Category Archives: Electronic Commerce

Interview by Peter Lorange


Peter Lorange has posted an interview (in German) with me on his blog. (Trust me, I don’t speak much German beyond “Bitte, bitte Kellner, noch ein Bier.” I can sort of read it, though.) I will be teaching a class (with Margherita Pagani) at his institute in a couple weeks.

I am posting the English version of the interview below – good questions, and I am happy with the answers, too.

1. There is no single business which is not affected by information technology in whatsoever way. Is there a general rule of thumb to follow in the e-commerce?

No – except, possibly, don’t ignore it or treat it as an afterthought to your regular business. E-commerce is increasingly the “normal” way to do things, and companies that are successful devote much time and resource to making sure that their value proposition online is as well thought out and delivered as anything else they do.

A persistent problem in many businesses is that, faced with new, Internet-enabled competition, they try to preserve their existing distribution channels and business models by mimicking them online. In some instances, this is the right thing to do, but surprisingly often, doing so leaves you open to competitors that have no existing business to defend. Competition online is often subject to strong network effects, meaning that it can be extremely important to establish a dominant position early – before the economics of the market financially justifies it.

2. Some businesses are quite successful although they are not working with the newest, latest technology. Why, to quote the title of one of your papers, does the best technology not always win?

My point about the best technology not always winning is more directed at technologists – who often things that the technology that is “best” in a technical sense (most advanced, say, or most adherent to the principles of technology the technologist believes in) deserves to win. If it doesn’t, the technologist concludes that this is due to a conspiracy, most commonly arranged by whoever ended up winning the market – be it Microsoft, Google, Facebook, or whoever.

For every new technology that comes along, you will always find a number of initiatives and companies that didn’t quite cut it, even though their ideas were right and the implementation beautiful. Perhaps their timing was wrong. Perhaps they chose the wrong initial market. Perhaps they were part of a larger company that didn’t understand the importance of the new technology or were fearful of its consequences. Or perhaps they just had bad luck.

3. Conversion is a keyword in today’s e-commerce. How can a merchant convert visits on his website into sales?

To a large extent, what makes you successful online no different from what makes you successful in any business: Offering a good product or service at a price the customer is willing to pay. Being online, however, allows plenty of opportunities to surround your existing product or service with electronically enabled experiences and extensions.

A big problem with many online offerings, in addition, is that they impose complicated procedures for the customer, especially around payment. Sometimes these complications are deliberate – to make sure online sales do not harm traditional sales, for instance. Sometimes they are a result of thinking too much about security. Sometimes they come from an insistence on making electronic commerce simple for the company rather than the customer. Small differences in design, especially of the process the customer has to go through, can make a big difference.

4. Design is not just what it looks like. Design is how it works, said Apple co-founder Steve Jobs. You claim that the presence on the web is no longer determined by having a nice web site only. And yet, contemporary web-based design can be used to generate business. Where do you see specific triggers at the interface between design, usability and conversion?

In general, design of a web site matters – but content matters more than colors, pictures and logos. Specifically, many companies forget that customers will enter their web site not through the front door – i.e., through the home page – but directly into any page visible, often through search engines. This means that you must design your web page not just to be esthetically pleasant – it must also be logical in its structure, be consistent in its message and quality no matter where the customers come from, and, most importantly, easy to find and link to for customers. If you type in the name of your product or your product category in a search engine, your site better be the one that pops up on top – or you have done something wrong.

5. For a few years already another buzzword has been on everyone’s lips: social media. In brief, where do you see the most poignant relation between higher sales and social media – if there is any at all?

Social media can be important – especially if you sell branded, high-end goods and services. They can enhance your value offering by providing customers contact with each other –many technology companies, for instance, use electronic forums to let customers help each other use, fix and even extend their offerings. They can also be a threat – news travels extremely fast on social networks, and you certainly don’t want to be the company whose poor service or stiff prices everyone is talking about. That being said, social networks offer you a chance to quickly fix mistakes – and to communicate how fast you fixed them. In short, social media offers you and your reputation everything a small town offers – only on a much larger and much faster scale.

