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Key Lessons Learned. Key lessons learned are based on PwC representative experience with the following eMarkets: Food Service (FS Portal) Hi Tech Exchange Pharma Utility Consortium Worldwide Retail Exchange Approach

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Key lessons learned
Key Lessons Learned

  • Key lessons learned are based on PwC representative experience with the following eMarkets:

    • Food Service (FS Portal)

    • Hi Tech Exchange

    • Pharma


    • Utility Consortium

    • Worldwide Retail Exchange

  • Approach

    • Data gathered from two conference call forums with PwC partners and staff with experience developing the referenced eMarkets

Pwc points of view based on key lessons learned across several emarkets
PwC points of view based on key lessons learned across several eMarkets

Development Period

Key Learning

Representative eMarket

Representative Experience


  • Involve the CEO from the beginning

  • Worldwide Retail Exchange (Kingfisher), Hi Tech Exchange

  • Walking the CEO of Kingfisher through the strategic process ensured buy-in and fit for the organization

  • Move quickly - use the press release deadline to build urgency to establish anchor partners

  • eCPG, Worldwide Retail Exchange, Utility consortium

  • Being the first to market was critical in gaining many of the industry leaders

  • Food Service

  • The timing of the press release influences barriers-to-entry and can be used to expand the network effort

  • Achieve critical mass in either buyer or seller community

  • Utility Consortium

  • The consortium will be a clear leader

  • Food Service

  • $7-10B Transaction flow required for IPO consideration

  • “Smaller” exchanges have greater promise for “owners” but no one else may want to participate


  • Seen as a BellSouth play; adding partners has proven difficult

  • Utility Consortium, Worldwide Retail Exchange, Pharma

  • These markets were organized as an unbiased industry-play.

  • “Bigger” exchanges are easier to join, but may be hard to get transactions due to lack of incentives (Worldwide Retail)

Pwc points of view based on key lessons learned across several emarkets cont

  • Utility Consortium

  • Compiled 50 questions within 24 hours of agreement and solicited answers from SMEs. These results were then presented to the consortium in an effort to manage the issue identification and thought processes.

  • Avoid being tied to a particular technology partner


  • Competitors with rival technologies passed on

  • Utility Consortium, Worldwide Retail Exchange, Pharma, Hi Tech Exchange

  • These eMarkets have avoided being tied to a particular technology

PwC points of view based on key lessons learned across several eMarkets (cont.)

Development Period

Key Learning

Representative eMarket

Representative Experience


  • Provide an open architecture with firewalls to protect competitive advantage

  • Worldwide Retail Exchange, Pharma

  • Proved critical to CEO’s; allows “to have cake and eat it too”


  • Move quickly from agreement to “end of build out phase” to avoid getting stuck in the details

  • Utility Consortium, Worldwide Retail Exchange, eCPG

  • The shorter the build period, the shorter the time the eMarket has without independent decision making

  • Hammer out governance as soon as possible

  • Pharma

  • The US partners are already conflicting with the European partner

Pwc points of view based on key lessons learned across several emarkets cont1
PwC points of view based on key lessons learned across several eMarkets (cont.)

Development Period

Key Learning

Representative eMarket

Representative Experience


  • Create an independent governing entity (as much as possible)

  • Utility consortium

  • PwC is seen as an independent third party and has led much of the decision making

  • Be aware that many technologies are still in the process of being created

  • Utility consortium, Pharma, Worldwide Retail Exchange

  • See functionality appendix which was created with input from e-business tech group

  • Clarify approach to staffing

  • Utility Consortium

  • 15% of equity has been set-aside for staff compensation. Executive search firms have been engaged. eMarket experience within industry is non-existent. Still are in the process of staffing


  • TBD

  • TBD

  • TBD

Learnings by emarket pharma confidential
Learnings by eMarket - Pharma [Confidential] several eMarkets (cont.)

  • Context

  • Pharma is in its first week of development. The consortium covers two continents (North America and Europe) and 15 partners. An announcement of the consortium is pending based on a detailed definition of its design and functionality. The eventual business model must include plans for value-added services or the partners will opt-out of the eMarket.

  • Key Lessons

  • Governance: Get the consortium partners working together quickly. Cultural differences to speed (US vs. Europe) created timing challenges for decision-making. This can lead to a drag toward the slowest common denominator

  • Financial model: Presenting a range of financials for stakeholders to react to helps to manage risk

  • Technology: Technology selection has not been the lead. It will come later on in development and will be developed as an open architecture

  • Legal: U.S. antitrust concerns may be triggered when over 35% of industry transactions flow through the eMarket; 20-35% will spark some concern; 20% or below will not trigger antitrust concerns. International concerns are on a case by case basis

Learnings by emarket food service fs portal
Learnings by eMarket - Food Service (FS Portal) several eMarkets (cont.)

