creating a winning e- business second edition defining your e-business idea chapter 2

Creating a Winning E-Business

Second Edition

Defining Your E-Business Idea

Chapter 2

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Learning Objectives

• Identify entrepreneurial abilities

• Describe the entrepreneurial

process

• Understand the factors affecting e-

business success

• Identify ways to exploit e-business

advantages

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The Entrepreneur and theEntrepreneurial Process

• Entrepreneur– Assumes the risks of starting and

operating his or her own business– Must be able to lead others– Must believe in his or her business idea– Must have the self-confidence to

accomplish business goals

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The Entrepreneur and theEntrepreneurial Process

• E-business entrepreneur examples– Jeff Bezos, Amazon.com– Pierre Omidyar, eBay– Kelby Hagar, GroceryWorks.com and

Digital Witness– Jason Zasky, Failure Magazine

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The Entrepreneur and theEntrepreneurial Process

• Entrepreneurial abilities– Leadership traits– High-energy level– Self-confidence– Organizational skills– Ability to act quickly and decisively– Independent, goal-oriented, creative,

competitive

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The Entrepreneur and theEntrepreneurial Process

• Entrepreneurial process– Stage 1: Are you an entrepreneur?

• Assess your entrepreneurial abilities• Evaluate time and effort involved in

starting/running your own business• Consider the effect of the business

commitment on your family life

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The Entrepreneur and theEntrepreneurial Process

• Entrepreneurial process (continued)– Stage 2: Buy existing business or start

own business?

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The Entrepreneur and theEntrepreneurial Process

• Entrepreneurial process (continued)– Stage 3: For a new business startup

you must• Define the business idea• Create a business plan• Secure financing

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The Entrepreneur and theEntrepreneurial Process

• Entrepreneurial process (continued)– Stage 4: Operate and grow your

business

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The Entrepreneur and theEntrepreneurial Process

• Entrepreneurial process (continued)– Stage 5: Harvest your business

• Continue to operate “cash cow”• Go public• Sell the business• Liquidate the business

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The Entrepreneur and theEntrepreneurial Process

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And now… what really needs to happen to be an innovator!

• Entrepreneurship and creativity are really represented by a process!– Identify an Opportunity– Develop a Concept– Determine the Required Resources– Acquire the Necessary Resources– Implement and Manage– Harvest the Venture

Source: Morris et al. Entrepreneurship & Innovation

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Entrepreneurship and Business Models

• Frameworks

Source: Morris et al. Entrepreneurship & Innovation

Entrepreneurial Process

The Environment

The Entrepreneur

The ResourcesThe Concept

The OrganizationalContext

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Entrepreneurship and Business Models

• How to find opportunities

Source: Morris et al. Entrepreneurship & Innovation

Types Methods Sources Detractors

Perennial Deliberate Search vs. Discovery

The Rules Change Demographics

Change

No Need Present Window is not yet

open

Occasional Market Pull vs. Resource or Capacity

Push

Underserved Markets Social Trends

Strong Loyalties High Switching Costs

Multiple Causes New customers to the market

Satisfied customers

Multiple Effects Increase in usage rates

Shortages

Easy for others to enter with alternatives

Intense competition

New Knowledge Customers hard to reach

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Entrepreneurship and Business Models

• Types of Innovations– New to the world products or services– New to the market products or services– New product or service line that at least one

competitor is offering– Addition to existing products or service lines– Product/service improvement, revision, including

addition of new features or options– New application of existing products or services,

including application to a new market segment– Repositioning of an existing product or service

Source: Morris et al. Entrepreneurship & Innovation

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Entrepreneurship and Business Models

• Entry Wedges

Source: Morris et al. Entrepreneurship & Innovation

Other Entry Wedges New Product or Service

Parallel Competition

Franchising Acquisition

Exploiting Parallel Momentum Geographic Transfer Supply Shortages Tapping Utilized Resources

X X

X

Customer Sponsorship Customer Contract Becoming a 2nd Source

X X

Parent Co. Sponsorship Joint Venture Licensing Market Relinquishment Selloff Division

X

X

X

X Governmental Sponsorship

Favored Purchasing Rule Changes

X X

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What is a Business Model?

