the increasingly important connection between the e-world and the p-world adventis perspective and...
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The Increasingly Important Connection Between the e-World and the p-World
ADVENTIS Perspective and Prescriptions
Fall 2000
ADVENTIS CORPORATION
200 Berkeley Street, 22nd FloorBoston, MA 02116
Telephone: 617.421.9990Fax: 617.421.9994
ADVENTIS CORPORATION
200 Berkeley Street, 22nd FloorBoston, MA 02116
Telephone: 617.421.9990Fax: 617.421.9994
The Increasingly Important Connection Between the e-World and the p-World
ADVENTIS Perspective and Prescriptions
Fall 2000
4Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
ADVENTIS: Heritage and Horizons
We were founded in 1993 to provide expert management and strategy consulting focused on the converging global information industries.We were founded in 1993 to provide expert management and strategy consulting focused on the converging global information industries.
Since our inception, we have maintained industry leading growth and financial performance. We have consistently achieved 60% annual growth and now have over 200 consultants and offices in Boston, Chicago, London, New York, San Francisco, and Washington, D.C.
Since our inception, we have maintained industry leading growth and financial performance. We have consistently achieved 60% annual growth and now have over 200 consultants and offices in Boston, Chicago, London, New York, San Francisco, and Washington, D.C.
To mark our March 2000 separation from our former parent Renaissance Worldwide, and to underscore our expertise in applying Real Economy Values to Next Economy Strategies, we changed our name in October 2000 to ADVENTIS.
To mark our March 2000 separation from our former parent Renaissance Worldwide, and to underscore our expertise in applying Real Economy Values to Next Economy Strategies, we changed our name in October 2000 to ADVENTIS.
Our new name captures the essence of who we are and what we do for clients every day, anticipating and harnessing convergence, enabling breakthrough results in the Next Economy.
Our new name captures the essence of who we are and what we do for clients every day, anticipating and harnessing convergence, enabling breakthrough results in the Next Economy.
5Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
The Premier Strategy and Management Consultancy to the Global Information Industries
• We Make Strategy Work, By Helping Clients Harness Convergence
• We Are Not Generalists—We Focus on the Converging Global Information Industries:
- Communications- Computing - Commerce- Content
• Six Global Offices:- Boston- London- San Francisco
• Entrepreneurial Growth- Established in 1993- 60% compound annual revenue growth - Over 200 staff
- Chicago- New York- Washington
Applying Real Economy Values to
Next Economy Strategies™
Blue Chip and New Chip Clients
Breakthrough Capabilitieswith Measurable Impact
PeerlessIndustry Focus
6Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
ADVENTIS: Our Core Values Enable Us to Relentlessly Pursue Our Mission
Our MissionOur Mission
To Help Clients Apply Real Economy Values to Next Economy Strategies by Harnessing the Power of Convergence
To Help Clients Apply Real Economy Values to Next Economy Strategies by Harnessing the Power of Convergence
Our ValuesOur Values
• FocusedWe are deeply specialized in the converging 4Cs of the Next Economy.
• SmartWe bring clarity to alarming complexity.
• CreativeWe see the whole picture and we are blazing new paths to a convergent future we are helping to create.
• FlexibleWe are rigorous and disciplined yet adapt adroitly to our client’s changing needs.
• FriendlyWe enjoy working with our clients and take our work very seriously, but we don’t take ourselves all that seriously.
• DependableWe are trustworthy, dedicated, and professional. We do whatever it takes to get the job done. Period.
• FocusedWe are deeply specialized in the converging 4Cs of the Next Economy.
• SmartWe bring clarity to alarming complexity.
• CreativeWe see the whole picture and we are blazing new paths to a convergent future we are helping to create.
• FlexibleWe are rigorous and disciplined yet adapt adroitly to our client’s changing needs.
• FriendlyWe enjoy working with our clients and take our work very seriously, but we don’t take ourselves all that seriously.
• DependableWe are trustworthy, dedicated, and professional. We do whatever it takes to get the job done. Period.
7Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Our Clients Are the Blue Chips and New Chips at the Epicenter of Convergence
CommunicationsCommunications ComputingComputing Commerce and ContentCommerce and Content
8Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
ADVENTIS Expert Commentary on the New Economy’s Issues Is Frequently Featured in the World’s Leading Business Media
We provide penetrating and provocative commentary on key industry developments and original thinking on breakthrough strategies and approaches
We provide penetrating and provocative commentary on key industry developments and original thinking on breakthrough strategies and approaches
9Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
ADVENTIS Helps Business Leaders Establish and Implement Their Convergence Destination, Navigation, and Mobilization
Business CreationBusiness CreationBusiness RenewalBusiness Renewal
• Newco Future Mapping• e-Business Strategy Blueprint• Ecosystems Beachhead Mapping• ASP Market Blueprint
• Strategic Architecture• Opportunity Blueprint
• Market Segmentation• Solutions Growth Blueprint• Technology Commercialization
• Newco Future Mapping• e-Business Strategy Blueprint• Ecosystems Beachhead Mapping• ASP Market Blueprint
• Strategic Architecture• Opportunity Blueprint
• Market Segmentation• Solutions Growth Blueprint• Technology Commercialization
• Enterprise Scan• e-Commerce Engine• M-Commerce Blueprint
• Business Model Redesign• Best Practices Benchmarking
• Rapid Strategy Realization• Business Engine Re/Design • Activity Based Management• Integrated Supply Chain
• Enterprise Scan• e-Commerce Engine• M-Commerce Blueprint
• Business Model Redesign• Best Practices Benchmarking
• Rapid Strategy Realization• Business Engine Re/Design • Activity Based Management• Integrated Supply Chain
Performance ManagementPerformance Management
• Strategic Performance Management Scorecard• Shareholder Value Creation • Knowledge Enabled Processes
• Quick Hit and Breakthrough Implementation• Change Management• Leadership and Skills Development
• Strategic Performance Management Scorecard• Shareholder Value Creation • Knowledge Enabled Processes
• Quick Hit and Breakthrough Implementation• Change Management• Leadership and Skills Development
ConvergenceDestination
ConvergenceDestination
Convergence Navigation
Convergence Navigation
Convergence Mobilization
Convergence Mobilization
Power Tools
11Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Leveraging the e-World/p-World Value Chain to Predict the Future
Connectivity Market Dynamics
Connectivity Market Dynamics
Applications Focused Business
Model Options
Applications Focused Business
Model Options
Consumer Applications/
Content Selection
Consumer Applications/
Content Selection
• Backbone & Local Access “Abundance”
• Applications as Success Driver
• How Broadband is Changing Customer Behavior
• Business Model Identification
• Business Model Attractiveness Rating
• Identification of Consumer Trends Online Purchasing
• Prioritization
• Broadband Impact
• Fulfilment Requirements
• Enabler Requirements
Consumer DeliveryConsumer Delivery
• Customer Experience
• Delivery/Supply Chain Issues
• Typical Misfires
12Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Leveraging the e-World/p-World Value Chain to Predict the Future
Connectivity Market Dynamics
Connectivity Market Dynamics
Applications Focused Business
Model Options
Applications Focused Business
Model Options
Consumer Applications/
Content Selection
Consumer Applications/
Content Selection
• Backbone Local Access “Abundance”
• Applications as Success Driver
• How Broadband is Changing Customer Behavior
• Business Model Identification
• Business Model Attractiveness Rating
• Identification of Consumer Trends Online Purchasing
• Prioritization
• Broadband Impact
• Fulfilment Requirements
• Enabler Requirements
Consumer DeliveryConsumer Delivery
• Customer Experience
• Delivery/Supply Chain Issues
• Typical Misfires
13Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Capital Abundance is Driving Bandwidth AbundanceCapital Abundance is Driving Bandwidth Abundance
Source: Brokers Reports, Textlines, Annual Reports, ADVENTIS Analysis
Fibers and Fibers Lit by Major Carrier 1999-2004
US NetworksUS Networks
Total # Fibers
(Incl. Not Lit)
TotalFibers Lit
1999
TotalFibers Lit
2004
0
100
200
300
400
500
600
SprintFrontierGTEMCI
AT&T
IXC
Williams
Qwest
Level (3)
508
1836
Nu
mb
er o
f F
iber
s
Capacity Build-Up On the Internet Is Disrupting Supply/Demand Balance–Pure Transport Players Will Be Threatened in This Environment
US Demand and Supply (Tbps)1999–2004Tbps
Demand
SupplyScenario 1
SupplyScenario 2
0
5
10
15
20
1999 2000 2001 2002 2003 2004
9 Tbps
18 Tbps
11 Tbps
Source: Renaissance Analysis, Telegeography, P Budde Communications Ltd, OECD, Pioneer Group, Brokers Reports, Textlines, Annual Reports
Scenario 1: One fiber pair lit, with no increase from 1999Scenario 2: Extra fiber pair lit by most players in 2000
14Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Transport Revenue and Price CollapseTransport Revenue and Price Collapse
Transport Service Revenues for US CarriersTransport Service Revenues for US Carriers
Embedded Network Management ComplexityEmbedded Network
Management Complexity
• Distance now irrelevant• IP is primarily local• Abundant transport bandwidth also
shifts value and power to local access• Network management complexity shifts
from customer to the network
• Distance now irrelevant• IP is primarily local• Abundant transport bandwidth also
shifts value and power to local access• Network management complexity shifts
from customer to the network
Re
ve
nu
es
fo
r U
.S.
