What is E-Business and does it matter?

Definitions and Emerging E-Business Models

Professor Feng Li
The Business School
University of Newcastle upon Tyne
E-Mail: [email protected]

© Feng Li, 2006

1
What is E-Business?

 Where do you draw the line?

 Software;
 Book
 Car
 Mortgage
 Measuring E-Business depends on
how far you stretch the ‘rubber
band’!

© Feng Li, 2006 2

What is E-Business?

 E-Commerce – electronic transactions

conducted by business partners (narrow
definition)
 E-Business: buying and selling, servicing
customers, collaborating with business
partners, and conducting electronic
transactions within an organisations
 Turban, Efraim, David King, Jae Lee and
Dennis Viehland (2004) Electronic
Commerce: A Managerial Perspective
2004. Pearson Prentice Hall, New Jersey

© Feng Li, 2006 3

 What is E-Business? …2
 E-Commerce as digitally enabled commercial
transactions between and amongst organisations
and individuals
 E-Business refers primarily to the digital
enablement of transactions and processes within
a firm, involving only the information systems
under the control of the firm
 E-Business are those activities other than ‘buying
and selling’ via electronic channels
 Laudon, Kenneth C & Carol Guercio Traver (2003)
E-Commerce: Business, technology and society.
2nd edition. Pearson Addison Wesley, Boston

© Feng Li, 2006 4

 What is E-Business … 3

 For this module, a broad definition of E-

Business is adopted
 It encompasses all internal and external
electronically based activities and
processes.
 E-commerce is part of E-Business, which
focuses on the electronic commercial
transactions between and amongst
organisations and individuals

© Feng Li, 2006 5

What is E-Business? … continued

‘E-business is all about time cycle,

speed, globalization, enhanced
productivity, reaching new
customers and sharing knowledge
across institutions for competitive
advantage’

-- Lou Gerstner, ex CEO of IBM

© Feng Li, 2006 6

What is E-Business … continued.
 Not just about dot com’s and Internet
only companies
 Transform existing businesses through
the Internet and related technologies
 Integration within and between
organisations – break down barriers and
boundaries
 Enabling new possibilities – new ways of
doing business - not possible in the past
 Origin go back several decades
 A wealth of knowledge already available -
through large research programmes

© Feng Li, 2006 7

 Dot Com Crash – End of E-Business?
 Underlying rapid growth has never stopped – even
during the dot com crash
 The Web has become an increasingly important part
of consumers' everyday lives - shopping, banking,
amusing, education …
 Part of mainstream business culture, fulfilling its
promise as a medium that can connect consumers
and enterprises and cut red tape from transactions
 Pure plays versus multi-channels - Web sites are
necessary for any business - even if the online arm
loses money
 E-Commerce still only a small section of the economy
(e.g. e-commerce < 5% of retailing)– ‘big bang’ yet
to come
 Not the end – the fun has just started !

© Feng Li, 2006 8

E-Business: Classification
 Business to Business (B2B)
 Business to Consumers (B2C)
 Consumer to Consumers (C2C)
 Consumer to Business (C2B)
 E-Government (B2G, C2G etc.)
 Intra-Organisation E-Business
 Others – P2P etc.

© Feng Li, 2006 9

Why E-Business? Why Now?
 Demand Pull – The New Economy
 Information economy - Information content & labour – over
60%
 New economics of information
 Technological Push – the ‘ICTs Revolution’
 Convergence of computing, telecom & media
 Exponential growth of the Internet
 Mobile communications
 Rapid development of the Internet
 Mass, public infrastructure
 Individuality, interactivity, mobility & consumer experiences
 Government Initiatives & Targets
 Others …

© Feng Li, 2006 10

 Context for E-Business
 All industries became information-intensive
 Information – and communication – are
crucial to success of industrial & commercial
operations
 Fast growing ICTs & information industries  
 Profound Impacts on what activities locate
where, how territories administered, markets
served, linkages maintained between
customers & suppliers
 Need for new strategies, business models &
organisational designs

© Feng Li, 2006 11

E-Business Models

 E-Shops – web marketing or a

shop (B2C)
 E-Procurement – E-tendering &
procurement of goods and services
 E-Shopping Centres/E-Malls– a
collection of E-shops
 E-Auctions – E-implementation of
bidding mechanisms

© Feng Li, 2006 12

E-Business Models .. continued
 Virtual Communities – members with
common interests
 Collaboration Platforms – tools &
infor. environment for members to
collaborate
 Third-Party Marketplaces – leaving
web marketing to third party
 Value-Chain Integrators

