Dean’s Seminar:

The Future of e-Business in the New Millennium

Ned C. Hill, Dean

Marriott School of ManagementBrigham Young University

Management SocietyHouston

April 2001

BYU Update

Increased enrollment (27,000 to 29,000) Summer visiting student program Growth in physical facilities Growth in online courses (over 200) Continuing education (50,000 students) Influence throughout the world

China Inventions Languages

Marriott School Update

Faculty—125 (20 new this year!) Students (MBA)

– International 17%– Women 21%– Bilingual 70-80%– GMAT average 670

Placement Web sitemarriottschool.byu.edu

Recognition MBA Finance #9 in world (Financial Times) Accounting (MS/BS) #3 in U.S.

Steve Albrecht—top award from AICPA Undergraduate Bus Mgmt ranked #31 MBA in second 25 in Business Week & USNWR

#1 for value MISM program #20 by ComputerWorld Entrepreneurship program #18 by Success “#1 Stone Cold Sober School in U.S.” Princeton

Review

Curriculum Strong functional area, e.g., Finance,

Accounting, Marketing Infuse throughout curriculum:

e-Business Globalization Entrepreneurship

Solid foundation of ethical behavior, work ethic, Gospel principles

International Outreach

China—designing MPA, MBA and certificate programs in Sichuan/Ningxia; microenterprise

Mexico—employment, certification Argentina—designing EMBA program Peru—helping congress Honduras—HELP project Australia—joint executive education, conferences ISSP students—125 so far

Annual Management Conference

June 28-30, 2001 Leadership and e-Business 600-700 attended last several years To register: marriottschool.byu.edu

The Future of e-Businessin the New Millennium

Outline What’s wrong with the old paradigm? What is e-Business? How large is the market? How e-Business change business processes? What does e-Business mean for you?

e-Business: Road to Fabulous Wealth!

Just add an “e” to a business process or a “.com” to a company. Without obeying well-accepted economic principles, you will magically create wealth beyond your fondest dreams.X

e-Business Changes... Information flows Internal and external processes Relationships PowerBUT, it does not change need for… Quality products Excellent service Cost effective delivery Valued relationships

What’s Wrong with the Old Paradigm?

The Paper-based Commercial Transaction

Seller

Buyer

Mail

Mail

Mail

Mail

Mail

Carrier BankingSystem

Req

uest

for Q

uote

Quote

Pur

chas

e O

rder

Invoice

Bill of Lading

Che

ck a

nd R

emitt

ance

Adv

ice

Check

Keying in the Paper World

Keying Keying

Keying

Keying Keying

KeyingKeying Keying

Postal System

Seller’s Computer System

Buyer’s Computer System

What’s Wrong with this Picture? Labor intensive Slow Error prone Uncertain Excessive inventory (and cash) Bottom Line: IT’S EXPENSIVE

What Can We Do? Option 1: Make paper work harder Option 2: Get rid of the paper altogether

Definitions of e-Business

To most people: “The selling of products and services using the Internet.”

More powerful definition : The use of computer and communication technology to facilitate the information exchange between two parties in a transaction.

Map of e-CommerceAll Electronic

All Paper/Manual

EDI, FEDI, FTP

Traditional Paper/Manual Transactions

FAX

MICR, OCR, ICR, Bar CodingCell Phones

Internet, E-mail, E-trade

Pay

men

t and

Rem

ittan

ce A

dvic

e

An e-Commerce Transaction

Seller

Buyer

Carrier BankingSystem

Req

uest

for Q

uote

Quote

Pur

chas

e O

rder

In vo ic e

Bill of Lading

Goods

Manual Processes in an e-Commerce World

Keying

Keying

Computer Network (VAN, Internet)

Seller’s Computer System

Buyer’s Computer System

Translation Translation Translation

TranslationTranslationTranslation

P.O. Invoice RA

F.A. F.A. F.A.

Changes Due to e-Business Lower personnel costs Reduced error rates Faster cycle time Improved customer service Reduced inventory Fewer stock-outs Reduced paper handling costs Faster payments Better control over information Potentially creates entirely new markets

Online Households

0

10

20

30

40

50

60

70

1997 1998 1999 2000 2001 2002

From Net Profit by Peter S. Cohan

Million

Web Ad Revenues

0

500

1000

1500

2000

2500

3000

1996 1997 1998 1999 2000

From Net Profit by Peter S. Cohan

$ Million

Business Through the Web

0

200

400

600

800

1000

1200

1996 1997 1998 1999 2000 2001 2002

Est. from the U.S. Department of Commerce

$ Billion

Size of e-Business Market

180

135

5.5633

B2CC2BC2CB2B

Billions of dollars, projected for 2003

Cost Curves

Labor costs Paper costs Building costs

vs. Computer costs Telecommunication costs

Time Required to Download the 32 VolumeNew Encyclopedia Britannica

1200 bps modem……………………..… 28 days 9600 bps modem………………….…… 3.5 days 28.8 Kb modem……………………….. 28 hours Basic Rate ISDN…………..……….… 6.3 hours T-1 line…………..…….……….….. 31 minutes T-3 line…………..……………….… 1 minute Optical Fiber (OC-3)…….…….…. 17 seconds Optical Fiber (OC-12)…….……... 4.7 seconds Optical Fiber (new technology).... .005 second

e-Business Impacts Everything

e-Business

Finance

Accounting

MarketingStrategy

Operations

Systems

Supply ChainHR

Example 1: Bergen BrunswigPaper System

Pharmacist

Bergen Brunswig

Ord

er

Manual Processing

Del

iver

y

Paym

ent

Example 1: Bergen Brunswige-Business System

Pharmacist

Bergen Brunswig

Ord

er

Automated ProcessingD

eliv

ery

Paym

ent

Capture bar code on shelf labelPC consolidates entire orderOrder transmitted over InternetWarehouse is automated Delivery is within 5 hours

Example 1: Bergen BrunswigWhat Changed?