Ca
rrie
rs (
$B
)
$12.7
$16.7
$45.4
$22.4
$29.2
$37.0
$66.3
$54.6
$82.6$84.7
$88.6$91.1$91.0$88.2$84.1
$80.6
$0
$25
$50
$75
$100
1996 1997 1998 1999 2000 2001 2004 2005
Price Per Gigabit Falling at More
Than 23% per Year
US Carriers Transport
Revenue ($B)
Dollars in Revenue Per GB Per Year
Relative Cost of Network TechnologiesRelative Cost of Network TechnologiesRelative Cost of Network Technologies
0
2
4
6
8
10
12
14
IP ATM Hybrid CircuitSwitched
Ind
ex o
f u
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co
stat
fu
ll c
apac
ity
Source: ADVENTIS
This Internet Abundance Is Collapsing the Transport Price Structure and Increasing Importance On Local Access
15Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Source: J.D. Power and Associates 2000 National Internet Service Provider Customer Satisfaction Study
Customer Satisfaction Index Weights: Internet/On-Line Service
The Present Focus on Price Has Is Leading Broadband Internet Access Towards Commoditization
Annual Local Access Revenue per Subscriber
$889
$391
$0
$200
$400
$600
$800
$1,000
1999 2003
Broadband Household Penetration
4.5
40.9
0
10
20
30
40
50
1999 2003
Households (millions)
Broadband Subscriber Revenue Growth
$16B
$4B
05
101520
1999 2003
Revenue (billions)
CAGR = 41.4%
CAGR = 73.6%
2000 2003
2000 2003
2000 2003
16Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
The Market Is Relatively Concentrated With AT&T Owning a 25% Share – With a Stock Price Reflecting a Commodity Position
Broadband SubscribersBroadband Subscribers
Source: Company Announcements, CyberData
• Facilities based players are the clear leaders
• Profitability of operators is questionable
• Operational issues (provisioning billing etc.) abound
• Equity markets no longer looking favorable on segment
• Facilities based players are the clear leaders
• Profitability of operators is questionable
• Operational issues (provisioning billing etc.) abound
• Equity markets no longer looking favorable on segment
0 200 400 600 800
Rythyms
Northpoint
Bell South
Adelphia
US West
Covad
Verizon
Comcast
Shaw
SBC
AT&T Broadband
Thousands
Q2-00
Q4-99
17Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Current Internet Users Reasons for Wanting BroadbandCurrent Internet Users Reasons for Wanting Broadband
Compelling Applications Increase Perceived Value of Broadband by Seven Fold– But Few Compelling Applications Exist
Source: The Yankee Group and ADVENTIS
Key Messages Propelling
Growth
Key Messages Propelling
Growth
Overall Penetration
Overall Penetration
Consumer Reaction
Consumer Reaction
SpeedSpeed Always OnAlways On Compelling ApplicationsCompelling
Applications
3 % Penetration3 % Penetration
Attractive to power users and home office workers
Attractive to power users and home office workers
10 % Penetration10 % Penetration 20 % Penetration20 % Penetration
Of the 22.5% of homes with multiple lines 32.2% say that they would drop one for “always on” high speed internet access
Of the 22.5% of homes with multiple lines 32.2% say that they would drop one for “always on” high speed internet access
Understand compelling power of:
• Productivity Applications
• Communications Application
• Entertainment Applications
Understand compelling power of:
• Productivity Applications
• Communications Application
• Entertainment Applications
New Application FocusNew Application Focus
• Development in Value Added Services and content offerings that demand a price premium and fill bandwidth supply
• Partnerships and alliances across the industry spectrum as providers team up with content providers to be able to give their customers the unique value proposition needed for them to switch to Broadband
• Content Providers are developing applications in an attempt to be the first to market with “the killer app” to make broadband real
• Investment in user infrastructure is necessary to utilize these applications and to create the “need” for broadband
• Development in Value Added Services and content offerings that demand a price premium and fill bandwidth supply
• Partnerships and alliances across the industry spectrum as providers team up with content providers to be able to give their customers the unique value proposition needed for them to switch to Broadband
• Content Providers are developing applications in an attempt to be the first to market with “the killer app” to make broadband real
• Investment in user infrastructure is necessary to utilize these applications and to create the “need” for broadband
18Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Leveraging the e-World/p-World Value Chain to Predict the Future
Connectivity Market Dynamics
Connectivity Market Dynamics
Applications Focused Business
Model Options
Applications Focused Business
Model Options
Consumer Applications/
Content Selection
Consumer Applications/
Content Selection
• Backbone Local Access “Abundance”
• Applications as Success Driver
• How Broadband is Changing Customer Behavior
• Business Model Identification
• Business Model Attractiveness Rating
• Identification of Consumer Trends Online Purchasing
• Prioritisation
• Broadband Impact
• Fulfillment Requirements
• Enabler Requirements
Consumer DeliveryConsumer Delivery
• Customer Experience
• Delivery/Supply Chain Issues
• Typical Misfires
19Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
There Are Five Business Model Internet Providers Are Using To Establish Stable Connection With the Consumer
Key Business Model Attributes
Key Business Model Attributes
Revenue ModelRevenue Model
OptionsOptions
Subscription, Advertising, Transactional Subscription, Advertising, Transactional
Product OwnershipProduct Ownership Owned, OutsourcedOwned, Outsourced
Service OfferedService Offered Connectivity, Context, Commerce, ApplicationsConnectivity, Context, Commerce, Applications
Stable Business ModelsStable Business Models
1. Wholesale Connectivity
2. Content Network
3. Portal Model
4. e-Commerce Model
5. Full-Service Network
1. Wholesale Connectivity
2. Content Network
3. Portal Model
4. e-Commerce Model
5. Full-Service Network
Target CustomersTarget Customers Mass, High EndMass, High End
20Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Bu
sin
ess
Mo
del
Bu
sin
ess
Mo
del
1. Content Network
1. Content Network
Business Models Add Value Through Distinct Combinations Of Activities
Provide Connectivity
Provide Connectivity
DevelopContent,
