• 1. STRATEGY AND THE INTERNET: TRENDS AND PREDICTIONSReal Tech Conference Peter Stanger
    • 2. E-COMMERCE IS DEAD“E-Commerce Is Dead, Long Live E-Commerce” The Industry Standard, April 2000“Going, Going, Gone: Business-to-Consumer Sector Goes Bust” Forbes.com, April 2000“Can you build a brand online selling third-party goods? The answer is no, even though everyone used to think the answer was yes” Bryan Rutbert, Warburg Dillon Read“The living dead have gotten away with murder because the public markets have funded riskier ventures. Look at Amazon.com - if could be the biggest living dead the public markets have ever seen.” Warren Packard, Draper Fisher Jurvetson
    • 3. TOM SIEBEL CEO, Siebel Systems“If you can’t generate profits, significant market share and customer satisfaction, you re out of business.” “On the B2B exchange side, I don’t think anyone will survive. They are all gone.”
    • 4. THE CAPITAL MARKETS HAD IT ALL WRONGTravelocityBarnsandnobel.comExpediaDrugstore.comEgghead.comPricelineeBayAmazon$123BWebvaneBayAmazonAll Other$11.4B
    • 5. IS THE REVOLUTION OVER? July 28, 1794
    • 6. THE BUMPY RIDE OF ECONOMIC REVOLUTIONS1860 - 18901895 - 1925
    • 7. FUNDAMENTAL FORCES ARE AT WORK120100804060200177017801775IndexWorkers per bushel of manufactured cottonEngland 1770-83Price of the Model T touring car1908-20191019151920198519901995Price of CPUcomputing power$/MIPS 1982-95Lower processing costs ...… with increased throughput ...Fiber capacityTime1050104103102… and powerful network economics0 20 40 60 80 100 012345678910nValue increases as the square of connectionsProfitLossValueCost02v6v12v20v30v42v56v72v90vn(n-1)vF+0F+ 2cF+ 3cF+ 4cF+ 5cF+ 6cF+ 7cF+ 8cF+ 9cF+ 10cF+ ncValue, costConnectionsCost increases linearly with connections… lower storage costs ...$/MBAverage HD size in PC at retail (GB)Harddrive size (GB)Cost ($/MB)
    • 8. LONG DISTANCE Wholesale (Network) Design/build Operations/maintenance Resale/interconnectionRetail Sales/marketing Account management BillingRetail Sales/marketing Account management BillingNetwork Design/build Operations/maintenance Resale/interconnectionRetailRetail Network intelligence Value added servicesWholesale service creation Network intelligence Value added servicesNetwork management/dispatchWholesalePHARMACEUTICALSResearchDevelopmentTrialsRegistrationManufac- turingSales & marketingIncreased development costs Role of blockbusters increasing Quality outsourcers available Easier coordination1980s1990sResearchDevelopmentTrialsRegistrationManufac- turingSales & marketingAcademic labsBiotech firmsContract research organizationsContract mfrsPBMsJVs/ licensingELECTRIC UTILITIESCOMPUTER INDUSTRYAT&T, MCI and Sprint… fragmented radicallyMicroprocessors, integrated circuits, memory chipsComputersOperating systemsApplications softwareMarketing, sales, and distributionCommon standards Time based competition1995IntelMotorolaAMDCyrixCompaqDellApplePackard BellIBMDOS and WindowsUNIXMac OSOS/2Microsoft OfficeWordPerfectOthersRetailSuperstoresOn-lineMail orderNeXtIBM , Digital1997Primary fuelPower generationTradingDistributionBackward integration to reduce risk Forward integration to open supply channelsScale through focusing on huge power plantsSynergy through bundling capabilities of general trading and energy businessNew services for the customerRuhrkohleMobilBPShellNational Power (UK)Electrobel (Belgium)RWE (Germany)Norsk Kraftmegling (Norway)EnronUnited Utilities (UK)South- ern WaterEastern Elect-ricity (UK)Stadt- werke Munch- en (Ger- many)1990199519851990Statkraft (Norway)Oslo Energi (Norway)EVO (Germany)IVO (Finland)MANY INDUSTRIES EXPERIENCING A REDEFINITION OF COMPETITIVE BOUNDARIES
    • 9. MASSIVE REDISTRIBUTION OF THE MARGIN POOL IS OCCURING Digital Photography Example CameraFilmEquipmentPaper, chemicalsPhoto-finisherReprint/ enlargeStore/ display Share with othersProcessingAnalog value chain – Kodak and Fuji dominateMajor players (2000 U.S. market share)Canon Nikon Olympus Minolta Kodak FujiKodak (66%) FujiKodak (Qualex) (~40%) Fuji PhotohutsAlbum manufacturers Frame manufacturersMail servicesdisposablesCameraManipulation Crop Alter pixelsPrinterPaper, inkReprint/ enlargeStore/ displayShare with othersProcessing (at home)Digital value chain – HP, Sony and others well-positionedMajor players (2000 U.S. market share)Sony (35%) HP (19%) Olympus (13%) Kodak (12%)HP (70%) Lexmark EpsonHP Lexmark Epson KodakPC IBM microdrive Sony Compact FlashE-mail posting Personal Web site Zing Shutterfly Snapfish Ofoto OthersAdobe (Photoshop) Standard with camera and available free online
    • 10. EXPLOSIVE GROWTH IN ONLINE RETAILING CONTINUES65.117.8Source: The State of Online Retailing 2.0, 3.0 and 4.0, Shop.org surveys conducted by The Boston Consulting Group; SEC filings; Media Metrix and Harris Interactive data; industry association reports; analyst reports Note: Excludes financial brokerage11.515.2North American Business-to- Consumer Revenues ($B)20.6+132%+66%+46%26.744.5Online channel >10% share in several categories
    • 11. CATALOGUERS ARE WINNINGEBIT Margin in % of Revenues19992000Source: The State of Online Retailing 2.0, 3.0, 4.0; Shop.org Surveys conducted by The Boston Consulting Group
    • 12. ADVANTAGE INCUMBENTSOnline RetailingDot.coms Marketplaces CLECsCataloguers GE, Big 3 ILECs/IXCsB2BTelecom
    • 13. RENAISSANCE OF THE FUNDAMENTALSIPO value Cash flow Growth = value Profitable growth = value Customer acquisition Segmentation Internet timeCompetitive advantage
    • 14. THE VAST MAJORITY OF CHANGE AND TRANSFORMATION LIES AHEADIllustrative view of transforming forces, Circa 2010Technology) GlobalizationDeregulationElectronic commerceSource: BCG analysisDeregulation and globalization index (1999=100)Technology and electronic commerce index (1999=100)
    • 15. A PERSPECTIVE ON OPPORTUNITIES IN REAL ESTATE: LEVERAGE YOUR ASSETS!Asset turns (sales/ assets)Cash flow margin in % of sales (%)RetailConstruction MachineryAutomobileChemicalsUtilitiesReal EstateAirlineAuto partsAerospaceTelecomSource: BCG Analysis
    • 16. A PERSPECTIVE ON OPPORTUNITIES IN REAL ESTATE: LEVERAGE YOUR ASSETS!Access Fibre Wireless Satellite Asset productivity focuse-Procurement e-Sales Margin focusOpportunity SpaceSource: BCG Analysis