E-business models Making sense of the Internet business landscape.
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Transcript of E-business models Making sense of the Internet business landscape.
Unprohibited want Massive channel
disintermediation? Delineation between technology
producers and technology users? Conducts of Dot-com Performance of vogue virtual
integrations?
The “new” economics of information
Evan & Wurster Less about any specific new technology than
a new behavior for reaching critical mass; The universal pervasion of open standards; The precipitate changes of the structure of en
tire industry and the ways companies compete
M. Porter: Return to the fundamental principles underlyi
ng the novelty of phenomena
Operations of new business
Be shaped and reshaped by customers and the business community
Emerging through evolution and adaptation
A flexible Value web (network) dominated a single/dedicated value chain
What is a model? The properties of models
Enable study of the structure of a complex system, relationships among structural elements, assumptions, and a description of the system in action
Can be built before the real system to help predict how the system might respond if we change the structure, structure, relationships, and assumptions
A model in the world of business A description of a complex business that enables study
of its structure, the relationships among structural elements, and how it will respond in the real world
What is the so-called business model?
A business model depicts the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportuniti
es.
Amit & Zott (SMJ, 2001, p.511)
The Content of Business Model
The good or information that are being exchanged
The resources and capabilities that are required to enable the exchange
E.g., transparency of transaction, vertical & horizontal expansion of product/service, the degree of customization, technologies of transaction
The Structure of Business Model
The parties that participate in the exchange
The ways in which these parties are linked The order process and the adopted
exchange mechanism E.g., the providers of complementary
assets, transaction speed, mode, simplicity, safety & reliability, integration of online & offline supply chains
The Governance of Business Model
The ways in which flows of information, resources, and goods are controlled by the relative parties
The incentives for the participants in transactions
E.g.,cooperative and shared incentive among allied partners, commitment and investment of co-specialized assets, loyalty maintenance
E-business Models
A description of roles and relationships among a firm’s consumers, customers, allies, and suppliers that identifies the major flows of product, information, and money, and the major benefits to participants, almost, over Internet .
(Weill & Vitale, Place to Space, 2001, p.34)
E-business models & examples
Distributors models Focused distributor models
Retailer, marketplace, aggregator/infomediary, exchange, E*trade, Amazon
Portal models Horizontal, vertical, affinity, AOL, Yahoo!, iVillage
Producer models Manufacturers, service providers, educators, ad
visors, information/news service, custom suppliers, Ford, GE, Boeing, Ernst & Yong, WSJ, McGraw-Hill
E-business models & examples (cont.)
Infrastructure provider models: to construct business that deliver the technology infrastructure
Focused distributor Infrastructure retailer/marketplace/exchange, CompUSA, Staples, Ing
ramMicro, EggheadPortal
Horizontal/vertical infrastructure portals, AOL, AT&T, OracleProducer
Equipment/component manufacturers, infrastructure software/services firms, IBM, Dell, Compaq, Oracle, Ariba, MS, Doubleclick
Custom software/hardware suppliers, Dell, Andersen Consulting
Does Adam Smith’s law still work?
Three technological prerequisites to facilitate market economy Excludability Rivalry Transparency
Could Internet technologies promote above three properties for the information-based economy? If not all, some business mechanisms will be needed
Indicators of survival business model
Customer value—segmentation, value proposition Scope—core or by-products Pricing—attractive willingness-to-pay prices Revenue sources—exploitation & leverage of
complements Connected activities—the complete value chain Construction—IT infrastructure, organization, and
key champion Capability—acquisition of necessary competence Sustainability—setup firewall to prevent imitation
Business models: a matter of perspective
The customer perspective Efficiency, responsiveness, security Anything valuable more than social contact
& face-to-face interactions? The business community perspective
Assets investment: current/tangible/intangible assets
Revenue flow: commerce/content/community/ infrastructure revenue sources
Cost allocation: M/I/T categories
Crafting an e-business web Attach to the gateway Leverage with the complements Search the common interface
Enhancement on functionality Expansion of diversity on existing
businesses Extension on new businesses Exit for far-leap
Extended readings
Evans, P. and T. Wurster (1997), “Strategy and the New Economics of Information,” Harvard Business Review, 75(5), Sept.-Oct., pp.70-83.
Porter, M. E. (2001), “Strategy and the Internet,” Harvard Business Review, 79(3), March, pp.62-78.
Referred papers Chatterjee, Debabroto, Rajdeep Grewal and V. Sam
bamurthy (2002), “Shaping Up for E-commerce: Institutional Enablers of the Organizational Assimilation of Web Technologies,” MIS Quarterly, Volume 26, Number 2, pp.65-89.
Fichman, R. G. and Kemerer C. F. (1999), “The Illusion Diffusion of Innovation: An Examination of Assimilation Gaps,” Information Systems Research, Sept. pp, 255-275.
Kline, R. B. (1998), Principles and Practices of Structural Equation Modeling, The Guilford Press, New Work.
Referred papers (cont.)
Grover, Varun, and Pradipkumar Ramanlal (1999), “Six Myths of Information and Markets: Information Technology Network, Electronic Commerce, and the Battle for Consumer Surplus,” MIS Quarterly, Volume 23, Number 4, pp.469-495.
Stigler, George (1961), "The Economics of Information", Journal of Political Economy.
Distorted Market Signals Attracting the base of customers by heavy
discounts rather than true costs Click-through is not the same as cash Booming by the curiosity rather than utility Revenue inflow from stocks rather prices Enjoying subsidized inputs Masking true costs but transferring them to
shareholders Understatement of the need of capital for asset
building
The Illusion of Prosperity Dot-Coms multiplied so rapidly
because of Every low barriers to entry Raising capital without having to
demonstrate performance and viability. Just going through a period of
transition Return to the fundamentals eventually