  • Context

  • This eMarket is seen as a “middle-man” play with its 20 food service distributor participants and one manufacturer. Many of the manufacturers have opted out, planning on going to the market directly. The decision making body was “not aligned” from the beginning slowing development

  • Key Lessons

  • Financial model: A plan for managing direct revenues becomes important early on as revenue from value added services is necessary to replace revenue generated from transaction fees

  • Financial model: Achieve a critical mass of transactions of between $7B and $10B in order to become an attractive IPO candidate and be large enough to generate enough incremental savings to justify the start-up costs

  • Financial Model: Savings can be gleaned through market efficiencies

  • Governance: From the outset the creation of a decision-making body representative of the consortium is critical when dealing with shareholders and financial decisions

  • PR/Marketing/Time to market: Timing of press releases influences competitiveness and ability to gain partners/participants

  • Business model: As an e-Market becomes more efficient and the role of middlemen diminishes, conflict increases between wholesalers and re-sellers

Learnings by emarket telconet bellsouth
Learnings by eMarket - Telconet (BellSouth) several eMarkets (cont.)

  • Context

  • C1 and BellSouth began talks of an eMarket. Then jointly with PwC they developed a B2B marketplace strategy over 8 weeks. Since that time, they have had difficulty selling the model to other telecoms who are either using competing technologies or had already begun developing their own plays or see the eMarket as a Bellsouth play rather than an industry play. In hindsight, a pure industry play could have been more successful

  • Key Lessons

  • Technology: Leading with Technology as a strategy can be a barrier to the attractiveness of the e-Market in the start-up phase

  • Alliances/Partners: Partnerships are tied up quickly, increasing the importance of speed to market

  • Business Model: Develop an industry-wide play; avoid being biased to a particular company

  • Financial Model: Transaction fee revenues essentially disappear by year three, then revenue sources needs to shift to value-added services

Learnings by emarket utility consortium
Learnings by eMarket - Utility Consortium several eMarkets (cont.)

  • Context

  • PwC partners developed a detailed point-of-view for an utility e-market and began promoting it to the utilities over 5 months ago. An agreement among the participants was reached approximately one month ago. PwC’s approach as an independent industry-wide play has been beneficial throughout the process. Ultimately, the 22 equity participants will generate $60B flow into the eMarket. Deal structured in a way that the newco is required to invest in PwC services and all new participants must use PwC as their integrator

  • Key Lessons

  • Business Model:

    • A comprehensive portal not a pure exchange was sought out by the industry to achieve greater market capitalization.

    • Delineating a compelling vision of possibilities for the e-Market with an executable plan surrounding an Industry point of view, facilitated buy-in and trust in PwC.

    • Develop an industry-wide model; avoid being biased to a particular company

  • Technology:

    • There is an important role for the convergence of technologies to provide a broad range of solutions. Newco’s will need complimentary technologies to complete transactions.

    • To permit the wide range of partners the play is not tied to any particular technology partner

Learnings by emarket utility consortium1
Learnings by eMarket - Utility Consortium several eMarkets (cont.)

  • Key Lessons (cont.)

  • Governance:

    • PwC acts a third party facilitator with independence and practices “Guerilla facilitation”, providing clear milestones and aggressive project management to promote clear decision-making and the elimination of iterative debates. This was also important to expedite the development of a highly independent newco

    • Creating an up-front thought document for discussion among various stakeholders framed issues and facilitated buy-in. The first day the concept was agreed upon, the PwC team made a list of 50 questions for all stakeholders and providers including the various service providers (i.e. exec search firm, legal, I-bankers)

    • Channeling issues through one project management staff person managed expectations from stakeholders. As issues expanded, sub-teams were formed to handle response and resolution.

    • The PwC team also owned the incoming communications and thus was in a position to capture all incoming questions. PwC responded to all incoming inquires with a set script that was modified slowly over time but the captured questions have developed into a useful list of relevant issues.

    • Move quickly from concept to launch to avoid getting stuck on the details. The shorter the build period, the shorter the time eMarket has without independent decision making

Learnings by emarket utility consortium2
Learnings by eMarket - Utility Consortium several eMarkets (cont.)

  • Key Lessons (cont.)

  • Organization Structure:

    • A fluid organization design works best. A benchmark for equity management stake is 15%. 138 staff are targeted to run the e-Market. Staffing timeline is aggressive – 6-8 weeks for the establishment of 25% of staff.

