Electronic commerce business models strategies and implementation in the network economy
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Electronic Commerce: Business Models, Strategies, and Implementation in the Network Economy. Minder Chen, Ph.D. Professor of Management Information Systems Martin V. Smith School of Business and Economics CSU Channel Islands E-Mail: [email protected]

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Electronic commerce business models strategies and implementation in the network economy

Electronic Commerce: Business Models, Strategies, and Implementation in the Network Economy

Minder Chen, Ph.D.

Professor of Management Information Systems

Martin V. Smith School of Business and Economics

CSU Channel Islands

E-Mail: [email protected]

Course Web site: http://faculty.csuci.edu/minder.chen/mis310/


Electronic commerce introduction

Electronic Commerce: Introduction

E-Business

E-Commerce

Commerce

Internet

Commerce

  • Before 1995, the term “E-Commerce” meant Electronic Data Interchange (EDI).

  • The Internet was commercialized in 1995


Electronic commerce business models strategies and implementation in the network economy

Travelocity

Microsoft Expedia

Priceline.com


Priceline com

Priceline.com

  • Priceline (PCLN) was recognized in 2010 for being the single best-performing stock in the S&P 500 over the past five years.

  • Name your price  Reverse auction, customer-driven e-commerce

  • Products/services sold are all perishable goods/services

  • Competitors: Orbitz.com, Kayak.com, Hotwire.com, Expedia, Travelocity, etc.

  • Dis-intermediation  direct sales from producers to consumers, i.e., Cutting out the middleman, e.g., Apple and Dell

  • Re-intermediation  Reintroducing the new middleman, e.g., Amazon, eBay


Market capitalization

Market Capitalization

Cap: 9.771B Share: $57 7/16

Who Can Afford Not to Play in the Internet EC Space?

Market Cap (4/16/99)

$11.6 Billion

$ 4.3 Billion

$ 2.5 Billion

$ 2.5 Billion

As 6/28/2011


Priceline tops 1 000 sept 18 2013

Priceline Tops $1,000 (Sept. 18, 2013)

  • Between April 1999 ~ Oct. 2000, a period when many dot-com companies failed, Priceline lost 97 percent of its market value.

  • The dot-com bubble burst, numerically, on March 10, 2000, when the technology heavy NASDAQ Composite index, peaked at 5,048.62. The Nasdaq Composite lost 78% of its value as it fell from 5048.62 to 1114.11.  (March 10, 2000 to Oct. 9, 2002)

  • Priceline’s gains have been fueled by its surging international business through two units, Amsterdam-based Booking.com (acquired 2005) and Bangkok-based Agoda.com (acquired 2007).

  • To diversify its business, Priceline also acquired travel search-engine Kayak Software Corp. for $1.8 billion in a deal that closed in May 2013. Kayak lets travelers compare prices and make reservations for hotels, flights, cars and vacations.

Priceline Tops $1,000 (Sept. 18, 2013) on Growing Demand for Web Bookings [Ref]


The rise and fall and rise of priceline com

The Rise and Fall and Rise of Priceline.com

  • By October 9, 2002, in the aftermath of 9/11 (2001), Priceline's stock fell from nearly $1,000 to only $6.60 a share, while its market value shrunk from $24.1 billion to $0.25 billion. 

“irrational exuberance”

Source: The rise and fall and rise of Priceline.com


The low friction market and e commerce opportunities

The Low-Friction Market and E-Commerce Opportunities

  • "[The Internet] will carry us into a new world of low friction, low-overhead capitalism, in which market information will be plentiful and transaction costs low."

    -- Bill Gates, The Road Ahead

  • "Where there is a friction, there is opportunity!"

    -- Net Ready.

  • “Nearly 100% of Innovation – from business to politics – is inspired not by market analysis, but by people who are supremely pissed off by the way things are."  - Tom Peters


Ec business opportunities

EC Business Opportunities

  • Innovative Ideas, Business models, and Business strategies

  • Funding

  • Business and technical talents

  • Technological enablers

New business models and ideas are driving EC initiatives.