6. Online business and e-commerce promises opportunities. On the downside, like everything, ecommerce is not only related with opportunities, but also with threats.

For most companies, e-commerce is a good opportunity, but for many it can be the first chink in the armor, the first sign that an industry upheaval is on its way. For the music industry, for publishers, for newspapers and for anyone selling access to information or entertainment, e-commerce can, long-term, be a threat to the company’s whole existence. The key lies in recognizing this threat early and turning the digital marketplace into an opportunity. For every industry facing a disruptive innovation threat such as e-commerce, there are companies that go out of existence, but also existing companies that seize the initiative and thrive in a digital environment. Often, these companies owe their existence to executives who had the foresight to see what was going to happen before it showed up in the financial results – and the legitimacy with their shareholders and their workforce to take action before everyone could see that it was necessary. Surprisingly often, these executives were not technical specialists – but they understood their business thoroughly, and that makes all the difference.

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Doc Searls on the market of one

I quite liked Doc Searls’ piece in the Wall Street Journal on the market of one – or as he calls it, power to individuals to broadcast their intents until they find a vendor that matches what they want, not what the vendor wants to sell:

Since the Industrial Revolution, the only way a company could scale up in productivity and profit was by treating customers as populations rather than as individuals—and by treating employees as positions on an organization chart rather than as unique sources of talent and ideas. Anything that stood in the way of larger scale tended to be dismissed.

The Internet has challenged that system by giving individuals the same power. Any of us can now communicate with anybody else, anywhere in the world, at costs close to zero. We can set up our own websites. We can produce, publish, syndicate and do other influential things, with global reach. Each of us can be valuable as unique individuals and not only as members of groups.

According to David Weinberger, the caption “Customer as God” was not something Searls wrote himself – it does look a bit over the top. But customer power is increasingly on the rise – though it has come much longer in the USA than it has in Europe, no matter how much legislation EU has as opposed to the USA. The wonders of competition and falling transaction costs…

Competing online at Lorange

I have just finished (as a matter of fact, I am writing this from the classroom while the students are taking their exam) teaching a two-day seminar called Competing online at Lorange Institute of Business, located in Horgen, a small town about half an hour south of Zürich in Switzerland. Teaching is normally quite tiring, but this time it was a breeze – firstly because it was only 9 students, secondly because they all had interesting experiences and viewpoints on how to use the Internet and Web 2.0 for business and personal purposes. As a consequence, I could run the class as an informal discussion, with less lecturing and quite a bit of learning for me as well as the students.

The diversity of backgrounds was quite interesting – we had three people that owned their own companies (technical textile manufacturing, logistics, and personal credit), three from pharmaceuticals and health companies, one from sports event marketing, one executive from a hotel company, and, last but not least, Isabella Löwengrip, who with her blog Blondinbella could provide very interesting perspectives on how to establish and promote a business on Web 2.0. She did, of course, blog (here and here and here) and Tweet about the experience, occasionally in real time – and she took the pictures you see here.

Linus Murphy, lively and inspiring CEO of Masterstudies.com, was the main case under discussion after lunch on the first day – and he did a great job talking about the importance of making your company findable on Google. To do this, you have to make sure your content is fresh and not duplicated, that each page is about one thing only (so the search engine is not confused) and design the structure and context of the web site before handing it over to be made pretty by a designer. When most of your traffic is driven by search, you must be both findable and searchable.

Competing online syllabus

Name of course: Competing online
Time: February 7-8, 2011
Place: Lorange Institute of Business, Zürich, Switzerland
Instructor: Espen Andersen, Assoc. Prof. Norwegian Business School

The course, a two-day seminar aimed at senior business decision-makers, will give insight into the strategic and tactical choices facing companies going into electronic commerce, whether from a pure online strategy or using an online presence as a support for their regular service and sales channels. The syllabus is not meant to be conclusive – the right to make changes is most explicitly reserved.

If you are interested, you can sign up here.