Commerce, and Applications
DevelopContent,
Commerce, and Applications
AggregateContent, Commerce,
and Applications
AggregateContent, Commerce,
and ApplicationsMarket and SellMarket and Sell Provide Customer
ServiceProvide Customer
Service
2. Wholesale Connectivity
2. Wholesale Connectivity
3. Portal Model3. Portal Model
- Consumer Service Value Chain -
4. eCommerce Model
4. eCommerce Model
5. Full Service Network
5. Full Service Network
ShipShip
21Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
1. Wholesale Connectivity
Pure-Play Connectivity Is Only Viable For Low Cost Providers
DescriptionDescription
• Pure-play connectivity consists solely of wholesale arrangements with Internet service providers and other customers, including enterprise and competing telecommunications providers
• Pure-play connectivity consists solely of wholesale arrangements with Internet service providers and other customers, including enterprise and competing telecommunications providers
PlayersPlayers
• Covad
• Northpoint
• Rythms Netconnection
• Covad
• Northpoint
• Rythms Netconnection
Service OfferedService Offered
ConnectivityConnectivity ContentContent CommerceCommerce ApplicationsApplications
Target SegmentsTarget Segments Target SegmentsTarget Segments Target SegmentsTarget Segments Target SegmentsTarget Segments
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
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22Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
2. Content Network Model
Cable TV Operators Are Prime Examples
DescriptionDescription
• Traditional cable TV operators provide content that is created by themselves and others
• Content is offered on a tiered basis, with distinctive bundle around premium content
• Traditional cable TV operators provide content that is created by themselves and others
• Content is offered on a tiered basis, with distinctive bundle around premium content
PlayersPlayers
• AT&T/MediaOne/TCI
• Cablevision
• Charter
• Comcast
• Cox
• AT&T/MediaOne/TCI
• Cablevision
• Charter
• Comcast
• Cox
Service OfferedService Offered
ConnectivityConnectivity ContentContent CommerceCommerce ApplicationsApplications
Target SegmentsTarget Segments Target SegmentsTarget Segments Target SegmentsTarget Segments Target SegmentsTarget Segments
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
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23Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
3. Portal Model
Portal’s Reliance On Advertising Has Proven Problematic and Need To Increase Subscription and Transactional Revenue Flow
DescriptionDescription
• Virtual portal plays offer no connectivity, but rely on owned and outsourced content, commerce, and applications for their value proposition
• The portals focus on the mass market with specialized applications for high-end users
• The content, commerce, and applications are bundled in a traditional portal format
• Virtual portal plays offer no connectivity, but rely on owned and outsourced content, commerce, and applications for their value proposition
• The portals focus on the mass market with specialized applications for high-end users
• The content, commerce, and applications are bundled in a traditional portal format
PlayersPlayers
• Yahoo• Infospace• Boston.com• Lycos• Excite• MSN.com
• Yahoo• Infospace• Boston.com• Lycos• Excite• MSN.com
Service OfferedService Offered
ConnectivityConnectivity ContentContent CommerceCommerce ApplicationsApplications
Target SegmentsTarget Segments Target SegmentsTarget Segments Target SegmentsTarget Segments Target SegmentsTarget Segments
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
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24Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
4. E-Commerce
Amazon.com Is A Leading Example
DescriptionDescription
• E-Commerce players offer unique content, commerce, and applications
• The content, commerce, and applications are bundled to secure advertising and transaction revenues
• E-Commerce players offer unique content, commerce, and applications
• The content, commerce, and applications are bundled to secure advertising and transaction revenues
PlayersPlayers
• Amazon
• Dell
• Peapod
• Buy.com
• Citysearch / Tickemaster
• Priceline
• Amazon
• Dell
• Peapod
• Buy.com
• Citysearch / Tickemaster
• Priceline
Service OfferedService Offered
ConnectivityConnectivity ContentContent CommerceCommerce ApplicationsApplications
Target SegmentsTarget Segments Target SegmentsTarget Segments Target SegmentsTarget Segments Target SegmentsTarget Segments
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
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25Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
4. Full Service Network
AOL / Time Warner Is The Leading Example
DescriptionDescription
• Full-service provider plays add value to their connectivity offering through the addition of unique content, commerce, and applications
• The content, commerce, and applications are bundled in a traditional portal format
• Full-service provider plays add value to their connectivity offering through the addition of unique content, commerce, and applications
• The content, commerce, and applications are bundled in a traditional portal format
PlayersPlayers
• America Online / Time Warner
• SBC/Prodigy
• MS/NBC
• America Online / Time Warner
• SBC/Prodigy
• MS/NBC
Service OfferedService Offered
ConnectivityConnectivity ContentContent CommerceCommerce ApplicationsApplications
Target SegmentsTarget Segments Target SegmentsTarget Segments Target SegmentsTarget Segments Target SegmentsTarget Segments
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
Mass Consumer
Mass Consumer
High-end Consumer
High-end Consumer
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26Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Market Value Segmentation
Note: Revenues are estimates for 2000 and Market Capitalization is for October 17, 2000
DescriptionDescription
1. Wholesale Connectivity1. Wholesale Connectivity
Example CompanyExample Company
CovadCovad
Market CapMarket Cap
$2,848$2,848
RevenueRevenue
$2,671$2,671
Market Cap/ Revenue
Market Cap/ Revenue
10.6610.66
2. Content Network Model 2. Content Network Model ComcastComcast $38,500$38,500 $873$873 4.414.41
3. Portal Model 3. Portal Model YahooYahoo $50,866$50,866 $1,045$1,045 48.6848.68