Internet technologies are enablers.


The cycle of electronic commerce

The Cycle of Electronic Commerce

Access

Searches

Surfing

Follow-on Sales

Online Ads

Customers

Online Orders

Standard Orders

Distribution

Online: soft goods

Delivery: hard goods

Electronic Customer Support


Ec and business processes

EC and Business Processes

Buyer

Seller

Dis/Re-intermediation

Procurement Process

Selling Process

Request info

Phone,

fax, e-mail

Send info

Provide

Info

Get

customer

Provide

info

Fulfill

order

Support

Identify need

Find source

Evaluate offerings

Purchase

Operate, Maintain, Repair

Data sheets, catalogs, demos

Web surfing

Web searches, web ads

Web site

Newsgroups

Net

communities

Corporate Databases

Demos,

reviews

Web site

Credit cards, e-cash

P.O.s

EDI

Deliver soft goods electronically

Web site, phone,

fax, e-mail, e-mailing list

Customer Feedbacks/Reviews


Study ziprealty com

Study ZipRealty.com

  • Findability: Identify needs  Search Criteria

  • Result list: Sorting attributes, default sorting attribute

  • Show partial information in the result list.

  • Questions:

    • What will be the role of real estate agent in light of emerging real estate web sites such as ZipRealty.Com?

    • How does ZipRealty make money?

    • Where does ZipRealty get its data from?

Example: http://www.ziprealty.com


Changes in the net economy

Changes in the Net Economy

  • Business environment

    • Local / Physical  Global /Virtual

  • Business assets

    • Tangible Intangible

  • Business change

    • Periodic Continuous

  • Business production

    • Mass Production Mass Customization Mass Personalization

  • Customization is under direct user control: the user explicitly selects between certain options such as ticker symbols for the stocks you want to track.

  • Personalization is driven by the computer which tries to serve up individualized pages to the user based on user's needs.

  • Source: http://www.useit.com/alertbox/981004.html


Electronic commerce business models strategies and implementation in the network economy

  • Mass customization and market making

Source: http://www.squidoo.com/zazzle101

Source: Zazzle Marketplace http://www.zazzle.com/sell/more/faq


Mass customization http www zazzle com

Mass Customization: http://www.zazzle.com/

  • The unfulfilled need of a user again was the mother of invention:The two brothers, Bobby and Jeff Beaver, wanted to create a cool t-shirt to advertise a party at their fraternity (in order to "draw in plenty of nice girls"). They realized how difficult it was at that time to get high-quality custom t-shirts without having to order larger quantities at a promotions company or to rely on the low quality of heat-transfer at the local copy store.

  • Unique digital custom printing technologies

  • Zazzle is not a technology company – it is a “market maker ” - How to make a profit on Zazzle

  • “Niching the niche” - a mass customization ecosystem

Source: http://mass-customization.blogs.com/mass_customization_open_i/sneaker/


Network and information economy

Network and Information Economy

  • Information is costly to produce but cheap to reproduce.

    • Price information according to its value not its cost.

  • Managing intellectual property.

    • Maximize the value of your intellectual property, not the terms and conditions that maximize the protection.

  • Information as an “experience good”

    • Consumers must experience it to value it. How does Zappos.com (sells shoes etc.) manage to sell “experience goods”?

    • Brand and trust building is critical.

  • The economics of attention

    • A wealth of information creates a poverty of attention.

Source: Information Rules


Attention economy eyeball stickness

Attention Economy (Eyeball, Stickness)

  • The attention economy is increasingly one where the consumer product costs nothing to reproduce and the supplier need to add valuable intangibles that cannot be reproduced easily. He identifies these intangibles as:

    • Immediacy - priority access, immediate delivery

    • Personalization - tailored just for you

    • Interpretation - support and guidance

    • Authenticity - how can you be sure it is the real thing?