Syllabus:

Tuesday, February 7

Session 1, 0830-1000: Introduction, the promise and peril of online competition
This session will introduce the course and use a short case as a starting point for discussing the impact of online competition on traditional companies. Please read and be prepared to discuss the following:

Study questions for the case:

  • Is eHerramientas a threat to Catatech?
  • What should Marisa do to design a strategy to counter eHerramientas’ competition?
  • What should Marisa to to communicate her strategy within Catatech?

Session 2, 1030-1200: The mechanisms of electronic commerce: Searchability and findability
Google provides the context in which you will need to be found on the web. Amazon shows a company that helps you find the right product when the customer lands on the site. In this session we will study the offerings by both companies, and see how they have evolved over time.

  • Article: Rangaswamy, A., C. L. Giles, et al. (2009). “A Strategic Perspective on Search Engines: Thought Candies for Practitioners and Researchers.” Journal of Interactive Marketing23: 49-60.
  • Article: Andersen, E. (2006). “The Waning Importance of Categorization.” ACM Ubiquity7(19).
  • Google technology overview, “What is AdWords” video,
  • Article: (for the more advanced student): Brin, S. and L. Page (1998). The Anatomy of a Large-Scale Hypertextual Web Search Engine. Seventh International WWW Conference, Brisbane, Australia. (this is the paper that started Google).
  • Amazon: “Inside Amazon” video, as well as this article: Linden, G., B. Smith, et al. (2003). “Amazon.com recommendations: item-to-item collaborative filtering.” Internet Computing, IEEE 7(1): 76-80.

Session 3 and 4, 1330-1700, with break: Evolving the pure online company
In this session we will study the evolution of Masterstudies.com, a company that helps graduate schools selectively recruit international students for their MBA and M.Sc. programs. We will be joined in this discussion by Mr. Linus Murphy, CEO of Masterstudies.

Session 5, 1700-1730: An introduction to disruptive innovations
In preparation for the group work for the night, there will be a short introduction to and discussion of the theory of disruptive innovations.

  • Articles: Christensen, C. M., M. Raynor, et al. (2001). “Skate to Where the Money Will Be.” Harvard Business Review (November): 73-81.

Session 6, after 1730: Group work

  • Case: Schibsted (HBS case 707474, Bharat Anand)
  • Article: “More media, less news”, The Economist, August 24, 2006
  • Assignment: On a group basis, prepare a short presentation for tomorrow’s morning session. More precise instructions will be distributed in class.

Wednesday, February 8:

Session 7, 0830-1000: Responding to online competition:

  • Case: Schibsted (HBS case 707474, Bharat Anand)
  • Group presentations, prepared the night before

Session 8, 1030-1200: Responding to the social web: Blogs, Facebook, Twitter

Social media represents many challenges to business organizations – but also opportunities for increasing brand awareness, learning from customers and .

  • Article: Mangold, W. G. and D. J. Faulds “Social media: The new hybrid element of the promotion mix.” Business Horizons 52(4): 357-365.
  • Case: A blogger in their midst (HBS case R0309X, Halley Suitt)
  • Case: Coca-Cola on Facebook (HBS case 511110, John Deighton, Leora Kornfeld)

Session 9, 1330-1500: Responding to the technical threat

Security and disaster management is often ignored by senior management – partly because the issues are, well, technical and difficult. The iPremier case, in cartoon form for your reading pleasure, allows for a discussion of how to think about and prioritize security in an online business environment.

Case study questions:

  • How well did the iPremier Company perform during the seventy-five minute attack? If you were Bob Turley, what might you have done differently during the attack?
  • The iPremier CEO, Jack Samuelson, had already expressed to Bob Turley his concern that the company might eventually suffer from a “deficit in operating procedures.” Were the company’s operating procedures deficient in responding to this attack? What additional procedures might have been in place to better handle the attack?
  • Now that the attack has ended, what can the iPremier company do to prepare for another such attack?
  • In the aftermath of the attack, what would you be worried about? What actions would you recommend?

Session 10, 1530-1700: Short written examination

  • TBA.

