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 SIEBELCEO, 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 increasingQuality outsourcers available
Easier coordination1980s1990sResearchDevelopmentTrialsRegistrationManufac-
turingSales & marketingAcademic labsBiotech firmsContract research organizationsContractmfrsPBMsJVs/
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 OCCURINGDigital 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