Business Models

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Business Models

• Foothill College
• Electronic Commerce

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Agenda

• Business models
• Example companies
• Business process (PTP)
• Analyzing process models
• Introduction to Value Webs

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What is a Business Model?

• A value chain that connects participants
• The path of goods in a supply chain
• The path of transactions in an exchange
• The path of information in a value chain
• Interdependencies / paths in a value web
• Ultimately, how you expect to make money

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Acronyms First

• B business
• C consumer
• M marketplace
• A application
• Each participant is a node along a for value
  transaction exchange (value chain)
• Models must include two or more participants

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Networked Business Models

• Connect more participants
• Integrate business process
• Transfer information much faster
• Support hybrid transaction models
• Lend themselves to workflow / BPR

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Business Models

• B2C, B2B
• C2C, C2B
• B2B2C, M2B2C
• Market models and M2M
• Internet exchange
• e-Hubs / e-Market places
• Direct commerce

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B2B - Business to Business

• The big mover
• e-Business driven
• EDI and Internet based
• 80 of e-Commerce s
• Estimated at 1 trillion spend
• growing to 2.5 trillion by 2005
• will be all of digital commerce by 2010

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B2B Examples

• IBM
• HP
• Cisco
• Dell
• Intel

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B2C - Business to Consumer

• Consumer driven
• Earliest e-Commerce
• Initially was retail - computers
• Books, CDs, travel, and entertainment
• 500,000 commerce sites in all verticals
• many click-and-mortar strategies
• driven by large Web only players

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B2C Examples

• Amazon.com
• Drugstore.com
• Wal-Mart.com
• Safeway.com
• 1-800-flowers.com

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B2B2C - Business to Business to Consumer

• Suppliers of products / services to B2C
• Large back end players
• financial services
• distribution, replenishment
• payments, EDI, supply chain
• New portal B2C model
• Can include direct commerce

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B2B2C Examples

• Yahoo!
• Fed-ex, UPS
• Safeway (hybrid)
• Direct commerce vendors
• Vitessa, CrossCommerce, EnText
• iConomy, Escalate, iVendor

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C2C - Consumer to Consumer

• Auctions
• facilitated at a portal
• Peer-to-peer
• Napster model
• file exchange
• transaction optional
• Classified ads at portal sites

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C2C Examples

• E-Bay
• E-wanted
• Match.com
• Napster (model)
• C2M2C really reflects the actual model
• Excite Classifieds
• Direct C2C really doesnt exist today

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C2B - Consumer to Business

• Reverse auction
• Post a wanted message
• Businesses will bid on message
• Can be automated at an exchange
• Creates very large consumer markets
• a way to liquidate distressed inventory
• or participate in a C2M2B2C exchange

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C2B Examples

• Priceline
• Autobytel.com
• GreatShop.com
• Reverse auction C2B is the driver
• In these examples, C2M2B is the model
• A marketplace intermediary is needed
• autobytel.com is technically a C2M2B, or
  C2M2B2C, as a B2B marketplace is central

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Market Models

• Market intermediary
• Vertical exchange model
• markets trade or share commodities
• DynegyDirect, VerticalNet
• Napster / eBay are market intermediaries
• Dynamic pricing / collaborative commerce
• Large buy-side / sell-side portals / exchanges

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B2M2X Examples

• eBay
• VerticalNet
• VertMarkets
• Part of Vertical Net
• DynegyDirect
• Part of Enron Online still operational
• Commerce One, Ariba, and Covisint

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Internet Exchange

• Large B2B component
• estimated at 33 of all B2B in 2003
• Dynamic pricing
• prices are set by buyers and sellers
• Multiple buyers and sellers
• it is a market place where many buyers and many
  sellers are present. Usually it is organized
  around a specific vertical market

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Exchange Players

• ANXeBusiness Corp
• EDI network / markets
• General Electric (GSX)
• Sold to Francisco Partners 6/02
• Covisint auto exchange
• DynegyDirect
• Enron online (energy) closed 7/02
• Still operational in energy, logistics, retail

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E-Markets and E-hubs

• Exchange
• Market place
• Channel partners
• eXtended enterprise
• Add process to portals
• Community, content, and commerce
• Creating process share from member value

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E-Hub Vendors and Players

• Covisint
• Vertical Net
• I2, Manugistics
• ANX - auto exchange
• See Net Market Makers for info / terms
• http//www.netmarketmakers.com/
• http//www.netmarketmakers.com/glossary/

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Direct Commerce

• New retail model
• Deliver products from suppliers
• Commerce appears on portal sites
• Portals are the merchant of record
• eCommerce vendor delivers back end
• Portal and commerce vendor split margins

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Direct Commerce Founders

• Vitessa (purchased)
• Cross Commerce (gone)
• iConomy (gone)
• iVendor (gone)
• Escalate (SCM software)
• EnText (gone)
• All launched in Spring 2000, as the bubble burst
  for 90 of their target customers.

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Analyzing Process

• The PTP model
• Process
• Transactions
• Participants
• Creating value webs

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The Model - PTP

• Process
• Transactions
• Participants
• Can be used to describe and explain all business
  models, especially the Internet
• Analytically defines process share
• Market share of a given business process

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Business Process Cycle
Negotiate
Discover
Settle
Perform
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Process (P)

• Discover
• Negotiate
• Performance
• Settle / payment
• Actions of participants
• Process can stall, fail, or require more than one
  turn to fully complete (close) a cycle

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Transactions (T)

• Spot
• Recurring
• Replenishment
• Dynamic
• Modalities of transactions

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Participants (P)

• Consumer
• Business
• Market
• Application
• Types of actors

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Analyzing Value Webs

• Look at PTP
• Analyze each component of the model
• Process
• Transactions
• Participants
• Look at the number of process turns
• Look at the efficiency of process turns

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Summary

• Internetworking allows many models
• e-Commerce was people driven
• e-Business is process driven
• eMarketplaces support process
• E-Hubs connect addition of partners
• Business models are business process
• Use the PTP model to analyze process models

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Review

• What is a business model?
• What are C, B, M, and A?
• What are extended value chains?
• What are P, T, and P in process?
• What is a definition of value web?

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Exercises

• How many business models do you participate in
  each week? Draw some.
• Are these networked process models?
• If so, how do goods, transactions, and
  information flow among participants?
• Name five B2C successes / failures
• Is a grocery store a portal? Explain.