Session 11: 1700-1730: Concluding remarks

Fulfilling the status role of books

Espen Andersen (Photo: Nard Schreurs)In my office at BI Norwegian Business School I have many books, accumulated over the years. In my living room I have even more, having spent time building bookshelves and defending the wall space against family members who think it could be put to better use. And in my basement I have stacks of cartons with even more books, which I do not have the heart to throw out – hey, I might get around to reading the complete works of Hermann Hesse, in German, some day – but not the space to display.

The book collection is nice – I like books, I can remember almost viscerally where most of them are, and often all that is necessary to remember what is in them is just to take them out of the shelf. And they do tell everyone around me that I am a bona fide intellectual, should anyone wonder.

But I (almost) don’t read books on paper any more – I buy them and read them on my Kindle or PC or iPad. Electronic books are searchable, weightless, cheap, accessible and cost nothing to store. But nobody can see how many books I have on my PC or Kindle. Having many books signals status, to the point where there are companies that will fill you bookshelves for you, in any color and style you want, for a fee. The usefulness of books as status signals will diminish over time, however, just as what has happened with CD racks, which you don’t display anymore, unless you have thousands of vinyl records and cross the threshold from music lover to music fanatic. So, what to do?

The Norwegian publishing and bookselling industry, an astonishingly backward group of companies when it comes to anything digital, yesterday introduced a new concept for e-books that, even for them, is rather harebrained. They want to sell e-book tablets where you can buy books not as downloads (well, you can do that, too) but as files loaded on small plastic memory cards, to be inserted into the reader [article in Norwegian]. This preserves their business model (though they can probably stop using trucks and start using bicycles for distribution). According to their not very convincing market analysis, this is aimed at the segment of the book buying market who do not want to download books from the net (but, for some reason, seem to want to read books electronically.)

imageI initially thought I would make a joke about having to replace my bookshelves with neat little minishelves for the plastic cards, when it dawned on me that perhaps we have the solution here – i.e., a model where we could get the accessibility of digital books with the status display of the paper version. Why couldn’t the publishing industry sell you a digital book (for downloading, if you please) bundled with a cardboard book model, with binding and all, to put in your bookshelf? This would look great, allow you to effortlessly project your intellectualism and elevated taste, while avoiding the weight, dust, and (since these books would only need to be a in inch or two deep) space nuisances of traditional books. You could even avoid physical distribution by letting the customer self-print and cut and fold the “shelf-book” in the right format.

You could even electronically link the two, so that you cold pick your cardboard book from the shelf, wave it in the direction of the e-book tablet (using transponder, 2D barcoding or other identifying techniques) and the book would show up in your reader. If you really wanted to show off, you could add a little color coded bar indicated how far you were in each book, much like a download bar for your computer, to be displayed on each book. Moreover, such as book could be lent from one reader to another.

I recently bought Don DeLillo’s Underworld for my Kindle. Imagine if it came with with nice little book spine, leather as an expensive option, with a barcode and a “read” bar as illustrated here…status, spatial memory, interior decoration, and a way to gradually replace the paper library with an electronic one without disruption.

Remember, you saw it here first!

(In case you wondered: Yes, I am being facetious.)

The Digital Economist Index

The Economist has long had the Big Mac index, a surprisingly useful index for all kinds of things (though the magazine use it primarily to track over/undervaluation of a local currency. The Big Mac is a useful indicator because it is locally produced with local labor, but subject to stringent standards in terms of production and provisioning.

The digital version of the Economist, on the other hand, should be the diametrical opposite of the Big Mac – it is the same all over the world (the Economist does relatively little tailoring of its product, seeing its customers are globalists) and the price for delivering it is, of course, the same in all countries (with some provision for sales taxes.) Consequently, you would expect the product to have one price, all over the world.

Alas, that is not the case.

Continue reading

A dose of tail reality

The long tail doesn’t work, according to Anita Eberle. Chris Anderson, rather sportingly, likes the article but begs to differ when it comes to determining how long that tail should be.

Maybe it is a tall tail?