StratVantage Consulting, LLC — Mike’s Take on the News 07/30/01

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StratVantage Consulting, LLC — Mike’s Take on the News 07/30/01

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The News – 07/30/01

B2B Pace Car

Covisint landed on the B2B exchange scene last year with a thud, simultaneously legitimizing and terrorizing the exchange marketplace. After spending most of last year getting their act together, the automotive marketplace is now doing $36 billion in transactions via auctions. There’s no telling how much revenue the independent company is reaping from those transactions because Covisint (stupid name alert) isn’t saying.

Lately it seems they’ve been having trouble signing up European automotive suppliers, but partner DaimlerChrysler should be able to bring them in line. Covisint claims automakers can save $2,000 to $3,000 on producing a car and take 6 to 8 months out of the product cycle.

Doug VanDagens, Covisint’s senior vice president of strategy and business development, said “At the end of the day, private and public exchanges want the same thing: they all want to be profitable and save money for their customers at the same time. Ownership is the only real difference.” I beg to differ. The aims of captive exchanges like Covisint are fundamentally different from the aims of either public or private exchanges. There’s more detail in the white paper, Taking Control of the B2B Exchange: What’s Next in the Supply Chain Evolution , but essentially the goals of the three types of marketplaces are:

· Captive Exchange (AKA COBAM – Collaborative Online Bricks And Mortar) – to ensure lower prices and continued industry dominance for the sponsors. Price pressure is applied through liquidity, the volume of transactions over the exchange. Partners commit to a certain transaction volume, and encourage or require their trading partners to participate. COBAMs are slowly realizing that true value can be created through collaboration with suppliers, not through beating them up over price.

· Independent Exchange (AKA Public Exchange) – to create liquidity that drives transaction fees and other revenue streams. A marketplace that is not liquid does not have a lot of trading activity. Without critical mass, independent exchanges cannot derive revenue, regardless of whether they charge transaction fees or depend on providing ancillary services to make ends meet.

· Private Exchange (AKA Extranets on Steroids) – to improve communications and increase collaboration with supply chain partners. Private Exchanges are controlled by a single buyer, and are typically not about liquidity, although a critical mass of transactions is necessary to justify their existence. The buyer and the suppliers can design new products or logistical flows, and all can benefit from greater visibility into what’s happening in the supply chain. The private exchange is more about creating lower costs through decreasing supply chain friction rather than through increasing competition.

Business owners should be aware of the goals of the various types of exchanges before agreeing to participate. If those goals are not aligned with the business’, take a hard look at participation. It seems that the COBAMs have the momentum and the transaction volume in the industry today, but private exchanges and the collaborative tools they make available will be the dominant form of online marketplace by the end of the decade.

Briefly Noted

  • Do Online Ads Work? A famous man once said, “I know that half the money I spend on advertising is wasted. I just don’t know which half.” You’d think online advertising, with its ability to track response, would improve that ratio. Apparently not, but there are some things we’re learning about online advertising. For example, a DoubleClick study found that larger banner ads work better. Also more effective were those incredibly annoying “interstitial” or “pop under” ads. Those are the irritating windows that pop up when you enter or leave a site. A great example is the ubiquitous ads for the wireless video camera you’ve no doubt seen. Those have become so obnoxious, that you can actually go to the manufacturer’s site and sign up not to see the ads. It only works for a month, and then they’re back in your face. Anyway, this eMarketer article pleads with advertisers to not start an arms race:

    Rather than lurching towards "bigger is better" online advertising, in an understandable attempt to provide both comfort and confidence to traditional advertisers, perhaps the industry should seek ways to work with consumers. After all, this is still a very young medium. Surely we haven’t run out of ideas already.

    Amen to that.