Sales function Role of salesperson Information channel

Order fulfillment processes Manual to automated

HR focus Compensation issues Hiring & training

Customer relationships Responsibility for order initiation/errors Service level

Example 2: Daimler-ChryslerVendor Relationships under e-Business

Chrysler

Supplier

Purc

hase

Ord

er

Del

iver

y

e-Pa

ymen

t

e-M

ater

ial R

elea

se

e-D

eliv

ery

Ord

er

e-Ad

vanc

ed S

hip

Not

.

Example 2: Daimler-Chrysler

Inventory management Just-in-time possible

Invoiceless pay (“Evaluated Receipt Settlement”) Quality control moved back to supplier Close cooperation necessary Tolerance for errors is much lower Result?

Inventory Reduced by $1,000,000,000

Four Stages of Web Involvement

Stage 1: “Brochure”– One-way information broadcast– Lowest cost, easiest to maintain– A holder for your place in e-commerce

Stage 2: “Basic Transactions”– Offer basic transactions: orders, payment– Requires significant maintenance, real-time processing– May compete with existing business avenues

Four Stages of Web Involvement

Stage 3: “Complete Business Partnership”– Multiple transactions with customers– Integrated functionality– Builds customer loyalty, long-term

relationships– Involves major funding commitments

Stage 4: e-Market Participation

Four Stages of Web Involvement

Stage 1

Stage 2

Stage 3Cisco: Product Info. DesignOrders StatusCustomer service DeliveryPaymentLandsEnd:

CatalogOrders

WSJ:News

Stage 4NASDAQ:Multiple buyersMultiple sellers

e-Marketplaces

AutomatedMatching

Rules

Buyer

Buyer

Buyer

Buyer

Seller

Seller

Seller

SellerRecord keeping, reporting, etc.

Banking RegulatoryAgencies

Internet-based Marketplace

Should My Company Go on the Web? Do we have $100,000 to $200,000 to invest in

launching a Web site? (And are we willing to invest in maintaining it?)

Are our competitors involved in the Web? Do our customers demand Web services? Do we have customer service opportunities that could

be improved via the Web? Is a significant portion of our customer base under the

age of 30? Do we want to be in business 2-5 years in the future?

Suggestions on Entering e-Business Keep your focus on creating value for your

customer--don’t get lost in the technology Use e-Business to improve processes and

information flow--don’t pave over old cow paths

Develop customer loyalty by providing multiple services that add value

Partner when necessary to widen your ability to provide services

Want to Find an Internet Business Opportunity?

Hint: Study Possible Timelines Consumer shopping Applying to college Buying a house Booking a flight Checking out a book from a libraryAlso ask: Will this add value? And will

people pay for it?

Be Careful of e-Business Negatives e-Business… Demands technologically sophisticated staff—make sure you

have them (or can obtain other services) Demands constant attention to keep up web sites May alienate some customers May alienate some employees—e.g., ubiquitous contact with

the office Will lead to problems if you overlay technology onto a

poorly designed information system May create security issues May create audit control problems

Rollins Center for e-Business

Faculty development Curriculum enrichment Research Public awareness Partnerships with e-Businesses

General Course Map for e-Business

Foundation Technologies: Networking, Data Bases, Programming

Overviewof e-Business

Application to Functional Areas:Finance, Marketing, Operations, HR, Government, etc.

Strategyand e-Business

Enter

Using e-Business within the University

Applications -- Internet Course Registration -- Internet Purchase of Supplies -- Internet Phone Bills -- EDI Grade Transcripts -- EDI Travel Arrangements -- Internet Alumni Relations

Publications -- Internet Communications -- e-Mail

Internal Communications -- MS Outlook Correspondence Courses -- Internet/CD Rom

Examples of Computer-Assisted Courses

Accounting Replaces lecturesRat Lab Decreases costsChemistry Lab Allows experimentsLanguages Adaptive learningMusic Visualizing BachAccounting Repetitive drills

Course Key Feature

References on e-Business Evans and Wurster, Blown to Bits: How the New Economics of

Information Transforms Strategy, Harvard Business School Press, 2000

Tapscott, et al, Digital Capital: Harnessing the Power of Business Webs, McGraw Hill, 2000

Shapiro and Varian, Information Rules: A Strategy Guide to the Network Economy, Harvard Business School Press, 1999

Kalakota and Robinson, e-Business: Roadmap for Success, Addison Wesley, 1999

Naisbitt, High Tech, High Touch, Broadway Books, 1999 Friedman, The Lexus and the Olive Tree, Anchor Books, 2000 Nicholas Negroponte, Being Digital, Knopf, 1995--one of

the most insightful commentaries on the Information Age

Conclusions Technology is changing the business (and the

educational) paradigm But e-Business is not a cure-all—just another tool

(and a very powerful one) Most changes are beneficial—some are detrimental Learn all you can about e-Business You will be doing e-Business sooner or later--might

as well get started now!

e-Business Changes Curriculum Some create separate programs

– Easier to transition--don’t have to change other classes

– Lots of new material to cover– But “e-business” is going away!?!

Better to integrate e-business into existing courses– More faculty have to upgrade– But better for students in the long run

Graduate Program at BYU

Networking Database e-Business Application Management Development

Introduction to e-Business

Strategyand e-Business

Enter

Functional areas can experiment here

SpecialTopics

Brand Mgmtand e-Business

InternetMarketing

Treasury Mgmt.& e-Business

LectureSeries

Existing New Existing New

NewExisting

Existing Existing Existing