E-Commerce: An Enron View Mike S. McConnell Vice Chairman & Chief Operating Officer Enron Net Works.
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Transcript of E-Commerce: An Enron View Mike S. McConnell Vice Chairman & Chief Operating Officer Enron Net Works.
![Page 1: E-Commerce: An Enron View Mike S. McConnell Vice Chairman & Chief Operating Officer Enron Net Works.](https://reader036.fdocuments.net/reader036/viewer/2022082604/5513ed5b5503463a298b5e47/html5/thumbnails/1.jpg)
E-Commerce: An Enron View
Mike S. McConnellVice Chairman & Chief Operating Officer
Enron Net Works
![Page 2: E-Commerce: An Enron View Mike S. McConnell Vice Chairman & Chief Operating Officer Enron Net Works.](https://reader036.fdocuments.net/reader036/viewer/2022082604/5513ed5b5503463a298b5e47/html5/thumbnails/2.jpg)
Presentation Summary
eBusiness Trends
Enron Philosophies
Conclusions
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“It Is Not the Strongest of the Species That Survives, Not the Most Intelligent, but the Most Responsive to Change.”
Charles DarwinThe Origin of the Species
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Today’s New Economy
New Economy Business Model is Fundamentally Different
than Old Economy Model
– Successful Companies are Increasingly Knowledge-Based
Businesses (with Increasing Incremental Returns)
– Network-Based Businesses Lead to Market Share Gains and
Continued Scale Advantages
Technology, Innovation, and Intellectual Capital are Critical
Metcalfe’s Law
“Winner-Take-All” Outcomes are More Frequent
Internet is Changing Everything
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1966 1998
Source: Financial Strategy, William E. Fruhan, Jr. 1979Based on 1,448 Compustat Companies Source: CFSB estimate. Based on S&P Industrial Avg.
100
90
80
70
60
50
40
30
20
10
0-26 -9 5 9 18 28 38
80
70
60
50
40
30
20
10
0-10 0 4 8 12 16 20 100
Fre
qu
en
cy
Fre
qu
en
cy
“Winner Takes All”
ROE (%) ROIC (%)200
The goal
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Management Strategy: Tight and Loose
Performance should drive protocol,not vice versa
Tight Controls
Loose Controls
– Financial accounting– Risk management– Performance reviews– Legal obligations
– Creativity/new business ideas– Dress code– Time clock
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20th Century Energy
Company
21st Century Energy
Company
• Capital-intensive• Vertically integrated• Geographically dominant• Commodity price dependent• Hierarchical
• Intellectual capital intensive• Network integrator• Differentiation dependent• Entrepreneurial culture
Two Energy Models
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Industry Trends
-10
0
10
20
30
40
50
IT Laggards
IT StarsMarket Share Gain
Increasein Sales
Return on Sales
- 4
4.80
7.4
1.8
47
Source: McKinsey & Company
% Difference by Economic Measures
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Industry Trends
$0
$50
$100
$150
$200
$250
‘98
Source: New York Times 2/15/99
Technology has Slashed the Price of doing Global Business
The Cost of a 3-Minute Phone Call From New York to London
‘90‘70‘50‘30
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Transaction Costs
$1.07
$.68
$.27
$.10
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
Source: Downes, Larry and Chunka Hui, Unleashing the Killer App., Boston: Harvard Business School Press, 1998, pp.44-45
Branch Telephone ATM Internet
…and Radically LoweredTransaction Costs
Average Cost per Transaction Retail Banking by Channel
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U.S. eCommerce Growth
Source: Forrester Research, Inc
0
500
1000
1500
2000
2500
3000
$ B
illi
on
1998 1999 2000 2001 2002 2003 2004
B2BB2C
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Worldwide eCommerce Growth
Source: Forrester Research, Inc
0
1000
2000
3000
4000
5000
6000
7000
2000 2001 2001 2003 2004
Bil
lio
ns
US
$ Rest of World
Latin America
Western Europe
Asia Pacific
North America
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eBusiness Trends
The Internet is a Disintermediary
The Internet Cannibalizes Existing Business Law of Diminishing Returns
The Internet Allows for Mass Customization
Barriers to Enter Markets are Dramatically Changing
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Enron Philosophies
Run Technology as a Business
Develop and Implement Enron’s Global E-Business Strategy
Spending Focused on Achieving Competitive Advantage
Highly Robust and Flexible Infrastructure
Develop Several Proprietary Applications
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Enron Philosophies Continued
Expansion and Extension of our Existing Business
Enabler of Unparalleled Information Dissemination
Incubator of New Ideas and Business Models
Challenge Existing Ideas and Beliefs
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Conclusions
Technology is More than Just Support
Must Move Quickly
Must Change the Culture
It is a Matter of Survival
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