    • Accessibility - wherever, whenever (mobile devices)

    • Embodiment - books, live music

    • Patronage - "paying simply because it feels good",

    • Findability - "When there are millions of books, millions of songs, millions of films, millions of applications, millions of everything requesting our attention — and most of it free — being found is valuable."

  • Source: http://edge.org/conversation/better-than-free


Pagerank traffic and ads

PageRank, Traffic, and Ads

  • “Attention economy” and “reputation economy” are too fuzzy to measure.

  • But, because of Google (and other search engines), we can now convert from reputation (PageRank) to attention (traffic) to money (ads).

Adapted from: [PDF]why $o.oois the future of business (free) Chris Anderson


Popularity adds value in a network

Popularity Adds Value in a Network

Virtuous cycle

Positive Network Externality

(Network Effects)

Value to User

  • Networks

    • Real: LAN, Internet, Fax

    • Virtual: Virtual community, Chat room, Instant messenger, Skype, FaceBook

Vicious cycle

Number of Compatible User


Benefits to the merchants sellers

Benefits to the Merchants (Sellers)

  • Expanded marketing channels and global reach to increase sales of existing products to generate additional revenues

  • Target marketing: Use the web to target their offers to a niche market

  • "The store is always open!"

  • Establish better relationships with customers.

  • Low distribution cost of product/service information

  • Increased speed to market


Benefits to the consumers

Benefits to the Consumers

  • Convenience: no driving around and no long wait times at checkout counters

  • Informative and engaging presentation

  • Value presented upfront: Demo and free download (experience the experience goods)

  • Easy flow and navigation

  • Search capabilities

  • Constant updates

Homeplus in Korea (Tesco)

http://www.extremetech.com/mobile/99033-virtual-stores-help-shoppers-save-real-time


Moving your business online

Moving Your Business Online

  • Companies are motivated by either fear or greed to move to their businesses to the net. To .com your company is becoming an imperative. Companies have to transform their current business models to an innovative business model.

  • Be aware of internet tax law and (1998Internet Tax Freedom Act & 2013 The Marketplace Fairness Act).

  • Interstate/international commerce laws

Your competitor is just

one-click away


Showrooming at retail stores

Showrooming at Retail Stores

Source: http://online.wsj.com/article/SB10001424052702304587704577334370670243032.html

http://www.cnn.com/2012/06/17/opinion/greene-showrooming/index.html


Technology fit customer and product

Technology-Fit: Customer and Product

High

Second Wave

Earlier Adopter

AA

FedExp

Microsoft

Jenny Craig

Chrysler

Customer Need for Product Information

Compassion about the product (SMM)

Second Wave

Web Laggards

Nike

Pepsi

Tide

Denny's

Low

Customer Demographics Match

Poor

High

Source: Forrester Research


Is ec appropriate for you

Is EC Appropriate for You?

NetFlix: Atoms to Bits

[ Video Nicholas Negroponte ]

Asset-Light Generation

From Hand to Cloud & Back…

Rise of the Sharing Economy

[ See Internet Trends &

eBook, airbnb.com ]

Industries who set up

virtual storefronts


Business models based on the value chain in the market place

Business Models Based on the Value Chain in the Market Place

Raw material producer

Exchange

  • Independent market operators

  • Consortia

Manufacturer

Online

Procurement

Buyer-side EC Model

Distributor

C2B

New

Middleman

Retailer

B2C

  • Examples:

  • B2B: alibaba.com

  • B2C: Amazon.com

  • C2B: Priceline.com

  • C2C: eBay.com, craiglist.com

C2C

Consumer

Channel Conflict

  • Service Providers:

