E-Business. Present outlook and prospects for the future. September 6, 2000 Matti Vikkula. PricewaterhouseCoopers

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1 E-Business Present outlook and prospects for the future September 6, 2000 Matti Vikkula PricewaterhouseCoopers consultants world wide from strategy to implementation e-business focus 2 1

2 Agenda - Background: Metacapitalism - emarkets - Observations on Construction industry 3 - Background: Metacapitalism - emarkets - Observations on Construction industry 4 2

3 Companies are transforming to the decapitalized e-business model The transformation to B2B e-business: Sales push focus Production focus BRAND CAPITAL High (Finished goods) HUMAN CAPITAL Customer pull focus WORKING CAPITAL Customer focus Low (Direct Delivery) High (ownership of production) PHYSICAL CAPITAL Low (Outsourcing)) (outsourcing network) Traditional business e-business 5 The formation of Value-Added Communities (VACs( VACs) Traditional business Brand-Owning company Value-Added Communities Financial accounting & other support processes Supply chain Decapitalization & the Formations of VACs Outsources financial accounting & other support processes Outsourced industry specific processes Outsourced supply chain VACs will become the great enablers of e-business. 6 3

4 VACs address either industry-specific- or cross- industry functional processes Target Unique Value Proposition Target Suppliers VAC Examples VAC Examples VALUE ADDED COMMUNITY Suppliers Suppliers Suppliers KEY BENEFITS Provide a central platform for transaction automation, demand aggregation, improved market liquidity, extended market reach Optimize a network of businesses vs. an individual business Introduce new market and process efficiencies to an industry supply chain Provide end-to-end procurement solutions GM Trade Exchange FORD CHEMDEX e-steel AmEx-Exchange WORKS.COM PLASTICSNET According to Bear Stearns: Vertical Communities Resolve industry specific supply-chain inefficiencies Horizontal Communities Cut across industries and automate functional processes such as MRO or Logistics Over 200 VACs have already been created by Internetbased businesses $438 billion of the $1.7 trillion anticipated in B2B online transactions will occur through VACs 7 VACs create value for its members through a combination of different value levers. Examples of Value Levers Purchase Power Aggregate buyers into buying consortiums Volume pricing Better information for supplier negotiations Supplier consolidation Spending and control reports Process Efficiency Electronic product searches/catalogs Electronic order taking and management Electronic requisition and approval (workflow) Auto replenishment Electronic bill presentment/ payment Improved information access Better spend control Reduced transaction costs Supply Chain Integration Disintermediation Improved visibility across market supply chains Reduced lead time Reduced inventory levels Improved logistics management ERP integration 8 Aggregated Content/Community Industry best practices Knowledge Management Benchmarking Monitoring/control reports Discussion forums Product information and reviews FAQs Industry collaboration Newsletters Network effect Market Efficiency Online market making mechanisms to match buyers and suppliers e-catalogue Auctions Exchange Bid processes Access to broader range of suppliers and buyers Improved information access 4

5 VACs are opening a new field in business optimization - the network effect between organizations ENTERPRISE OPTIMIZATION (Single Business) Physical flow NETWORK OPTIMIZATION (Multi-Business) Procure Produce Products Manage Logistics Forecast Demand B A G D E C F Information flow Companies that do not join these trading communities may see their market power decline as networks enable consolidation of other players influence 9 In the near future, Meta-Markets will emerge, aggregating portfolios of communities Meta-Market Meta-Market Operations HR Benefits Logistics MRO Marketing Oil & Gas Auto Telecom High Tech VAC Development Identify, launch or roll up VACs Identify new customer bases Create critical mass Technology Infrastructure Provide Technology Platform/Integration Capabilities Cross Community Support Sales/Marketing Customer Service Cross VAC Optimization Broader communities to allocate R&D Seller/ Suppliers Meta-Market Drivers The larger the network, the greater its power to create value for its members Increased leverage with suppliers Broader market access Greater integration across market supply chains Expanded community/collaboration opportunities The larger the Meta-Market, the faster it can form and launch new emarkets and provide greater functionality to its portfolio members 10 5

6 - Background: Metacapitalism - emarkets Sometimes known as emarket,, e-commerce hub, infomediary,, or electronic marketplace, VACs will become the great enablers of e- business. - Observations on Construction industry 11 emarkets will develop around a number of different models emarket Models Market Maker/ Intermediary GM Sellers Model Type Example Characteristics Eco-System (1) can be initiated by dominant players on the sell or buy side or neutral parties (e.g., FreeMarkets) (2) under development Community of Mutual Interest (Buyer Led) Neutral Exchange (1) Distributor (Seller Led) Integrated Supply Chain GM TradeXchange PwC e.conomy e-steel Grainger.com Hitechmatrix (2) Community forms Neutral party All suppliers to GM Groups of buyers Distributors around common builds platform are linked with GM with common needs/ group sellers to exchange of for ebusiness and, if applicable, interests align to gain focus on a buyers and within a vertical each other leverage (can be with common group sellers (no market (e.g. high or without anchor of buyers dominant party technology) tenant) necessarily) 12 6

