| Contents | |
| About the Authors | xi |
| Preface | xii |
| From the Publisher | xv |
| Acknowledgments | xvii |
| PART ONE | |
| THE INTERNET | 1 |
| Chapter 1 | |
| Introduction and Overview | 3 |
Determinants of Performance | 3 |
Business Models
| 4 |
Environment
| 5 |
Change
| 6 |
The Internet
| 6 |
| Internet Business Models | 7 |
| Internet Business Models and Strategies | 7 |
Part I: The Internet
| 8 |
Part II: Components, Linkages, Dynamics, and Evaluation of Business
Models
| 9 |
Part III: The Role of Competitive and Macro Environments
| 9 |
Part IV: Applying the Concepts, Models, and Tools
| 10 |
Part V: Cases
| 10 |
| Chapter 2 | |
| Overview of Internet Technology and Value Network | 12 |
| Definition and History | 12 |
What Are the Internet and the World Wide Web?
| 12 |
A Brief History of the Internet and the World Wide Web
| 15 |
| The Internet Value Network | 17 |
I. Users
| 18 |
II. Communications Services
| 22 |
III. Suppliers
| 25 |
| Chapter 3 |
| Competitive Landscape-Changing Properties of the Internet | 32 |
| Properties of the Internet | 32 |
1. Mediating Technology
| 33 |
2. Universality
| 33 |
3. Network Externalities
| 33 |
4. Distribution Channel
| 35 |
5. Time Moderator
| 35 |
6. Information Asymmetry Shrinker
| 35 |
7. Infinite Virtual Capacity
| 36 |
8. Low Cost Standard
| 36 |
9. Creative Destroyer
| 36 |
10. Transaction-Cost Reducer
| 37 |
| Impact of the Internet on the 5-Cs | 38 |
Coordination
| 38 |
Commerce
| 39 |
Community
| 43 |
Content
| 43 |
Communication
| 44 |
Implications for Industries
| 44 |
| Limitations to Transactions over the Internet | 44 |
Tacit Knowledge
| 45 |
People
| 45 |
| PART TWO | |
| COMPONENTS, LINKAGES, DYNAMICS, AND EVALUATION OF BUSINESS
MODELS | 49 |
| Chapter 4 |
| Components of a Business Model | 51 |
| Internet Business Model | 51 |
| Components and Linkages | 52 |
Rationale for Components
| 52 |
| Profit site | 53 |
| Customer Value | 55 |
Differentiation
| 55 |
Low Cost
| 57 |
| Scope | 57 |
| Price | 58 |
Market Share and Margins Are Critical!
| 59 |
It's Growth! It's Revenues!
| 59 |
Lock-in
| 59 |
Types of Pricing and the Influence of the Internet (Dynamic Pricing)
| 60 |
| Revenue Sources | 62 |
| Connected Activities: What Activities and When | 63 |
Which Activities to Perform
| 63 |
When to Perform Activities
| 65 |
Implementation
| 66 |
Structure
| 66 |
Systems
| 67 |
People
| 67 |
| Capabilities | 69 |
Resources
| 69 |
Competencies
| 69 |
Competitive Advantage
| 70 |
| Sustainability | 70 |
Block Strategy
| 71 |
Run Strategy
| 71 |
Team-up Strategy
| 72 |
| Cost Structure | 72 |
| Chapter 5 |
| Dynamics of Internet Business Models | 78 |
| Who Profits from Technological Change? | 78 |
Complementary Assets Model
| 78 |
Implications for the Internet
| 80 |
Strategic Implications of Complementary Assets Model
| 80 |
Determining One's Complementary Assets
| 82 |
| Developing the Technology | 83 |
Models of Technological Change
| 84 |
| Example: The Dot.com Boom and Burst | 96 |
Should the Dot.com Bubble and Burst Have Been Expected?
| 97 |
Who Wins in a Dot.com versus Bricks-and-Mortar Battle?
| 97 |
| Chapter 6 | |
| A Taxonomy of Business Models | 103 |
| A Taxonomy of Business Models | 103 |
Intermediary
| 104 |
Advertising
| 106 |
Infomediary
| 107 |
Merchant
| 108 |
Production
| 108 |
Affiliate
| 109 |
Community
| 110 |
Subscription
| 110 |
Fee-for-Service
| 111 |
| Putting It All Together: The Four Elements and the Taxonomy | 111 |
Profit Sites
| 112 |
Revenue Models
| 113 |
Commerce Strategy
| 113 |
Pricing Models
| 114 |
| Chapter 7 | |
| Value Configurations and the Internet | 118 |
| Value Creation and Organizational Technologies | 118 |
| The Value Chain | 121 |
A Manufacturer's Value Chain
| 121 |
How Does the Internet Affect the Primary Activities of the Value Chain?
| 122 |
| The Value Shop | 125 |
Value Creation Logic and Service Provision
| 125 |
Primary Activities of the Value Shop
| 126 |
How Does the Internet Affect the Primary Activities of the Value Shop?
