Webvan

1
Webvan
Jason C. H. Chen, Ph.D. Professor of MIS School
of Business Administration Gonzaga
University Spokane, WA 99223 USA chen_at_jepson.gonza
ga.edu
2
The Case

• Learning Objective To examine aspects of the
  question "How and why did so many of the new
  economy start-ups fail so spectacularly?" To
  discuss whether Webvan's problems were
  foreseeable and whether the company had room to
  be wrong about any of its operating assumptions.
• Subjects Covered Electronic commerce, Food,
  Information technology, Internet, Logistics,
  Scheduling, Supply chain, Warehousing.
• Setting California Food industry 2001

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The Case

• Description Examines Webvan's operations and the
  processes by which it delivers groceries that
  were ordered from the Internet to customers'
  homes. Recounts Webvan's history from founding
  through early 2001 and concentrates on the unique
  approaches to warehousing, delivery, scheduling,
  and to a lesser extent, marketing and information
  technology.
• It also examines the rest of the Webvan business
  model and how it was formulated. At the time of
  the case, there is great pessimism, reflected in
  the press and the company's share price, that
  Webvan will be able to execute its business model
  profitably or even stay in business. Webvan's
  business model relied heavily on properly
  designed and executed operations, and it appears
  clear that the company's operations were neither.
• However, the mismatch between visiting
  operational capabilities and the operational
  requirements imposed by the rest of the business
  model appear to be severe.

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Case Analysis

• The Analysis consists of the following sections
• The Webvan Business Model
• Problems with Conception in the Business Model
• Problems with Execution in the Business Model
• Incremental vs. Big-Bang Approaches to Technology
  Adoption
• How GBF Was Supposed to Work

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Main concepts and discussions

• Perception vs. Execution
• Assumption GBF strategy
• Network effects
• Definition - The phenomenon whereby a service
  becomes more valuable as more people use it,
  thereby encouraging ever-increasing numbers of
  adopters.
• Information - The network effect is often the
  result of word-of-mouth testimonials. The network
  effect can be perpetuated indirectly, as well,
  through analysis of a network's size and
  projected growth.
• Brand-building
• Webvan life span lasted from Nov. 1999 till
  July 9, 2001 (less than two years and burned
  several billions of dollars)

Get Big Fast (winner-take-all)
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Exhibit TN 2-Webvan's Plan for Success
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Exhibit TN 1 Webvan's Plan for Success

• Marketing research?
• Ready for culture and habit changes?

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Webvan's Ambition

• Supermarket
• Amazon
• Fedex
• hour delivery window
• NO CHANCE