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E-Business 2.0 Emerging Business Models

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In this article, e-commerce experts Ravi Kalakota and Marcia Robinson highlight several emerging e-business models, including Net markets, collaborative click-and-brick, and mobile portals. As you read the article, ask yourself which of these emerging business patterns your company is attempting to compete with. Answering this question will help you get started assessing technology enablers and what opportunities they may present.

This article is adapted from e-Business 2.0: Roadmap for Success, Second Edition by Ravi Kalakota and Marcia Robinson (Addison-Wesley), 2001, ISBN 0-201-72165-1.

E-business is tricky business. In these turbulent times, how should management respond? They should begin by asking the right questions. By focusing on the right transition, companies can proactively alter the nature of competition. What are the transitions that are taking place? Traditional market channels are giving way to new channels, production-centric processes are yielding to customer-centric processes, old business models are morphing to new models, information is replacing inventory, and physical goods are being replaced by digital products.

Before you jump into the deep end of e-business change and begin shifting your operation toward the future, it's important to stop and consider the emerging structural patterns that characterize the new economy, including e-channels, click-and-brick patterns, e-portals, e-market makers, and pure e and mobile portals.

E-channels, or extension models of large companies, have evolved considerably. The first step was developing a stand-alone channel, or spin-off.com, independent of the parent company (for example, Proctor and Gamble spin-off venture Reflect.com); the second step was a stand-alone channel with some connection to the mother ship (for example, Wal-Mart.com). The new phase, channel synchronization, is a tightly integrated click-and-brick strategy, like CVS.com, that serves customers seamlessly no matter what the entry point is.

At the same time, e-portals, or business-to-consumer models, have evolved in three phases in the last few years. The first was developing appropriate traffic (for example, Yahoo!); the second was fighting for transactions (for example, Amazon.com). Now in the third phase, companies are beginning to battle for margins with click-and-brick partnerships such as Amazon.com and Toys R Us. Expect to see more partnerships like this.

It's interesting that both the e-channels and e-portals are converging on what appears to be the same business model: collaborative click-and-brick. The following sections discuss three e-business patterns that are fairly new—net markets, collaborative click-and-brick, and Pure E—to help you better understand the next set of e-wars.

Collaborative Click-and-Brick (C&B)

Here's a formula for the electronic age: (brick-and-mortar) + (click-and-order) = click-and-brick (C&B).

So-called brick-and-mortar (BAM) companies are looking increasingly like new economy companies as they harness technology to achieve greater productivity. An increasing number of BAM companies, such as Williams Sonoma, Circuit City, and Wal-Mart, are attempting to transform their operations to support a digital business model. At the same time, several Internet-based companies are looking to build a real-world physical channel in addition to their virtual channel. The hottest trends in e-tail going forward probably won't be pure-play companies selling strictly through the Net. The next trend is toward the click-and-brick pattern, a hybrid online/offline business model incorporating both physical and online business practices.

The C&B model allows an existing offline business to profit from partnering with an emerging online presence. A great example of C&B is discount stockbroker Charles Schwab. Schwab's success has proven that storefronts can drive traffic to their Web sites. The firm continues to open new storefront offices every year, because that's where customers feel most comfortable signing up for their accounts. But once the relationship is established, the majority of the customers use Schwab's Web site to monitor and manage their accounts, where Schwab's customer-service costs are lower.

This lesson has not been lost on other retailers, who are finally starting to see benefits of combining e-commerce with old-fashioned department store service. An established retailer's name has tangible advantages in cyberspace in a world where consumers are swamped with too many choices.

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