© Feng Li, 2006 13

E-Business Models .. continued

 Value-Chain Service Providers –

support part of value chain (e-logistics,
e-payments)
 Information Brokerage, Trust and other
services – business information and
consultancy; trusted third party
services
 Others (e-betting/gambling;
syndication ……)

© Feng Li, 2006 14

Implications of E-Business:
Fundamental and Pervasive transformation

 New strategy & business models

 New organisational designs
 New inter-organisational relations
 New work organisation and new
ways of Working
 Others …

© Feng Li, 2006 15

Organisational implications
 Two ways to beat competition and succeed
in the market:
 Product/service innovations
 Organisational/managerial innovations
 Organisational innovations essential to
efficiency and competitiveness
 Internet enables new organisational
designs/new ways of doing business –
often in ways impossible in the past
 Within AND between organisations – the
entire value/supply chain/network

© Feng Li, 2006 16

De-Construction of Integrated Businesses

 What does your company really

do?
 Customer relationship business -
scope
 Product innovation and
commercialisation businesses - speed
 Infrastructure management
businesses - scale
 Unnatural Bundle – everything
operate at sub-optimal level

© Feng Li, 2006 17

Customer Relationship

 Driven by scope economy

 Customer service-oriented culture
 Customisation – developing relationship
with them and understand their needs
 Offer as many products as possible to
maximise selection for customers
 Tailor bundles of products and services
to capture a larger share of wallet

© Feng Li, 2006 18

Product Innovation & Commercialisation

 Driven by speed – the faster the better

 Using all possible distribution channels to
reach customers
 Organisational culture geared to attract
and retain creative talents
 Operations tailored to serve the needs of
creative talents for breakthrough
innovations

© Feng Li, 2006 19

Infrastructure Management

 Driven by scale economy –

pumping as many products
through it as possible
 Full utilization of facilities & low
cost operations
 Culture – cost reduction &
standardisation

© Feng Li, 2006 20

Already Happening ...
‘Transformational outsourcing’

 J.P. Morgan - IBM will take over most of the

bank's computing operations - $5bn over 7
years
 Ford spin off Visteon – computing on demand
deal with IBM - $2bn over 10 years
 Telecom Italia – HP will provide IT
management services – worth 225 million
euros, or about US$243 million over 5 years
 Other functions – and entire business
processes – increasingly being outsourced too

© Feng Li, 2006 21

Organisational Design:
When is Virtual Virtuous?

 Not all the smart people work for you -

market gives you access to them
 Internal capability vs. partners
 Short-term vs. long-term
 Autonomous vs. Systemic innovations
 Integrated companies vs. SMEs

© Feng Li, 2006 22

Web/Cluster Strategy

 Webs – clusters of companies consolidate around

a particular technology
 Examples – Intel/Microsoft; SAP’s integrated
solutions;
 Spread risk, increase flexibility, enhance
innovation, reduce complexity
 Conditions - technological standard & increasing
returns
 Shapers and adapters – choose your role
 Grow market share vs. grow the pie
 Unbundling & outsourcing

© Feng Li, 2006 23

Internet Banking:
Cheap channel VS new business model?

 Internet as a new cheap

convenient distribution channel
 New entrants challenge the
integrated banking model
 De-construction of the integrated
banking processes
 Future scenarios?

© Feng Li, 2006 24

 Deconstruction of
Telecom Value Networks

 Boundaries increasingly eroded

 Traditional business model may
not longer be sustainable
 Deconstruction of integrated value
chains
 The emergence of new value
networks
 Competing at multiple fronts

© Feng Li, 2006 25

E-Government and E-Public Services

 ‘After ecommerce and e-business, the next

Internet revolution will be e-government’ The
Economist, 28 June 2000
 USA - $600billion annual procurement spending
 EU – euro720billion combined
 Big private sector companies typically achieve
20% saving by procuring online
 Slashing purchasing and fulfilment cycles and
lower admin costs by up to 75% and halve
stocks
 Potential to fundamentally change the way
people relate to government!