  • Logistics

  • Financial

B2C


Business to business vs business to consumer

Business-to-Business vs. Business-to-Consumer

<

Business-to-Consumer

Business-to-Business

  • No vendor loyally

  • No switching costs

  • Time-insensitive

  • Short-term

  • Casual

  • Many vendors

  • Products differentiated on price, image

  • Relationship-based

  • Very high switching costs

  • Extremely time-sensitive

  • Long-term

  • Mission-critical

  • Few partners

  • Partners differentiated on reliability, flexibility


Business channel multi channel presence

Business Channel: Multi-Channel Presence

  • Brick-and-mortar

    • Face-to-Face

  • Mail order

    • Mail

    • Printed catalog

  • Phone order

    • Telex

    • Phone

    • Fax

  • Electronic commerce

    • EDI

    • Email

    • Web

Click and Mortar

Seller

Buyer

Pure Play

Multi-channel plays will have extraordinary power if companies elegantly blend and synchronize those channels.


The b2c business models bricks clicks revolution and evolution

The B2C Business Models – Bricks, Clicks, Revolution and Evolution

Physical Store

Virtual Store/Pure Player

Clicks

Bricks

  • Bricks organizations set up separate click organizations to give the required freedom to operate in the fast moving Click environment

  • or

  • Clicks organizations were created through VC capital

Gap, Safeway, Wallmart

eBay, Amazon, Webvan,

Wingspan Bank, Yahoo

Bricks & Clicks

  • Mergers or sales of assets to Bricks

  • Folding bricks ventures into portfolio

  • Narrow focus of offerings

  • Sat on the sidelines for the explosion

  • Evolved to online commerce

  • Online services are incremental

  • Not huge differentiators for clients

  • Source of convenience

  • Took advantage of lessons learned

  • Assets CHEAP from Click failures

Wells Fargo, Safeway,

Barnes and Noble


The long tail

The Long Tail

http://en.wikipedia.org/wiki/Long_Tail

Source: Chris Anderson, “The Long Tail”, Wired, http://www.wired.com/wired/archive/12.10/tail.html

Reference: From Niches to Riches: The Anatomy of the Long Tail (lnk)


Niche gets richer online

Niche Gets Richer Online


Recommendation system

Recommendation System

Amazon


Changing demand curve

Changing “Demand Curve”

  • The total volume of low popularity items exceeds the volume of high popularity items.

  • Why? Search Cost, Carrying Cost, Niche

  • Changing demand curve: Recommendation systems

  • Recommendation System

  • Amazon: Collaborative filtering

  • NetFlix: CineMatch

Jon Krakauer wrote Into Thin Air

Joe Simpson, Touching the Void


Product variety comparison for internet and brick and mortar channels

Product Variety Comparison for Internet and Brick-and-Mortar Channels

The unlimited “shelf space” of the Internet.

Free:The Future of a Radical Price, Chris Anderson

http://www.heinz.cmu.edu/~mds/smr.pdf


Long tail pure players vs physical retailers

Long Tail: Pure Players vs. Physical Retailers

Profit threshold

http://www.wired.com/wired/images.html?issue=12.10&topic=tail&img=1

http://www.wired.com/wired/archive/12.10/tail_pr.html


The real cost of music physical vs digital

The Real Cost of Music: Physical vs. Digital


Ec strategies 4 cs

EC Strategies: 4 Cs

Customers

Commerce

Community

Content

Case Study: The $250 Neiman Marcus Cookie Recipe Story


Customers

Customers

  • Obsess over your customers

  • Remember that the Web is an infant

    • What do you have to offer that the physical world cannot in order to attract customers?

  • If you make one customer unhappy, he won't tell five friends -- he'll tell 5,000 on newsgroups, list servers, and so on.

    • "Word of mouth" (WOM) factor gets amplified on the Net

  • The shifts of balance of power away from business and toward customer.

  • Jeff Bezos


Amazon story

Amazon Story

  • Spring 1994, Jeff Bezos observed that Internet usage was increasing by 2,300 percent a year.

