Challenges in (E-Commerce) Strategy

1. Challenges in (E-Commerce) Strategy Ajit Kambil Global Director, Technology and Innovation, Deloitte Research.

2. Outline • The context.. (US viewpoint) • What went wrong • The underlying transformations • What we need to address

3. The times they were a changing…

4. to be followed by..

5. And even more..

6. But there is silver lining • The lowest interest rates in decades • Unemployment rate has flattened • Corporate cash flows and profitability are going up • Oil prices are more stable • Household spending is holding steady • New life in the venture capital environment

7. It should be no surprise eCommerce is not top of mind for CXOs • Generate demand and cut cost • Reduce over capacity • Restore pricing power in their industry • Compete in deflationary and inflationary environments • New regulations

8. Many eCommerce initiatives were oversold and under-delivered • Not enough real value in exchange processes • Did not create a win-win-win between buyers, sellers and market makers • Governance and business model failure • Process redesign integration costs were very high • Others drowned in liquidity

9. Despite the failures – there are genuine successes • Auction based market place founded in 1995 • 45 million subscribers in March 2002 • 61+ million subscribers by January 2003 • Rapid international expansions and diversification • 2002 gross merchandise sales on eBay exceeded US$13 billion • eBay motors ($4.3 billion) • Computers ($1.9 billion) • Consumer Electronics ($1.8 billion) • Books/Movies/Music ($1.4 billion) • Sports ($1.2 billion)

10. EBay is lot more than a consumer auction • Clearance – Time is money and many high technology products are perishable. Liquidation on eBay is cheaper and often generates higher prices • Resale - Accelerate upgrades while reaching new customers and driving new growth • Customer Insights - Product demand, pricing and customer preferences • Fashions and Nostalgia – Nissan 350z, the mini are hot products • B2b – New channels to small businesses Resale markets like eBay should not be ignored as even large companies look to to them for value. Resale markets must be factored into supply chain strategies especially in a down turn.

11. There are other promising market applications

12. Nevertheless there is technology and innovation fatigue and skepticism • Technology often outruns the user • User expectations for convenience have gone up but we all carry multiple gadgets

13. But there are fundamental and disruptive changes • Socio-Economic and Demographic Changes • Aging of developed world populations seeking economic and health security • New security concerns – national and corporate • Major workforce disruption at the level of knowledge workers • China and India plugged into the world economy • New customer cultures

14. Businesses are rapidly outsourcing • Business Models • Outsourcing • Business networks are becoming more complex • Decoupling returns from physical, informational, relationships and other intangible assets • Competing through IP

15. Technological Changes on the horizon include: • Information Technologies • Auto-Identification • Grid computing • Utility computing • New Interfaces • New sensors and MEMs • Nanotechnology • Power technologies • Bio-technology

16. From a business perspective the questions remain the same.. • How will a new idea impact my business? • What is the business case for a new technology or initiative? • What are effective models for moving from innovation to deployment of a new idea or technology? What works? • How should I organize to capture the value? (collaboration, co-opetition, internal development etc) • What are the broader social impacts of the technology? • How will individuals, unions and society respond to these changes?

17. Beyond the obvious there are broader challenges • What are we really managing and measuring? • Many intangibles are invisible in much of traditional accounting? • Thankfully cash flow and earnings can be measured. • How should we conceptualize strategy in networks? • Does IT matter (not so according to the recent HBR)? • What technology capabilities and architectures are required to compete in the future? (IBM wants to sell it to you on demand) • How do we increase individual and knowledge worker productivity? • How do individuals really collect and interact with information to make critical decisions? • How should governments respond to technological change and create environments suitable for attracting the best labor, capital and other value creating assets to meet the promises and obligations to their citizens? • How can information technology support the growth and economic aspirations of a society?

18. Conclusions • eCommerce is not novel any more • Today we want to know how to make it work better to satisfy individual, corporate and societal needs. • Within this context each of us has to decide how we create distinctive value in a competitive market place for ideas for different audiences. • The latest CAIS issue suggests some directions for this in a summary of an ICIS panel