    • Staffing/resourcing is best handled by an external research firm, with given targeted profiles. PwC can play an interim staffing role during the transition from old-co to new-co.

    • Sourcing and site selection are inter-dependent given the limited talent pool with the appropriate skill set. Top executives with supply chain and technology experience will come from the Industry not from the participant firms in the e-Market.

    • Executives and procurement staff have difficulty working together to build the exchange.

    • A virtual structure for the newco decreased problems surrounding site selection.

Emarket functionality appendix
eMarket Functionality Appendix several eMarkets (cont.)

Suppliers several eMarkets (cont.)

  • Inform

  • Provide information about the product

  • Configure

  • Allow customers to customize the product

  • Attract

  • Introduce sellers & buyers

Part #






Part 1

Part 2

Part 3

  • Transact

  • Set the terms of transaction

  • Build customer relations

  • Handle inquiries

  • Account mgmt

  • Data mining






Product A



  • Fulfill

  • Logistics mgmt

  • Inventory mgmt

  • Process Payment

  • Bill

  • Take payment

Many functions that are associated with a traditional value chain are currently being conducted or ultimately will be conducted electronically via eMarkets

Source: Business 2.0

Different eMarket functions vary in terms of current availability, future penetration, and importance to the retail industry


Stage of Development1

Good for Retail2

Idea Generation / Planning Stage

Early stage of development

Significant Penetration

Currently Exists

Business Intelligence & Knowledge Management

Somewhat - depends on what companies are willing to share


Somewhat - depends on the segment of retail & type of products

Dynamic Pricing & Online Transactions


Financial Services


Systems Integration

Yes - especially given the heavy investment in EDI & ERP


Somewhat - companies may want to maintain existing relationships

Shipment Tracking

Somewhat - unclear what the demand for real-time tracking is

Demand Planning & Inventory Management

Yes - if existing competitive advantages can be maintained

Brand / Promotional Campaign

Somewhat - depends on the segment of retail

Point-of-Sale System

Yes - if customer control & relationships are maintained

1 Based on a eMarket initiatives across all industries and not specifically retail industry eMarkets

2 A function is deemed “Good for Retail” if it would significantly contribute to an eMarket’s ability to attract and retain members, quickly reach critical mass, and gain a competitive advantage in the Retail industry

Emarkets attract numerous buyers and sellers inform members and facilitate transactions
eMarkets attract numerous buyers and sellers, inform members, and facilitate transactions...





Potential for Competitive Advantage

Time to Build Capability*

Business Intelligence & Knowledge Management

  • eMarkets can provide an excellent centralized source of industry news and best practices, product information & reviews, benchmarking studies, discussion forums, and other knowledge management capabilities

  • eMarkets can provide information that more generally serves the community’s interest


  • ChemConnect provides industry news and an online reference library

  • Becoming a standard function

  • 3 months - commonly found on industry websites

  • A large-scale eMarket conducting transactions for thousands of buyers and suppliers will generate a wealth of data that can be mined as long as appropriate security measures and ethical business practices are followed

  • Supply chain sourcing and company or market specific data can be especially valuable

  • Business Intelligence data can be distributed in a variety of ways to a variety of parties


  • Altrade is part of Altra’s full service offering which provides some business intelligence data; ChemConnect provides a industry news and an online reference library

  • Planned - ex. Envera

  • Unclear, potential could be limited if companies unwilling to share data

  • 1-3 years

  • Technology, security, and ethical issues complicate situation


  • eMarkets can potentially allow buyers to make product specifications and seek a supplier or suppliers willing to sell products tailored to these specifications

  • A built-to-order model established by companies like Dell, could adapted for an eMarket exchange

  • Product configuration tools originated in the 1980s at companies like GM, Dell Computer, and Gateway to reduce incorrect orders when they began selling built-to-order computers and networking gear online


  • B2B commerce companies are positioned to deploy configuration technology although there are still major hurdles in integrating the technology with back-end legacy systems and eMarket systems

  • Depends on the industry and the existing demand for product specification

  • The complexity of potential product specification (e.g. electronics vs. commodity chemicals) and technological hurdles will largely determine the time to build capability

*The stated time estimates are best used as indications of relative time and not precise figures.