  • Choose books to start with because …. Bezos reviewed the top 20 mail order businesses methodically, and asked himself which could be conducted more efficiently over the Internet than by traditional means, and ……

  • Choose Seattle as HQ because …..

  • Name it Amazon because …..

  • The 4Cs at Amazon.com …

Source: http://www.achievement.org/autodoc/page/bez0bio-1

Another Example:


Wom and viral marketing good bad and ugly

WOM and Viral Marketing: Good, Bad, and Ugly

  • WOM: Words of Mouth

  • eWOM: Yelp.com, Amazon User Reviews, eBay Buyers and Seller rating.

  • Watch United Break My Guitar at https://www.youtube.com/watch?v=5YGc4zOqozo and be ready to answer the following questions:

    • Who benefited (companies, individuals, products) from this video?

    • Why this video went viral?

    • How can you create a viral video?

  • Anger is more influential than other emotions such as joy through social networks. [ref]

http://en.wikipedia.org/wiki/United_Breaks_Guitars


Self assessment customer caring

Self Assessment: Customer Caring

What do your customers need?What requests do they make of you?

How do you respond to customer’s requests?

What kind of information can they get from you?

What process do they go through?How do you produce and distribute it to them?

What are the steps that your customers have to take

to complete a purchase transactions?

How do they get shipment status?

How are exceptions handled?

What do you need from customer?What do you know about customer preferences?

What information could you use to better target your

product and service offerings?

What to build relationships?How can you engage customers in an ongoing dialog?

How can you continue to provide information, products,

and services to reinforce your ongoing relationships?


Virtual communities

Virtual Communities

  • User generated contents

  • Crowdsourcing

Virtual

Community

  • Content

  • Hard goods

  • Games

  • Services

  • Money

  • Content

  • Demographics

Providers

Users

  • Advertising

Other

Websites

Advertisers


Www parentsoup com

www.parentsoup.com

http://www.ivillage.com/pregnancy-parenting/

-- Community Web Site


Groupon business model group buying

Groupon Business Model: Group Buying


Group buying sites

Group Buying Sites

Source: http://online.wsj.com/article/SB10001424052748704896104575139692395314862.html


Revenue streams

Revenue Streams

  • Transaction

  • Subscription / Listing Fee

  • Value-added services

  • Donation and Sponsorship: KhanAcademy.org

  • Advertising

    • Google Ad Words

    • Google Ad Sense

Twitter's estimated advertising revenue:

2012: $288.3 million; 2013: $582.8 m.

2014: $950 million; 2015: $1.33 billion

Google revenue: 2012: $50.2 billion; 2011: $37.9 billion

Facebook revenue: 2012: $5.1 billion; 2011: $3.7 billion

Yahoo revenue: 2012: $5 billion; 2011: $5 billion

Source: eMarketer Inc.

(source: Link, 9/12/2013)


Freemium model and monetization

Freemium Model and Monetization

  • Consumers: Everything on the Internet should to be free.

  • Merchant: How can I make a profit if everything is free.

  • Monetization is a buzzword for adapting non-revenue-generating assets to generate revenue. 

  • Examples:

    • Free web browsers: Netscape Communicator and Internet Explorer

    • Free email: Juno, mail.yahoo.com, hotmail.com, gmail

    • Free web hosting: Geocities, Angelfire, Zoom

    • Free ...

All tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve.

Anticipate this cheapness in your pricing strategy and product/service development strategy

Gilder's Law

$250

Cost of a 3-minute

Long Distance Call

Price

$0

Source:

http://en.wikipedia.org/wiki/Freemium

1999

1930

Year


Electronic commerce business models strategies and implementation in the network economy

[PDF]why $o.oois the future of business (free) Chris Anderson

[PDF]FREE: The Future of Radical Price


Providing free services is there a free lunch

Providing Free Services: Is There a Free Lunch?

  • Facebook/Google and You

    If you are NOT paying for it,

    you’re not the customer.