• Six key questions– How do we create value?– For whom do we create value?– What is our source of competence/

advantage?– How do we differentiate ourselves?– How do we make money?– What are our time, scope, and size

ambitions?

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Porter’s Competitive Forces Model: How the Internet Influences Industry Structure

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Factors AffectingE-Business Success

• The network effect– Total value of a product, service, or

technology grows as more and more people use it

• Telephone system example– Single telephone has no value; as more people

join the telephone system, the value of each telephone increases

• uBid online auction site example– As more people participate, the auction site

becomes more valuable to buyers and sellers

• Second Life

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Factors AffectingE-Business Success

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Factors AffectingE-Business Success

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Factors AffectingE-Business Success

• Innovative marketing ideas– Hotmail and viral marketing example

• Hotmail users grew at a rapid rate because of electronic word of mouth coupled with the network effect

• Electronic word of mouth or viral marketing spreads from user to user in the same way a human virus spreads from person to person

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Factors AffectingE-Business Success

• Scalability– Ability of a business to function well in

the face of rapid growth• Systems and procedures meet customers

needs• AllAdvantage e-business failure example

– E-business idea: Paying for users to browse the Web and view advertising

– Millions of customers signed on; advertisers did not

– No scalability with rapid growth in customers

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Factors AffectingE-Business Success

• Ease of entry into electronic markets– Low-cost technologies make it easy to create

new e-businesses– eBay and online auction example

• Easy for consumers to interact at auction site• Web auction software is cheap and easy to

install /maintain• E-businesses earn commissions without having to

manage, warehouse, and distribute products

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Factors AffectingE-Business Success

• Ease of entry into electronic markets (continued)– Competitive barriers to overcome

• Failure to secure first-mover advantage• Lack of name identification• Lack of customer loyalty

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Factors AffectingE-Business Success

• Ability to quickly adapt to marketplace changes– Rapid knowledge transfer– Need to make decisions quickly– Exploit new ideas and opportunities– Handle new challenges

• Amazon.com is an example of ongoing evolution from a basic e-business idea

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Exploiting E-BusinessAdvantages

• Expand the market– Business and consumers are no longer

bound by constraints of time, space, physical location

– Opportunity to reach larger market– Ticketmaster example

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Exploiting E-BusinessAdvantages

• Acquire greater business visibility– Get business name, products, and

services in front of potential customers more quickly

– Auto industry example

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Exploiting E-BusinessAdvantages

• Use the power of the Internet and Web to maximize customer relationships and improve responsiveness – Create customer loyalty– Stay in touch with customer needs– Build one-on-one relationships– Provide information to enrich customers’

online experience• Southwest Airlines example

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Exploiting E-BusinessAdvantages

• Create new products and services– Opportunities for new e-business ideas

where products or services are accessed over the Web

• Business software applications• Server facilities for data file backup• Legal dispute resolution

– Cybersettle example

• Web hosting services– Rackspace Managed Hosting example

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Exploiting E-BusinessAdvantages

• Reduce costs of running a business– Sales and customer support costs– Transaction costs– Order handling costs

• Dell Computers, Cisco Systems, and Microsoft Corporation examples

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Exploiting E-BusinessAdvantages

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Exploiting E-BusinessAdvantages

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Chapter Summary

• An entrepreneur assumes the risks of starting and operating his or her own business

• Entrepreneurial abilities – Leadership– High-energy– Self-confidence– Organization skills– Ability to act quickly

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Chapter Summary

• Five stages of the entrepreneurial process– Decide if you are an entrepreneur– Decide to buy or start new business– Plan the business– Operate the business– Harvest the business

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Chapter Summary

• Factors that can affect e-business success– Network effect– Innovative marketing ideas– Scalability of the e-business idea– Cost of entry into the marketplace– Ability to overcome competitive barriers– Ability to exploit inherent advantages