4. eCommerce Model4. eCommerce Model AmazonAmazon $8,924$8,924 $2,816$2,816 3.163.16
4. Full Service Network4. Full Service Network AOL / TWAOL / TW $116,800$116,800 $38,243$38,243 3.053.05
27Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Leveraging the e-World/p-World Value Chain to Predict the Future
Connectivity Market Dynamics
Connectivity Market Dynamics
Applications Focused Business
Model Options
Applications Focused Business
Model Options
Consumer Applications/
Content Selection
Consumer Applications/
Content Selection
• Backbone Local Access “Abundance”
• Applications as Success Driver
• How Broadband is Changing Customer Behavior
• Business Model Identification
• Business Model Attractiveness Rating
• Identification of Consumer Trends Online Purchasing
• Prioritisation
• Broadband Impact
• Fulfillment Requirements
• Enabler Requirements
Consumer DeliveryConsumer Delivery
• Customer Experience
• Delivery/Supply Chain Issues
• Typical Misfires
28Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Applications Are The Best Way To Reverse These Trends and Increase Broadband Service Take-up Rate
Computing IndustryComputing Industry Communications IndustryCommunications Industry
Increased Performance
Increased Requirements
The Win/TelVirtuous
Circle
Data Processing/
Retrieval Capabilities
Data Processing/
Retrieval Capabilities
Application Complexity and
Processing Requirements
Application Complexity and
Processing Requirements
Increased Performance
“The big opportunity is to think up new services to be delivered over this suddenly cheap, plentiful and still unregulated channel”
—John Chambers, CEO Cisco Systems
“The big opportunity is to think up new services to be delivered over this suddenly cheap, plentiful and still unregulated channel”
—John Chambers, CEO Cisco Systems
Increased Requirements
Connectivity / Storage
Capabilities
Connectivity / Storage
Capabilities
Application Complexity and
Processing Requirements
Application Complexity and
Processing Requirements
Broadband Applicatio
ns and Content
Broadband Applicatio
ns and Content
“Classic” Services &
Content
“Classic” Services &
Content
29Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Market Attractiveness Rating Screen For Priority Application/Content/Commerce Services
Market PotentialMarket Potential
• Determination of a market’s expected future profitability based on a combination of the following factors:
- current market size
- forecasted growth
- revenue model sustainability
• Determination of a market’s expected future profitability based on a combination of the following factors:
- current market size
- forecasted growth
- revenue model sustainability
“Established”6. News
11. Gambling
18. Low Value, Low Tactile, Physical Goods
19. Low Value, High Tactile, Physical Goods
20. High Value, Low Tactile, Physical Goods
22. Shopping for Software
23. Shopping for Music
24. Shopping for Videos
25. Shopping for Books“Finished”
3. Personal Productivity
13. Recruiting
16. Government Services
26. Search Engines
“Hottest”2. Personal Finance
4. Communications
7. Professional Services
8. Video Entertainment
9. Audio Entertainment
10. Online Video Games
21. High Value, High Tactile Physical Goods
“Dormant”1. Media Sharing and
Manipulation
5. Information Storage
12. Distance Learning
14. Content / Community
15. Remote Security / Surveillance
17. Event Planning
High
Low
Low High
Ma
rke
t P
ote
nti
al
Attractiveness to aNew Entrant
— Market Attractiveness Screen —
Attractiveness to a New Entrant
Attractiveness to a New Entrant
• Determination of a market’s attractiveness to a new entrant based on a combination of the following factors:
- market concentration
- barriers to entry
- competitive intensity
• Determination of a market’s attractiveness to a new entrant based on a combination of the following factors:
- market concentration
- barriers to entry
- competitive intensity
30Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Revenue Forecasting for Attractive Services
$0
$5,000
$10,000
2000 2003
Source: IDC, Jupiter, Frost & Sullivan, Forrester, Renaissance
CAGR
Personal Finance29%
Communications108%
Video Entertainment138%
Audio Entertainment321%
Online Video Games73%
High Value, High TactileeCommerce
69%
48% Professional Services Key TakeawaysKey Takeaways
• Highest growth areas are in the entertainment segments with audio entertainment leading the pack with a 321% CAGR
• Projected size for the entertainment segments for 2003 is only $2.6 billion; however, these markets are expected to maintain their growth rates for several years and grow to be large markets as broadband and other enabling technologies improve
• Highest growth areas are in the entertainment segments with audio entertainment leading the pack with a 321% CAGR
• Projected size for the entertainment segments for 2003 is only $2.6 billion; however, these markets are expected to maintain their growth rates for several years and grow to be large markets as broadband and other enabling technologies improve
$2,924
$11,037
$484$577$900
$1,030
$1,078
$3,414
$3,535
Million
31Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Other ADVENTIS Research Confirms That Broadband and Wireless Are The Top Enablers for Priority Application/Content/Commerce Services
File Compression
Security
Non-PC Devices
Number of Priority Services Benefiting from Each Key Enabler 1 2 3 4 5 6 7
Wireless Devices
Broadband
Smart Cards
Key Enablers Frequency
• Broadband service and wireless devices will be the top enablers for mass adoption
• Wireless devices give consumers anytime, anywhere access to applications
• Non PC devices will create a demand for priority services by utilizing new devices and advanced online connectivity
• Service providers have an opportunity to leverage relationships with enabler firms
• co-operative marketing agreements to get customers from enabler
• revenue sharing as existing customers are up-sold to new technologies by enabler
• increased customer loyalty and usage through a superior offering due to the enabler technology
Service Providers Should Leverage Broadband and Other Key Enablers to Deliver Differentiated, Value-Added Offerings to Consumers
32Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
E-Commerce Processes Such As Researching & Ordering Are Greatly Affected by Broadband and Wireless
Sites VisitedSites VisitedIn Stock
Information Available?