    You are the product being sold.*

*Andrew Lewishttp://www.metafilter.com/95152/Userdriven-discontent#3256046

** See a counter argument at http://powazek.com/posts/3229


Multifaceted model for web based ec design

Multifaceted Model for Web-Based EC Design

  • ATTRACT: Hits

    • Communities of interest

    • Changing topics for repeat customers

    • Features that encourage customers to explore

  • ENGAGE: Leads

    • Special areas encourage customer to register (i.e. selection of articles customized for visitors interests)

  • PARTICIPATE: Sales revenue

    • Free download (video, audio, & software)

    • Shopping

    • Chat and News

    • Subscription

  • JUMP: Advertising revenue

    • Other products of interest to customer

    • Other sites of interest to customer

Attract

Jump

Engage

Participate

Adapted from Netscape Communications Inc., 1996.


Electronic commerce business models strategies and implementation in the network economy

End-to-End Process of An E-Commerce Site

Advertising

Engage

Manage

Lead generation

Transact

Customer

service

Fulfillment

Merchandising

Order processing

Payment


Opening an online business

Opening an Online Business

  • Identify a need and a niche

  • Determine what you have to offer (products/services)

  • Set your business goals

  • Design your EC architecture

  • Assemble your EC teams

  • Build your web site

  • Set up a system to handle sales

  • Provide customer services

  • Advertise/promote your online business (online and offline)

  • Evaluate site performance & improve continuously


Ec site life cycle

EC Site Life Cycle


Web metrics

Web Metrics

  • Hit – any Web server request that generates a log file entry. A page has many elements (html, gifs), each generating a hit.

  • Page – Web server file that is sent to client user agent, usually a browser.

  • Session – all actions (i.e. requests, resets) made in single visit, from entry until logout or time out (e.g., 20 minutes of no activity).

  • Visitor – a user or bot/spider/crawler that makes requests at a site. Can be new, returning, registered, anonymous.

  • Buyer – visitor that purchases something

  • Customer – a visitor that registers (sometimes defined as buyer)

  • Conversion rate – rate at which visitors transition to desired state (buyers, customers, registered, started checkout)

  • Host – remote machine, identified by IP address, used for visit.

  • Referrers – Page that provides a link to another page. Can be internal or external

  • Web logs, Google Analytics, and Alexa


Ec hosting

EC Hosting

  • Yahoo!Small Business

    • http://smallbusiness.yahoo.com/ecommerce/

  • Ebay

    • http://pages.ebay.com/help/sell/sell-getstarted.html

  • Amazon Marketplace

    • http://www.amazon.com/gp/help/customer/display.html?nodeId=1161232

  • Drupal.org

    • http://drupal.org/hosting

  •  Wordpress: Open source solution for a web site.

    • http://wordpress.org/

  • Webs.com: Webs’ point-and-click Site Builder requires no technical skills.


The elements of user experience

The Elements of User Experience

The Elements of User Experience

Source: Jesse James Garrett, The Elements of User Experience,

http://jjg.net/elements/pdf/elements.pdf


Site elements

Site Elements

  • Home page: Menu-driven, News-oriented, Path-based, etc.

  • Graphics and texts

  • Submenus pages & subsites (alternative home pages for special audiences)

  • Tables of contents, site indexes, site maps

  • Product/service/information pages

  • "What's new" pages

  • Search features (Findability): Search criteria and sorting order of the results

  • Contact information

    • Street address, phone number, fax numbers, maps, travel directions, parking information

  • User feedback and virtual community pages

  • Bibliographies and appendixes

  • FAQ (Frequently Asked Questions) pages

  • Customized server error pages

Source: Web Style Guide at http://webstyleguide.com/wsg3/index.html


Web site architecture design website navigation diagram

Web Site Architecture Design: Website Navigation Diagram

Navigation Map

See http://webstyleguide.com/wsg3/index.html for Web Style Guide

And http://webstyleguide.com/wsg3/3-information-architecture/index.html for Information Architecture


Site structure choices

Site Structure Choices

Choose the right site structure for your audience and content.

