R

These are a few of hundreds of companies that are re- inventing business models and raising the bar of customer value. The change affects every industry; banking is no exception.  Thane market and the industry are changing in fundamental ways. In both retail and corporate banking, the distinction between the banking services market and other financial services markets is rapidly blurring; customers expect and are receiving more integrated  and broader product and service offerings. Price levels and cost structures are changing as new entrants are not burdened with the relatively high cost of traditional operations. The full service, full-line supplier model is increasingly difficult to sustain in the face of nimble, focused competitors.

Our examination of e-commerce success stories reveals a fundamental truth behind the initial impression that these companies are exploiting a new market channel. Behind the channel play is a collection of companies that are combining their strengths, or business capabilities , to create a superior customer value proposition that alters the competitive terrain. These focused companies - whether start-ups or mature, established organizations, are generally playing one of three roles in the emerging value networks:

• Channel Manager - using the power of the Internet to reach customers, aggregate offerings, and provide new services to the market;

• Product Developer- customizing and commercializing products as a focus; and 

• Fulfiller - using scale and focus to provide efficient and highly reliable execution of orders and deli- very.

The value network is held together by the web. Coordi-  nation and communication among channel partners is easier, faster and less expensive than ever. Indeed, the cost of communication and coordination between companies may now be lower than the cost of communication and coordination within a company. The paradox of separate, focused roles and seamless delivery of superior customer value is resolved by the emergence of powerful information technology-enabled business platforms that connect the capabilities of the partners in the value net.

 See next page>>

The Internet unleashes an inexorable, classic, economic force:  market efficiency. Shopping and comparison ser- vices reach millions of consumers and commercial buyers with information about product availability, price, and quality. This torrent of data about choices and value makes it easy for buyers to shop and com- pare quickly, easily, and across a national or even global selection. Arriba, CommerceOne, and other purchasing services go one step further - they let their customers aggregate their buying power to get better deals from suppliers. Information, selection, and aggregate buying power make the customer king. The world is getting tougher for suppliers - and there is no end in sight.

The rise of e-commerce drives increasing market efficiency and provides the means for suppliers to respond. New business models are rapidly emergent that change the economics, market definitions and assumptions that have ruled the industrial age:

• e.Schwab reduced the price per trade by more than 50 percent - forever transforming the retail securities market;
• Dell.com has reduced the already stressed price of PCs;
• Amazon.com made purchasing books easy - great selection from home, no hassle, competing not on price, but on selection and convenience.

• eBay makes rarities available - finding costs for the customer are close to zero; and

• Fingerhut Business Services leverages the cataloguer's historic logistics and distribution expertise to become the fulfillment arm for e-commerce retailers