e-commerce: an enron view mike s. mcconnell vice chairman & chief operating officer enron net...
TRANSCRIPT
E-Commerce: An Enron View
Mike S. McConnellVice Chairman & Chief Operating Officer
Enron Net Works
Presentation Summary
eBusiness Trends
Enron Philosophies
Conclusions
“It Is Not the Strongest of the Species That Survives, Not the Most Intelligent, but the Most Responsive to Change.”
Charles DarwinThe Origin of the Species
Today’s New Economy
New Economy Business Model is Fundamentally Different
than Old Economy Model
– Successful Companies are Increasingly Knowledge-Based
Businesses (with Increasing Incremental Returns)
– Network-Based Businesses Lead to Market Share Gains and
Continued Scale Advantages
Technology, Innovation, and Intellectual Capital are Critical
Metcalfe’s Law
“Winner-Take-All” Outcomes are More Frequent
Internet is Changing Everything
1966 1998
Source: Financial Strategy, William E. Fruhan, Jr. 1979Based on 1,448 Compustat Companies Source: CFSB estimate. Based on S&P Industrial Avg.
100
90
80
70
60
50
40
30
20
10
0-26 -9 5 9 18 28 38
80
70
60
50
40
30
20
10
0-10 0 4 8 12 16 20 100
Fre
qu
en
cy
Fre
qu
en
cy
“Winner Takes All”
ROE (%) ROIC (%)200
The goal
Management Strategy: Tight and Loose
Performance should drive protocol,not vice versa
Tight Controls
Loose Controls
– Financial accounting– Risk management– Performance reviews– Legal obligations
– Creativity/new business ideas– Dress code– Time clock
20th Century Energy
Company
21st Century Energy
Company
• Capital-intensive• Vertically integrated• Geographically dominant• Commodity price dependent• Hierarchical
• Intellectual capital intensive• Network integrator• Differentiation dependent• Entrepreneurial culture
Two Energy Models
Industry Trends
-10
0
10
20
30
40
50
IT Laggards
IT StarsMarket Share Gain
Increasein Sales
Return on Sales
- 4
4.80
7.4
1.8
47
Source: McKinsey & Company
% Difference by Economic Measures
Industry Trends
$0
$50
$100
$150
$200
$250
‘98
Source: New York Times 2/15/99
Technology has Slashed the Price of doing Global Business
The Cost of a 3-Minute Phone Call From New York to London
‘90‘70‘50‘30
Transaction Costs
$1.07
$.68
$.27
$.10
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
Source: Downes, Larry and Chunka Hui, Unleashing the Killer App., Boston: Harvard Business School Press, 1998, pp.44-45
Branch Telephone ATM Internet
…and Radically LoweredTransaction Costs
Average Cost per Transaction Retail Banking by Channel
U.S. eCommerce Growth
Source: Forrester Research, Inc
0
500
1000
1500
2000
2500
3000
$ B
illi
on
1998 1999 2000 2001 2002 2003 2004
B2BB2C
Worldwide eCommerce Growth
Source: Forrester Research, Inc
0
1000
2000
3000
4000
5000
6000
7000
2000 2001 2001 2003 2004
Bil
lio
ns
US
$ Rest of World
Latin America
Western Europe
Asia Pacific
North America
eBusiness Trends
The Internet is a Disintermediary
The Internet Cannibalizes Existing Business Law of Diminishing Returns
The Internet Allows for Mass Customization
Barriers to Enter Markets are Dramatically Changing
Enron Philosophies
Run Technology as a Business
Develop and Implement Enron’s Global E-Business Strategy
Spending Focused on Achieving Competitive Advantage
Highly Robust and Flexible Infrastructure
Develop Several Proprietary Applications
Enron Philosophies Continued
Expansion and Extension of our Existing Business
Enabler of Unparalleled Information Dissemination
Incubator of New Ideas and Business Models
Challenge Existing Ideas and Beliefs
Conclusions
Technology is More than Just Support
Must Move Quickly
Must Change the Culture
It is a Matter of Survival