Emarkets attract numerous buyers and sellers inform members and facilitate transactions1
eMarkets attract numerous buyers and sellers, inform members, and facilitate transactions





Potential for Competitive Advantage

Time to Build Capability

  • Auctions - dynamic pricing where multiple buyers bid competitively over a set period of time from one or few suppliers

  • Reverse auctions - dynamic pricing where one or few buyers post their needs and multiple suppliers bid competitively


  • GM, SciQuest, MarketSite, Dovebid, ChemConnect, Big 3 Auto Exchange

  • All eMarkets offer online transactions and procurement functionality by definition

  • 3 months

  • Many eMarkets begin conducting online transactions within several months of announcing their intentions

Dynamic Pricing via Online Transactions &

Procurement - variety of methods

  • Bid/Quote - Buyers issue a Request for Quote to predetermined suppliers who competitively bid for the transaction


  • GM

  • Demand Aggregation - multiple buyers place orders collectively and the bulk order results in volume pricing & lower cost


  • FOBChemicals

  • Spot exchange - buyers and suppliers post products they want to purchase and products for sale, respectively; Specific buyers and suppliers find each other and negotiate final terms online


  • CheMatch, e-Steel

  • Product catalogue - eMarkets can take member catalogues from multiple sources, normalize data, categorize, make regular updates and provide search engine capabilities allowing members to “find” trading partners based on product type, price, etc. - not a dynamic pricing model


  • Healtheon, Chemdex, VerticalNet,

  • Note: Some eMarkets conduct transactions AND take payments online (see Financial Services function) but many eMarkets rely on traditional payment methods - monthly invoices, phone calls between buyers and sellers, etc.

  • Citigroup and Chase are creating portals that will allow large transactions between buyers and suppliers to take place in a virtual marketplace

  • Online payment - Zonetrader, MadeToOrder,, Healtheon, Grainger

  • Offline payment - WIZnet, USF Processors, Promedix, i2i, Chemdex


Financial Services

  • Beyond online payments, eMarkets can provide credit checks, escrow services, and warranties for members

  • Use of 3rd party financial institutions

    • Handle automated payments via the eMarket

    • Member transactions on the eMarket could be tracked by a financial institution which could provide regular reports on the member’s activity

    • Could provide financing services to members


  • PlasticsNet, PCConnection,,, Citibank Procurement Connection portal

  • Planned - ex. Big 3 Auto Exchange, Envera, GlobalNetXchange

  • First-mover competitive advantage

  • Increasingly becoming a standard feature

  • 6 months

  • Need to align with 3rd party financial services providers & implement technologies

eMarkets can provide specific services that further integrate the supply chain, facilitate order fulfillment, tracking and delivery of goods





Potential for Competitive Advantage

Time to Build Capability

Systems Integration - eMarket systems & member back-end systems

  • eMarkets can provide services that integrate a member’s legacy systems (ex. EDI, ERP) with those of the eMarket

  • Development of standards, like XML, facilitate systems integration

  • Transaction data can be securely and “smoothly” exchanged between the eMarket and the legacy systems that may directly or indirectly improve demand planning, inventory management, and other business processes

  • It is likely that industry convergence and open standards will lead to different eMarkets integrating their systems to create horizontal eMarkets


  • i2i1 offers ERP integration through its partner services; Chemdex offers some systems integration services

  • MySAP and Oracle are developing integrated systems

  • Many are planned - ex. including Big 3 Auto Exchange, Envera, ChemicalOnline

  • Major first-mover advantage especially in industries heavily invested in back-end systems

  • 1-3 years

  • Complexity of member legacy systems and complexity of desired integration will be important factors in determining the time to build capability


  • As transactions are conducted, 3rd party shippers can be identified through a variety of potential means:

    • Shippers can post rates via the eMarket

    • A proposal and bidding process

    • eMarket may have preferred 3rd party that handles logistics for members

  • Some eMarkets take actual ownership of the product during transfer and some have warehouses to facilitate this

Low to Medium

  • National Trade Exchange, i2i has 3rd party logistics partners providing services for its various vertical eMarkets; Many planned

  • Zonetrader & Chemdex take ownership of product

  • Increasingly becoming a common feature that may become a standard function

  • Under 1 year

  • Need to establish own logistics capabilities or partner with 3rd party provider

Shipment Tracking

  • Allows a member to determine the location and up-to-the-minute estimates of shipment arrival times

  • eMarkets can provide shipment tracking data to members with in-house shipment tracking systems easily if the two systems are integrated


  • e-Chemicals has a relationship with Yellow Freight system which provides tracking information

  • Many are planned

  • Web enabled integration with FedEx and UPS make tracking easy

  • May become a standard feature

  • Under 1 year

  • Electronic transactions facilitate real-time shipping information

1 i2i (industry-to-industry) is a company that operates various industry specific eMarkets (i2i chemicals, i2i energy, i2i retail, i2i construction) and is not related to i2 and i2 TradeMatrix