7 emarket Benefits How do I best benefit from an emarket opportunity? Membership Value Benefits of using the emarket as a member Cost savings Process improvements Reduced marketing Lower Return -- Lower Risk Ownership Value Benefits of being one of the founding partners that created the emarket Equity return Potentially significant market valuation Influence over emarket construction Market perception of ebusiness leader Higher Return -- Higher Risk 13 Value levers provide benefits to both buyers and suppliers emarket Value Propositions Sellers Benefit Lower price & negotiation costs Expanded supplier access Lower search costs Lower processing costs Reduce inventory costs Reduce processing costs Reduce time to market Improved, ongoing benchmarking Cost-effective research Faster competitive response Price & inventory transparency Reduced cost of spot buying Reduced excess inventory costs Value Lever Purchase Power Process Efficiency Supply Chain Integration Aggregated Content & Community Market Efficiency Benefit Higher profits & volume Lower negotiation costs Extended customer base Lower customer acquisition cost Lower processing costs Improved inventory management Improved demand forecasting High buyer switching costs Improved, ongoing benchmarking Cost-effective, ongoing research Faster competitive response Greater customer reach Reduced cost of sales Reduced excess inventory costs Benefits from an emarket s value propositions drive adoption to create a critical mass of buyers and sellers. Functionality then retains participants with a superior offering and experience. 14 7

8 emarket Roles to Consider Industry Hosted Buying Site e Marketplace Leader e Marketplace Supplier Hosted Purchasing Service B (e.g. Mid-sized Corps) - Product and Service Selection - Workflow Approvals - Online ordering - Online payments ERP Integration Commerce Services - Content Management - Content Aggregation - Customized Pricing - Transaction Handling - Central Services (Tax, Freight, etc.) Supplier A Supplier B Supplier C Hosted Buying Site User Service B Customer 1 Service B Customer 2 Service B Customer 3 emarketplace User Intranet Buying Organization A Intranet Buying Organization B Horizontal Service Provider Intranet Buying Organization C Supplier D Supplier E Supplier F 15 There are various requirements for the company to fully exploit emarkets Electronic Bill Presentation and Payment Customer emarket Member Customer Service E-Store Content Management Manage Customer Orders Customer Relationship Management Perform Sales Procure Materials / Services Core Systems Core Systems Customer Data Develop Products People B2E HR Enterprise Information & Reports Integration Produce Products Service Provider Content Integration Perform Marketing Manage Logistics Distribution E-Procurement Manage Customer Service Supply Chain Management E-HRM CPFR Meta-Market Supplier E-Fulfillment 16 8

9 - Background: Metamarkets - emarkets - Observations on Construction industry 17 Lehtiotsikoita Suomesta - suunta sama kuin maailmalla, emarkkinapaikat tulevat alalle 18 9

10 Kuinka e-business vaikuttaa rakennusalaan: Yleiskuvaus rakennusalan nykyisestä verkostosta Liite 5 Viranomaiset Omistaja / Kiinteistön käyttäjä Valmistaja Kiinteistön ylläpitäjä Suunnittelija Kauppa Rakennuttaja Rakennusliike 19 Tuleva kehitys: esimerkit e-bisneksen luomista uusista Liite 5 toimijoista ja linkeistä rakennusalan verkostoon Omistaja / Asunnon, Kiinteistön käyttäjä Rakennuksen elinkaaritietopankit Viranomaiset Valmistaja Kiinteistön ylläpitäjä Suunnittelija Rakennuttaja Kauppa VAC - tiedonvälitys, tarjoukset, kauppapaikka, projektin hallinta Erikoisurakoitsija Erikoisurakoitsija Rakennusliike 20 10

11 Construction industry VAC - example: Cephren (US) is effectively building the network 21 European example: Eu-supply.com is building the marketplace, to what direction will it develop? 22 11

12 Johtopäätöksiä e-business muuttaa vahvasti eri alojen toimintalogiikkaa - vanhat, suuria pääomia vaatineet toimialat siirtyvät yhä verkottuneempaan toimintatapaan, missä uudet toimijat ja toimintamallit näyttelevät isoa roolia. emarkkinapaikat ovat merkittävä askel kohti yhteisöllistä, verkottunutta toimintatapaa (VAC). Tämä kehitys tulee luomaan yrityksille sekä merkittäviä mahdollisuuksia että haasteitakin. Sekä emarkkinapaikkojen todellinen hyödyntäminen kuin yleisemminkin verkottuneessa toimintaympäristössä menestyminen vaatii yritykseltä uudentyyppisiä valmiuksia. Näiden valmiuksien - osaaminen, resurssit ja erityisesti taustajärjestelmät - rakentaminen tulee aloittaa mahdollisimman nopeasti, sillä kehitys on ennennäkemättömän nopeaa. ebusiness on tullut myös rakennusteollisuuteen - emarkkinapaikat ovat yksi merkittävistä muutoksista, joihin alalla toimijoiden tulee pikimmiten varautua. 23 Yhteystiedot Esitys saatavissa: Matti Vikkula - yhteystiedot alla. Yhteystiedot myöhemmin esiin nousevia kysymyksiä ja keskustelua varten: Matti Vikkula Telephone +358 (0) , Mobile +358 (0) matti.vikkula@fi.pwcglobal.com Eero Kivi Telephone +358 (0) , Mobile +358 (0) , eero.kivi@fi.pwcglobal.com Lisäksi

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