories, particularly for
    electronics and toys.

21
Technology supply may not equal market demand
  • Since the pace of technological improvement
    usually far exceeds the performance improvement
    rate than mainstream customers can absorb, the
    companies whose technological features match
    customer demands today may overshoot mainstream
    market needs tomorrow.
  • Consider developing conventional photographic
    films. The first mover advantage clearly went to
    AOL and Kodak. The service was carefully
    positioned to address the needs of those who
    wanted to have the ability to share digital
    photographs with friends and family. Hence the
    emphasis was on functionality.
  • Then came Ememories (sluggish) and Ofoto (low
    reliability) who started offering free processing
    along with the ability to share digital
    photographs. Such advancement was clearly
    surpassing what the current market could absorb.
    The customer expectation hovered around
    functionality and reliability aspects.

22
Conclusion
  • In the end success will be defined by the ability
    of the respective firms to differentiate between
    sustaining and disruptive technologies and their
    ability to manage the resource allocation
    problem, competence in matching the market to the
    technology and systematically identify and
    position their capabilities.
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