In Stock Information Available?
Upsell Recommendation
Made?
Upsell Recommendation
Made?
Complementary Product
Complementary Product
Time to Confirm Order
Time to Confirm Order
Quality of Confirm
Quality of Confirm
Time Order Until Receipt
Time Order Until Receipt
1. Value America 1. Value America YesYes YesYes Only received email congratulating me on becoming a member
Only received email congratulating me on becoming a member
Link to Value America
Link to Value America
6-10 days for one item and 9 days for the other
6-10 days for one item and 9 days for the other
2. SpotShop 2. SpotShop YesYes NoNo 2 days after placing order2 days after
placing orderOrder # and order
dateOrder # and order
date5-10 days after order
was placed5-10 days after order
was placed
3. Circuit City 3. Circuit City YesYes YesYes 20 minutes-1 hour after
placing order
20 minutes-1 hour after
placing order
Order #, order date, price, delivery
method, address
Order #, order date, price, delivery
method, address3-11 days after order
was placed3-11 days after order
was placed
4. CDW 4. CDW YesYes YesYes 1 hour afterplacing order1 hour after
placing orderOrder #, items, price, sales linkOrder #, items, price, sales link
Very inconsistent see report for details
Very inconsistent see report for details
5. Egghead 5. Egghead YesYes YesYes Ranged from 10 minutes to 2
hours
Ranged from 10 minutes to 2
hours
Order #, address, items, price,
customer svc. links
Order #, address, items, price,
customer svc. linksBetween 1-4 days after order
was placedBetween 1-4 days after order
was placed
6. Outpost 6. Outpost NoNo YesYes 30 minutes-2 hours after placing order
30 minutes-2 hours after placing order
Order #, address, items, price
Order #, address, items, price
2-7 days after order was placed
2-7 days after order was placed
7. Amazon 7. Amazon YesYes20 minutes- 2
hours afterplacing order
20 minutes- 2 hours after
placing order
Order status link, address, items
and price
Order status link, address, items
and price4-5 days after order
was placed4-5 days after order
was placed
8. CDNow 8. CDNow YesYes YesYes 1-3 hours after placing order
1-3 hours after placing order
Order #, shipping method, items,
price and address
Order #, shipping method, items,
price and address5-8 days for the first item and 6 days for the other
5-8 days for the first item and 6 days for the other
9. eToys 9. eToys YesYes YesYes 5 minutes-6 hours after placing order
5 minutes-6 hours after placing order
Order #, items, price, address and customer service
link
Order #, items, price, address and customer service
link
5-8 days after order was placed
5-8 days after order was placed
10. Buy.com10. Buy.com YesYes NoNo 15-30 minutes after placing order
15-30 minutes after placing order
Order #, items, tracking link,
support link and 800#
Order #, items, tracking link,
support link and 800#
6-9 days for the first item and 7 days for the other
6-9 days for the first item and 7 days for the other
11. NECX11. NECX YesYes NoNo 1 hour-2 days after placing order
1 hour-2 days after placing order Order #Order # 1-4 days after the order
was placed1-4 days after the order
was placed
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
12. Dell 12. Dell YesYes NoNo 6 hours after placing order6 hours after placing order
Order #, items and price
Order #, items and price
3 days after order was placed
3 days after order was placedYes
33Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Leveraging the e-World/p-World Value Chain to Predict the Future
Connectivity Market Dynamics
Connectivity Market Dynamics
Applications Focused Business
Model Options
Applications Focused Business
Model Options
Consumer Applications/
Content Selection
Consumer Applications/
Content Selection
• Backbone Local Access “Abundance”
• Applications as Success Driver
• How Broadband is Changing Customer Behavior
• Business Model Identification
• Business Model Attractiveness Rating
• Identification of Consumer Trends Online Purchasing
• Prioritisation
• Broadband Impact
• Fulfillment Requirements
• Enabler Requirements
Consumer DeliveryConsumer Delivery
• Customer Experience
• Delivery/Supply Chain Issues
• Typical Misfires
34Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Profile of Value America Customer Experience: Round 1-4 Order Process
1. Place Order
1. Place Order
2 . Order Confirmation
2 . Order Confirmation
4 . Receive Order
4 . Receive Order
5 . Return Product
5 . Return Product
3 . Order Status
3 . Order Status
Round 1Round 1
Round 2Round 2
Round 3Round 3
Round 4Round 4
• Submitted order on August 4th
• Received e-mail congratulating me on becoming a member one day after order was placed
• Never received order confirmation
• Never received order status
• Submitted order on August 4th
• Submitted order on August 5th
• Submitted order on August 9th
• Received e-mail congratulating me on becoming a member one day after order was placed
• Never received order confirmation
• Received order confirmation 5 hours after order was placed
• Received e-mail congratulating me on becoming a member
• Never received order confirmation
• Never received order status
• Order was canceled, but not followed up by cancellation confirmation e-mail
• Never received order status
• Order was successfully canceled
• Order was successfully canceled
• Received Palm IIIX on August 16th
• Received Renaissance Art Book on August 17th via UPS Ground
• Received order on August 11th via UPS Ground
• ValueAmerica set up FedEx to pick up package
• Returned order via FedEx with RA #
• Received order on August 11th via UPS Ground
• ValueAmerica set up FedEx to pick up package
35Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Customer Experience CharacteristicsCustomer Experience Characteristics
Profile of Value America Customer Experience: Overall Experience