© Feng Li, 2006 26

Modernizing government in the UK
 Better government, better policy making, better
responsiveness to what people want and better public
services by reforming the machinery of government in
the UK- especially through the use of ICTs – information
age government
 Electronic service delivery to join up service provision
across departmental boundaries, break down silo based
delivery networks and allow citizens to interact with
government whenever they choose
 Joined up working between different parts of
government and provide new efficient and convenient
ways for citizens and businesses to communicate with
government
 E-Government targets - making 100% of services
available electronically by 2005 – almost achieved

© Feng Li, 2006 27

Emerging issues in E-Government
 All existing research shows in the UK joint
up government providing joint up
services is not happening – yet?
 Public services - People as citizens or
customers
 So far 85% all public sector IT projects
are deemed to be failures (IBM worldwide
head of government services)
 Purposes of E-Government – stated and
real

© Feng Li, 2006 28

 Emerging issues in E-Government (2)
 E-Government and the redefinition of power
structure and the buy-in from key stakeholders
 Strong resistance from those negatively affected
 The practical feasibility of achieving joint up
government ?
 Potential Conflicts between strategic objectives
 efficiency gains could be translated into reduced
employment in certain sections of the public sector
(as many as 1 in 5 - 800,000!)
 clash with other strategic objectives of the
Government such as full employment – an issue that
will need to be carefully addressed given that the
public sectors are the biggest employers in many
regions in the UK

© Feng Li, 2006 29

What Next ?
 Old established corporations will not
disappear
 The new energetic dot.com’s would not
necessarily survive
 A new class of firms would emerge
 All organisations need to go through profound
changes
 Prahalad, C K & Venkat Ramaswamy (2004)
The Future of Competition. Harvard Business
School Press, Boston

© Feng Li, 2006 30

What is E-Business?
How the Internet Transforms Organisations

 Chapter 1. Introduction
 Chapter 2. What is E-Business
and Does It Still Matter?
 Chapter 9. Emerging E-Business
Models in the Network Economy

© Feng Li, 2006 31

Suggested Reading
 Jelassi, Tawfik & Albrecht Enders (2005) Strategies for E-Business:
Creating Value through Electronic and Mobile Commerce. Pearson
Education Ltd, Harlow
 Farhoomand, Ali (2005) Manageing (e)Business Transformation: A
global perspective. Palgrave Macmillan, Basingstoke
 Turban, Efraim, David King, Jae Lee and Dennis Viehland (2004)
Electronic Commerce: A Managerial Perspective 2004. Pearson
Prentice Hall, New Jersey
 Laudon, Kenneth C & Carol Guercio Traver (2003) E-Commerce:
Business, technology and society. 2nd edition. Pearson Addison
Wesley, Boston
 Chaffey, David (2002) E-Business and E-Commerce Management.
Pearson Education Ltd, Harlow
 Timmers, Paul (2000) Electronic Commerce: Strategies and Models for
Business-to-Business Trading, Wiley, Chichester
 Rappa, Michael (2004) Managing the Digital Enterprise.
http://digitalenterprise.org/index.html Especially chapter 5 -
Business Models on the web.
http://digitalenterprise.org/models/models.html
 100’s of new books on e-business and e-commerce …

© Feng Li, 2006 32

 Suggested reading 2
 Cabinet Office (2000) ‘e-governmnent-A strategic
framework for public services in the Information
Age.’ London: HMSO
 Li, F (2003) Implementing E-government Strategy in
Scotland: Current Situation and Emerging Issues.
Journal of E-Commerce in Organisations 1 (2) April-
June 2003:44-65
 Cornford, J (2004) Understanding the Process of
Implementing Electronic Local Government in
England -
http://www.campus.ncl.ac.uk/unbs/sbi/Project2.asp
?ProjectID=3

© Feng Li, 2006 33

 Readings … 3
 Hagel III, John and Marc Singer (1999) Net Worth: Shaping
Markets When Customers Make the Rules. Harvard Business
School Press, Boston (Chapter9)
 Li, Feng (2002) Internet banking in the U.K.: From new
distribution channel to new business models. The CAPCO
Institute Journal of financial transformation.
http://www.capco.com/pdf/j06art10.pdf
 Christensen, Clayton & Michael Raynor (2003) Innovator’s
Solutions, Harvard Business School Press, Boston
 (also Christensen’s earlier book on Innovators Dilemma and
latest book Seeing what next?)
 Zuboff, Shoshana & James Maxin (2004) The Support
Economy. Allen Lane, London
 Prahalad, C K & Venkat Ramaswamy (2004) The Future of
Competition. Harvard Business School Press, Boston
 Peters, Tom (2003) Re-Imagine! Dorling Kindersley, London

© Feng Li, 2006 34