Source: http://webstyleguide.com/wsg3/3-information-architecture/3-site-structure.html


Browsing vs searching

Browsing vs.Searching

Large sites are just too large to depend solely on browsing. Heavily used pages are likely to appear on browsing menus pages, but obscure pages deep within the site will only be found and read through web search technologies.

Source: http://webstyleguide.com/wsg3/3-information-architecture/3-site-structure.html


Designers vs users

Designers vs. Users

Source: Steve Krug, Don’t Make Me Think, 2006.


Sample page layout structure

Sample Page Layout/Structure

Source: http://webstyleguide.com/wsg3/6-page-structure/3-site-design.html


Cross selling and up selling

Cross-Selling and Up-Selling

Amazon’s Collaborative Filtering/Recommendation system


Personalization

Personalization


The evolution of ec implementation

The Evolution of EC Implementation

Extension

eCRM

eProcurement / SCM

eMarketplace / Auction

Process Integration

Fulfillment

Settlement

Workflow

Real-time organizations

Communities of Interests

Marketplace creator

Web-based Transaction

Product database queries / Search

Electronic Payments

Fund transfer

1:1 Relationship

Functionality

Customer Interactivity

Registration / Forms

Email

Games / Chat room / eForum

Publishing (Brochure-ware)

Advertising

Marketing

Information

Maturity


Future ec trends

Future EC Trends

  • Broadband internet connection: i.e., ADSL/Cable modem, 3G/4G

  • Streaming media and web-based learning (e.g., MOOC)

  • More interactive virtual community (e.g., Second Life)

  • Customization and personalization

  • SoLoMo: SOcial networks, LOcation-based services, MObile commerce and apps (SoLoMo) (link; link2)

  • Affiliate partners (e.g., Amazon Associate)

  • Multiple-channel integration

  • Affordable EC software and hosting service for small-medium-size companies

  • Standards such as XML to enable B2B E-commerce


The end

The End

  • Backup Slides on Business Models


Elevator pitch

Elevator Pitch  

Our business [list name] will deliver [list key deliverables] to [list key beneficiaries] to enable them to [list key benefits]. The business is headed by [list founder and key executives, investors, and advisors] that have [list key background and qualifications]. The business [will launch/was launched] on [date] and we [will begin/began] delivering [first product or service] on [date]. We expect to prove our business model and achieve profitable growth on [date] and anticipate that the terminal value of the business will be [list anticipated value], which represents a [list return] to investors. The total cost to achieve this goal will be [total cost], which includes the following key cost categories [list]. We have currently received [list dollars of funding secured to date] from the following sources [list]. We anticipate receiving the remainder of the funding by [date] from [list sources]. The key risks for the project are [list risks]. These risks will be managed by [list key approached to managing each risk].

  • Source: Applegate and Saltrick, “Developing an Elevator Pitch for a New Venture.”


Elevator pitch1

Elevator Pitch

  • Elevator Pitch – What is it?

    • In the time it takes to ride an elevator from the 1st to the 10th floor – explain the gist of your business idea to a stranger!

    • An elevator pitch conveys the businesses’ key features and rationale in a clear, concise way so that it can be communicated easily to others

  • Who is the primary audience?

    • Potential investors, customers, suppliers, partners, employees

    • Anyone who has or could have a stake in your business

  • Why does it matter?

    • Communicate – What, why, how, where and when

    • Teaser to generate interest – the upfront hook!

    • Share a coherent vision of the firm’s goals and high level strategy for achieving these goals

    • And, last but not least - Raise $$$!

    • Plus, it might be your only shot!

http://nuvc.innuvation.org/Elevator_Pitch_Workshop_v2.ppt


Key issues

Key Issues

  • Overview of the problem your business will solve and opportunity it will address

    • Why does this problem matter?