| 127 |
| The Value Network | 130 |
Examples of Value Network Businesses
| 130 |
Primary Activities of the Value Network
| 131 |
| Making a Firm's Value Configuration Consistent with Its Activities | 134 |
| Chapter 8 | |
| Valuing and Financing an Internet Start-Up | 140 |
| When to Cash Out | 140 |
Over a Firm's Life Cycle
| 140 |
Collecting Early
| 141 |
| The IPO Process 141 |
Impact of the Internet on the IPO Process
| 142 |
Valuation of a Business | 143 |
Cash Flows
| 143 |
Price-Earnings (P/E) Ratio
| 145 |
Price-Earnings Growth (PEG) Ratio
| 146 |
| Valuation of Businesses That Are Not Yet Profitable | 146 |
Firm and Industry Proxies
| 146 |
Business Models Approach: Earnings and Cash Flow Chain
| 147 |
Implications of Market Value for Financing and Investment Strategies
| 148 |
| Intellectual Capital: Valuing the Parts | 149 |
Components of Intellectual Capital
| 150 |
| Financing a Start-Up | 152 |
Internal Sources: Assets and Activity
| 152 |
Equity
| 152 |
Debt
| 154 |
Complementary Assets
| 154 |
| Chapter 9 | |
| Appraisal of Business Models | 158 |
| Elements of Appraising Business Models | 158 |
Profitability Measures
| 159 |
Profitability Predictor Measures
| 159 |
Business Model Component Measures
| 160 |
| The Case of Juniper Networks | 164 |
The Networking Industry
| 165 |
Juniper Networks' Company History
| 168 |
Juniper's Corporate Strategy
| 168 |
Initial Success for Juniper
| 169 |
Juniper Gains Market Share
| 171 |
Juniper's Competitors
| 172 |
Juniper at Crossroads
| 173 |
| Appraising Juniper Networks' Business Model | 173 |
How Viable Is Juniper Networks' Business Model?
| 174 |
Should Juniper Enter the Enterprise Router Market?
| 179 |
| PART THREE | |
| THE ROLE OF COMPETITIVE AND MACRO ENVIRONMENTS | 183 |
| Chapter 10 | |
| Competitive and Macro Environments | 185 |
| The Environment As Determinant of Firm Performance | 185 |
The Competitive Environment
| 185 |
Industry Characteristics and Critical Success Drivers
| 187 |
| The Internet and Environmental Determinants of Performance | 187 |
Impact of the Internet on Industry Environment
| 187 |
The Internet's Multiple Forces
| 190 |
A Five Forces Analysis of ISPs
| 190 |
An Important Point about Industry Analysis
| 191 |
| Co-opetitors and Industry Dynamics | 192 |
Co-opetitors
| 192 |
Industry Dynamics and Evolution
| 193 |
| The Macro Environment | 193 |
Impact on Performance
| 194 |
| PART FOUR | |
| APPLYING THE CONCEPTS, MODELS, AND TOOLS | 199 |
| Chapter 11 | |
| The General Manager and the Internet | 201 |
| Competitive Advantage and the General Manager | 201 |
| Incumbents versus New Entrants | 202 |
Managing Bricks-and-Mortar Incumbents
| 202 |
Managing New Entrants
| 207 |
| Formulating and Implementing a Strategy | 208 |
Change and the Strategic Management Process
| 208 |
Where Is the Firm Now?
| 209 |
Where Does the Firm Go Next?
| 213 |
How Does the Firm Get There?
| 213 |
Implementation
| 216 |
| Personal Role of the General Manager | 217 |
Champions
| 217 |
Sponsors
| 217 |
| Chapter 12 | |
| Sample Analysis of an Internet Business Model Case | 222 |
| Amazon.com: zShops | 222 |
Amazon.com
| 223 |
Amazon's Diversification Strategy
| 224 |
zShops
| 226 |
| e-Commerce Industry | 228 |
Competitors
| 228 |
Threats
| 229 |
The zShops Dilemma
| 229 |
| What Is the zShops New Product Concept and How Does It Add Value to Stakeholders? | 230 |
How the zShops Add Value to Customers
| 231 |
How the zShops Add Value to Shop Merchants
| 232 |
How the zShops Add Value to Amazon
| 232 |
| What Value Configuration Activities Should Amazon Be Undertaking? | 234 |
Value Network Components
| 234 |
| Does Amazon Have Control Over Key Assets? | 234 |
Complementary Asset Framework
| 234 |
| Are the zShops a Viable Growth Strategy for Amazon? | 235 |
Analysis of Business Model Components
| 236 |
| Recommendations: Is Amazon Risking Too Much from the Standpoint of Brand
Name and Reputation? | 239 |
| Appendix | 241 |
| PART FIVE | |
| CASES | 247 |
| Case One | |
| Broadcast.com | 249 |
| Case Two | |
| Webvan: Reinventing the Milk-man | 257 |
| Case Three | |
| Reflect.com: Burn the Ships | 269 |
| Case Four | |
| VerticalNet: The New Face of B2B | 283 |
| Case Five | |
| LiveREADS: Valuing an E-book Start-up | 299 |
| Case Six | |
| Beyond Interactive: Internet Advertising and Cash Crunch | 311 |
| Case Seven | |
| Hotmail: Free E-Mail for Sale | 327 |
| Case Eight | |
| GMBuyPower.com: Dealer Beware | 335 |
| Case Nine | |
| iVillage: Innovation among Women's Websites | 349 |
| Case Ten | |
| eBay, Inc.: Diversification in the Internet Auction Market | 358 |
| Case Eleven | |
| Microsoft: Xbox Online | 369 |
| Case Twelve | |
| Sun Microsystems: Jumping for Java | 390 |
| Case Thirteen | |
| OSCar-The Open Source Car Project | 402 |
| Case Fourteen | |
| *Trade: "A Lust for Being Different | 413 |
| Case Fifteen | |
| Research in Motion Limited (RIM) and BlackBerry: Wireless E-Mail . . .
the Killer App? | 426 |
| Case Sixteen | |
| Sprint PCS: Winning the Wireless War? | 440 |
| Case Seventeen | |
| Napster: The Giant Online Pirate Bazaar | 457 |
| Index | 471 |
2003 McGraw-Hill Higher Education