Company FactsCompany Facts
Corporate Headquarters:Charlottesville, VA.1998 Total Employees:3321998 Revenue:$41.4 million1998 Customers: 260,000
Corporate Headquarters:Charlottesville, VA.1998 Total Employees:3321998 Revenue:$41.4 million1998 Customers: 260,000
Products Offered:Computers, Electronics, Apparel and Footwear, Jewelry, Housewares, Books, Sporting Goods, Makeup, Toys & Games, Appliances and Specialty FoodsSales Coverage:Business and ConsumerCustomer Service: 1-888-337-VALU, by email at [email protected], or by fax at 1-804-817-8966. Available Monday-Friday 8am-9pm; Saturday & Sunday 9am-6pmProduct(s) Purchased: Palm IIX and an Art Book
Research ProductResearch Product Place OrderPlace Order Wait for DeliveryWait for Delivery Receive ProductReceive Product Maintain RelationshipMaintain
Relationship
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Low High
Product Comparison
Value Assessment
Needs Assessment
Brand Availability
Ease of Use
Market Conditions
Site Features
Convenience
Availability of Customer Service
Payment Methods
Ability to Bundle
Slated Ease of Return
Shipping Cost
Warranty
Total Cost
Expectations:Level of Anxiety
Level of Trust
Order Management:
Delivery
Where
When
Access to Order Status:
How
Delays
Order
Order Accuracy
Delivery Method Experience
Appearance of Carton and Contents
Information Availability
Ease of Issue Resolution
Customer Loyalty Programs
Personalized Experience
Feedback Mechanisms
36Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Sites VisitedSites Visited
Interim CommunicationInterim Communication
Update?Update?
Waiting for Delivery and Receiving Product Affect Customer Experience At Least As Much as the Web Experience Does
Shipping Info?Shipping Info?
Interim CommunicationInterim Communication
Received on or Before
Date Expected
Received on or Before
Date ExpectedQuality of Box and Materials
Quality of Box and Materials
Return Information
Provided
Return Information
ProvidedQuality of
InvoiceQuality of
InvoicePresence of
Other MaterialsPresence of
Other Materials
1. Value America 1. Value America NoNo
2. SpotShop 2. SpotShop 50% 50%
3. Circuit City 3. Circuit City YesYes
4. CDW 4. CDW YesYes
YesYes
75% 75%
50% 50%
NoNo
No
50%
Yes
Yes
5. Egghead 5. Egghead YesYes Y/NY/NYes
6. Outpost 6. Outpost YesYes
7. Amazon 7. Amazon YesYes
8. CDNow 8. CDNow YesYes
9. eToys 9. eToys YesYes
10. Buy.com10. Buy.com YesYes
11. NECX11. NECX YesYes
YesYes
NoNo
YesYes
YesYes
50% 50%
YesYes
50%
Yes
Yes
Yes
Yes
Yes
12. Dell 12. Dell YesYes Y/NY/NYes
37Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Po
ten
tial
Pro
ble
ms
Po
ten
tial
Pro
ble
ms
Demand Generation
Demand Generation
Customer ConversionCustomer
ConversionOrder
ManagementOrder
ManagementOrder
FulfillmentOrder
FulfillmentSales
SupportSales
Support
Most eCommerce Web Sites Will Encounter A Common Set of Problems -- To Be World Class, an eTailer Must Now Be Well Past the Tablestakes Issues
Customer Loyalty
Management
Customer Loyalty
ManagementGenerate Customer Loyalty
Affiliate Programs
PrintAdvertising
Direct Mail/Email
Verify DataVerify Data
Customer CheckoutCustomer Checkout
Send Newsletters/
other programs
Send Newsletters/
other programs
ww
w.w
ebsite.comw
ww
.website.com
Provide Product Info
Provide Product Info
Execute Product Placement/OfferExecute Product Placement/Offer
Provide Product Guidance
Provide Product Guidance
Trade-show/PR
Other.com Site Tie-in Programs
BundlePromotions
Provide Special Offers
Provide Special Offers
Process Order Cancellations and Returns
Process Order Cancellations and Returns
Make Account Adjustments
Make Account Adjustments
Order TrackingOrder Tracking
Process OrderProcess Order Fulfill PurchaseFulfill Purchase
Community-of-Interest
Programs
WebAdvertising
TelevisionAdvertising
ProcessFlow
Follow-upCommunications
Flow
ProvideCustomer Care/
Customer Support
ProvideCustomer Care/
Customer Support
• Links point to wrong Web address
• Web site down or unstable
• Web site loads slowly
• Incompatible with user’s browser
• Links point to wrong Web address
• Web site down or unstable
• Web site loads slowly
• Incompatible with user’s browser
• Out of date info on Web site
• Info hard to retrieve or organized poorly
• Purchase links do not work
• Different info than in stores, call centers
• Out of date info on Web site
• Info hard to retrieve or organized poorly
• Purchase links do not work
• Different info than in stores, call centers
• Shopping cart doesn’t work or is poorly integrated
• Incomplete or duplicate order confuses system
• Batch process or rekeying causes order loss
• Shopping cart doesn’t work or is poorly integrated
• Incomplete or duplicate order confuses system
• Batch process or rekeying causes order loss
• Single item stock-out holds up order
• Simple order change/correction holds up order
• Order delivered to wrong address
• Order includes wrong items
• Single item stock-out holds up order
• Simple order change/correction holds up order
• Order delivered to wrong address
• Order includes wrong items
• Customer unable to get consistent order status
• Customer unable to return product
• Customer billed incorrectly
• No mechanism for ongoing eSupport
• Customer unable to get consistent order status
• Customer unable to return product
• Customer billed incorrectly
• No mechanism for ongoing eSupport
• Customer profiles not well maintained and not centralized
• Profiles sold to 3rd party w/o consent
• No proactive use of customer profiles
• Customer relation-ship not maintained
• Customer profiles not well maintained and not centralized
• Profiles sold to 3rd party w/o consent
• No proactive use of customer profiles
• Customer relation-ship not maintained
Tablestakes Issues Leadership Challenges
38Sloan_Ford Presentation_1019 © 2000 ADVENTIS CORPORATION All rights reserved.