    • How severe is it?

    • How big is the opportunity?

    • How fast is it growing?

    • Why has it not been solved yet?

    • Why can you solve it when others could not?

  • What value is being created?

  • Who are the primary beneficiaries?

    • Think about who is capturing the value

    • Consider that some groups may capture more than others – these represent the ideal first customers


Products services and competitors

Products/Services and Competitors

  • What are the products and services that you will deliver to solve the problem

  • How do these products and services meet the unsolved market problem?

    • Do they immediately solve the entire problem?

    • Or what is the product and service “path” for getting there?

  • Who are the competitors and why are your products and services superior?

    • Focus on direct competitors

    • Consider segmenting direct competitors by type

    • Why, where and how does each competitor or type fall short?


Revenues and resources

Revenues and Resources

  • How do you plan to generate revenues

    • Short term

    • Longer term if there is a twist or kicker

  • Hit the high points of your business model

    • Profitability

    • Leverage – As revenues and size increases, do gross and/or operating margins improve?

    • Scale efficiencies - how do the mechanics and economics of your business model scale

  • What are the resources required?

    • Money – Capital intensity?

    • Time – core development, unique product versions for different customer types, distribution channel build, etc

    • Team background and expertise – what are the critical competencies of the team?


Teaser and vision

Teaser and Vision

  • Teaser to pique interest

    • Punchy, crisp and clearly articulated

    • Incentivizes stakeholders to care by logically presented the case for how the business benefits them

    • Delivered with confidence but not cockiness

    • Should leave them wanting to hear more about the details at a later date

  • Communicate a common vision and goals

    • Everyone on the same page, working toward the same goal

    • Minimize non-productive activities, speeds up time to market


Raising money

Raising Money

  • Raise $$$

    • Distilling the essence of your business idea into a few critical points reflects well on you

    • Strong elevator pitch results in more favorable assessment of your talents by potential backers

      • VCs would rather back a Grade A management team with a Grade B product than vice versa

    • Decisions to proceed forward with due diligence are often made on the basis of the elevator pitch and the accompanying follow up conversation by seasoned VCs


Electronic commerce business models strategies and implementation in the network economy

What

How

Who

Cash Flow

Source: Alexander Osterwalder & Yves Pigneur, Business Model Generation (Preview version), 2009.


Describe a business model 9 building blocks

Describe a Business Model: 9 Building Blocks

How

What

Who

Partner Network

Customer

Relationships

CLIENT

SEGMENTS

CLIENT

SEGMENTS

CLIENT

SEGMENTS

CLIENT

SEGMENTS

Offer

Customer

Segments

CLIENTS

Key Issues To Solve

CLIENT

SEGMENTS

CLIENT

SEGMENTS

CLIENT

SEGMENTS

CLIENT

SEGMENTS

CLIENT

SEGMENTS

CLIENT

SEGMENTS

Distribution Channels

Competencies, Activities, Resources

CLIENT

SEGMENTS

CLIENT

SEGMENTS

CLIENT

SEGMENTS

CLIENT

SEGMENTS

Cost

Structure

Revenue

Streams

CLIENT

SEGMENTS

CLIENT

SEGMENTS

CLIENT

SEGMENTS

CLIENT

SEGMENTS

How Much?

Source: Describe and Improve your Business Model


Reverse engineering facebook s business model with ballpark figures

Reverse Engineering Facebook’s Business Model with Ballpark Figures

http://www.businessmodelalchemist.com/


Five essential elements of business

Five Essential Elements Of Business

Source: Ram Charan, What the CEO Wants You to Know


Electronic commerce business models strategies and implementation in the network economy

  • Hit/page hit/ Referrers/ Host (location), domain, IP address/


Information architecture

Information Architecture

http://www.pivotdigitalmarketingagency.com.au/websites/information-architecture/


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