e-Business

1. e-Business Discussion with UW Students

2. Agenda (from Abstract) • e-Business vs e-Commerce vs Internet • What makes e-Business different from business? • The rise and fall of the dot.com economy • Successful models for e-Business • The drivers of benefit for e-Business applications • The value of Brand with e-Businesses • The potential for e-Business in Insurance and high quality on-line Financial Advice

3. e-Business vs e-Commerce • E-Business: • Improving business • performance through low cost and • open connectivity: • New technologies in the value chain • Connecting value chains across businesses • in order to : • Improve service/reduce costs • Open new channels • Transform competitive landscapes • E-Commerce: • marketing • selling • buying of products and services on the Internet e-Business is more than selling and marketing online!

4. Re- Assess Re- Assess Implement Implement Implementation Planning Implementation Planning Opportunity Analysis Opportunity Analysis Traditional business organization ‘develop step by step’: Characteristics of an “Electronic Business journey”: • Definitions are clear • No change in the business and technology environment • High time pressure • Continuous learning • Definitions of the future are ‘fuzzy’ • Permanent and unpredictable change in the business and technology environment • Time to market and speed are major competitive factors • Continuous learning & fast adaptation is required Understand Electronic Business Understand Business e-Business vs Business ‘E-Business’: ‘Traditional’: E-Business is not a project - but rather a journey that requires vision and non-linear procedures

5. Product development Procurement Marketing Inbound logistics Outbound logistics Production Sales Customer service Supplier network Customer network Experimentation and Learning Short Strategy Formulation loops Being a Connected Enterprise Emerging e-Strategy awareness learning learning Continuous experimentation through specific Solutions Prototyping

6. 1997-1999 - e-Business Mania Strikes! • E-Business becomes a major economic force • NASDAQ hits 5,000 • Venture capital in abundance • Focus on new economy, new business models, growth potential • no attention to traditional fundamentals • bricks and mortar viewed as liability • Traditional businesses shake in their boots at the threat of new non-traditional nimble bold competitors • Dot.Com start-ups in every field • Dot.Com multi-millionaires made over night

7. B2B and B2C - Huge Potential

8. Online Retail Sales - Likewise!

9. 2000 - The Dot.Com Bubble Bursts! • The Demise of Dot Com Retailers. Weak financials, intense competition, and investor flight will drive many of today's online retailers out of business in 2000. Those that survive must refocus funding on building hard assets to achieve scale, service, and speed. • Wall Street will run out of patience. Financial markets exasperated with non-existent online profits will turn a deaf ear to persistent "investment mode" rhetoric and soundly punish merchants who bleed red ink. Recent stock disasters like Value America and eToys -- whose market caps as of January 11, 2000, are down $3.1 billion and $7.7 billion respectively from 1999 highs -- serve as bad omens for online stores that lack a unique approach or technology. • The revenge of the brick-and-mortars will begin. The narrowing of the playing field in 2000 will rationalize but not resolve online retail competition. It will usher in a new era characterized by a few large players that exploit deep customer relationships and a presence across multiple channels to entrench themselves. To measure their success, these firms will ditch new economy platitudes in favor of unfashionable old metrics like margins, profits, and customer retention costs. Forrester Research, 1999/2000

10. Valuations Plummet Amazon.com - AMZN Pets.com - IPET Priceline.com - PCLN eBay.com - eBay

11. Same Trend in Canada 1-year trend

12. Lessons Learned • Fundamentals important, bottom line important • Traditional bricks and mortar assets can represent significant competitive strengths • logistics, inventory, distribution • choice in terms of customer access • strength and brand • e-Business becomes an element of overall business strategy - not the total business strategy • e-Business still widely seen as a way of transforming business operations and thinking

13. Hybrid “Bricks and Clicks” ‘Bricks and Clicks’ - A Hybrid Model Traditional “Bricks and Mortar” Pure Web - Dot.com “Clicks” Combines strengths from traditional and pure Web approaches

14. Emergence of the Hybrid Strategy

15. Convergence Cross-Industry Supplier/Customer convergence Just under 15% are in the integration phase. Connections to suppliers and customers are fully E-Business enabled. Transformation Over 50% are in the channel phase of E-Business development with a web presence but no infrastructure tie-in. Industry transformation, achieve competitive advantage Integration Driver Business Value Integrate with customers and suppliers Channel Brochureware and buying /selling Enabler E-Business Leverage Source: PricewaterhouseCoopers Phases of e-Business Development Four stage model in E-Business maturity relates business value to e-business leverage

16. Phases of e-Business Development

17. The Journey Requires Investment Significant multi-year investment predicted

18. The Journey Requires Investment Significant multi-year investment predicted

19. The Benefits of e-Business • Generate additional Revenues • New markets • New products • New customers • Reduce Costs (Integration and ‘Collaboration’) • Process efficiency • Reduce IT variety and -complexity • Synergies with other initiatives • Customer Retention (‘Added Services’ and ‘Virtual Community’) • Know more about your customers • Integrated channel management • Proactive and personalized offerings • Improve Image / Position Brand • Applying innovative technologies • Leadership enterprise • Address younger customer segments • Not to miss the boat • Keeping options open • Acquire know-how • Focused investments

20. e-Business and Brand • Research from Mainspring… • Online financial services customers are initially motivated by price sensitivity, but that influence declines as they realize the benefits of convenience • Brand is more important online than offline • When researching insurance purchases online, 56% of customers went straight to name-brand sites as compared with 32% for aggregation sites. • When initiating a purchase online, 60% went to name-brand sites as compared to 32% for aggregation sites.

21. Online Insurance

22. Online Advice

23. Online Advice vs Face to Face • Forrester: Few financial companies believe that online advice will replace the human advisor. Except for a small group of low-end, self-directed customers, consumers are expected to continue to seek advice from financial advisors. More than half of our respondents believe that online advice solutions will never be a compelling alternative to working with one of their advisors, even as the technology improves. • Almost half of financial institutions believe that online advice will enable advisors to deliver additional value to their customers. • As automated advice vendors piece together the elements of the new advice creation process,we believe that use of online advice will surge.“ • Customers don ’t care about the data-entry and number-crunching aspect of advising -- they pay for the conversation they have after the analysis is done. These online solutions will enable our advisors to spend more time with their customers.” (Insurer)