Customers Generally Prefer the eTailers Who Follow These Best Practices in Creating a Quality eCommerce Customer Experience
1. Research Products
1. Research Products
2. Make Buying Decision
2. Make Buying Decision
3. Place Order
3. Place Order
4. Wait for Delivery
4. Wait for Delivery
5. Receive Product
5. Receive Product
6. Maintain Ongoing Relationship
6. Maintain Ongoing Relationship
7. Utilize Customer Support
1.1 Site loads quickly - “More
than 1/3 of consumers give-up on purchasing on line because
of slow download times.”
1.1 Site loads quickly - “More
than 1/3 of consumers give-up on purchasing on line because
of slow download times.”
2.1 Product Availability
Information is clearly indicated and frequently
updated
2.1 Product Availability
Information is clearly indicated and frequently
updated
3.1 Site uses historical purchase
information for suggestive selling
3.1 Site uses historical purchase
information for suggestive selling
4.1 Timely, personalized
stream of information is provided from
order placement until order receipt
4.1 Timely, personalized
stream of information is provided from
order placement until order receipt
5.1 Product arrives in a
clearly labeled package
5.1 Product arrives in a
clearly labeled package
6.1 Personal Information is collected and
USED to make shopping
experience more intimate
6.1 Personal Information is collected and
USED to make shopping
experience more intimate
1.2 Layout, Categories and
Navigational Tools facilitate
use by the “lowest common
denominator”
1.2 Layout, Categories and
Navigational Tools facilitate
use by the “lowest common
denominator”
3.2 All costs are readily available to the customer
PRIOR to entering any
payment information
3.2 All costs are readily available to the customer
PRIOR to entering any
payment information
4.2 Change or Cancel Order is
handled efficiently irregardless of
channel used by Customer
4.2 Change or Cancel Order is
handled efficiently irregardless of
channel used by Customer
5.2 Automated returns process requires minimal customer effort
(all information is included)
5.2 Automated returns process requires minimal customer effort
(all information is included)
6.2 Purchasing History and
Survey data is used for
suggestive selling - Creating a
“virtual handshake”
6.2 Purchasing History and
Survey data is used for
suggestive selling - Creating a
“virtual handshake”
1.3 Consumers are able to get to
the level of information
necessary to make an informed buying decision
1.3 Consumers are able to get to
the level of information
necessary to make an informed buying decision
2.2 A consumer will make a
purchase from a site they trust (Brand, Prior
Experience) in lieu of making a
pure price decision
2.2 A consumer will make a
purchase from a site they trust (Brand, Prior
Experience) in lieu of making a
pure price decision
6.3 Privacy is Respected
6.3 Privacy is Respected
3.3 Site clearly indicates
estimated time of delivery
3.3 Site clearly indicates
estimated time of delivery
7.2 Automated responses clearly indicated anticipated wait times for Customer Support. Loads are balanced between channels so that customer is not
“penalized” making the “wrong” choice
7.2 Automated responses clearly indicated anticipated wait times for Customer Support. Loads are balanced between channels so that customer is not
“penalized” making the “wrong” choice
7.1 Customer Service provides both Pre and Post Sales service through multiple channels - 800 numbers, E-mail, Chat, Instant Messenger
7.1 Customer Service provides both Pre and Post Sales service through multiple channels - 800 numbers, E-mail, Chat, Instant Messenger
5.3 Post-receipt “Thank-you” for your purchase
provides opportunity for
customer feedback and “soft sell” of additional products
5.3 Post-receipt “Thank-you” for your purchase
provides opportunity for
customer feedback and “soft sell” of additional products
The enclosed material is confidential and proprietary to ADVENTIS CORPORATION and is for the internal use of addressee only.
For further information please contact:
Ford Cavallari, Executive Vice President
ADVENTIS CORPORATION
200 Berkeley Street, 22nd FloorBoston, MA 02116
Tel: 617.421.9990 Fax: 617.421.9994
The enclosed material is confidential and proprietary to ADVENTIS CORPORATION and is for the internal use of addressee only.
For further information please contact:
Ford Cavallari, Executive Vice President
ADVENTIS CORPORATION
200 Berkeley Street, 22nd FloorBoston, MA 02116
Tel: 617.421.9990 Fax: 617.421.9994