  • European Online Grocers: Several grocery dot-coms have blown up recently, yet two European firms are charging ahead with online grocery. As reported here earlier, multinational grocery Ahold has made eCommerce and home deliveries a major strategy, buying the rest of Peapod and running a very nice online operation in Argentina . In 2000, it achieved online sales of about 250 million euro and expects sales to rise to about 1 billion euro by 2002. After shelving and writing off $30 million, multinational grocer Safeway transferred 35 percent of GroceryWorks equity to Tesco PLC, a British grocer. Tesco runs a profitable $420 million online operation in the United Kingdom and intends to allow users to shop via Microsoft Pocket PC devices. In return for the equity, Tesco is helping to revamp Safeway’s online operations. The operations will reopen under the local Safeway banner with a new Web site and deliveries fulfilled from the stores. Now that’s the way you do it.
    IDC eBusiness Trends
  • Demise of a Newsletter: Jeffrey Harrow, the author of one of my favorite online newsletters, the Rapidly Changing Face of Computing, published by Compaq, is leaving the company. RCFoC has a little larger circulation than SNS, about half a million readers. There’s no telling what will happen to this tremendous resource about leading edge tech, but chances are good something will occur at .
  • Web Site Outage: Although it didn’t make the national news, the StratVantage Web site was inaccessible for many hours last Thursday, right after the previous SNS went out. I apologize for the inconvenience and blame

    the nitwits at my hosting company, who decided to change all the IP addresses in the middle of the day. When I pressed them as to why they hadn’t notified me beforehand, they said, “We have thousands of users. We couldn’t possibly call them all up.” I asked them if they had ever heard of email. They said they usually post notices of this sort on their helpdesk Web site, although they had neglected to do so this time. This reminded me of the bit in Hitchhikers Guide to the Galaxy where poor Arthur Dent is told the notice of his impending house demolition had been on display at the local planning office for nine months. Dent eventually found the notice: “It was on display in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying ‘Beware of the Leopard .’”

  • Content-Free Websites: Noted Web usability expert Jakob Nielsen recently wrote about Web site tag lines, the short statements that sum up what a site offers. He has found that B2B sites have a tough time putting what they’re about into short, pithy statements. He offers some guidelines for front page design (among them, lose the Flash animations):

    Users decide quickly whether to stay or leave a site. To assess whether your homepage communicates effectively to visitors in the crucial first 10 seconds, follow two simple guidelines.

  1. First, collect the taglines from your own site and your three strongest competitors. Print them in a bulleted list without identifying the company names. Ask yourself whether you can tell which company does what. More important, ask a handful of people outside your company the same question.
  2. Second, look at how you present the company in the main copy on the home page. Rewrite the text to say exactly the opposite. Would any company ever say that? If not, you’re not saying much with your copy, either.

Think about your home page as analogous to a tradeshow booth. Why do you stop at some booths and skip others? And, no: having a live magician is not the answer for your home page. Clearly saying what you do and why users should care is the way to go.

  • Gimme a Cold (Bud) Light: When I saw a reference to this article the first time, I thought, “It’s too incredible to be true.” When I saw it again, I finally had to read it. It is too incredible to be true: Physicists have found a way to stop light. Not the red kind on the corner, they actually have slowed light down to a stop. A research team at Rowland Institute for Science in Cambridge, Mass., first succeeded in slowing light in March 1998. By July of that year, they got it down to less than the speed of sound. Late last year, they brought pulses of light to a complete halt within tiny gas clouds cooled to near absolute zero. They kept light on ice, essentially translating it into motionless forms of quantum information. Of course, it’s no trick to slow down light. We couldn’t see anything if the lenses in our eyes didn’t slow light down to focus it on our retinas. But stopping it is pretty drastic. It required a cloud of sodium atoms trapped in a magnetic field and cooled to within a millionth of a degree of absolute zero. That’s pretty cool. The researchers say this technique could be the key to creating quantum computers with unimaginable power. Now if the answer to life, the universe and everything turns out to be 42 . . .
    Scientific American
  • Wireless LANs Unsafe: If you’re thinking, as I am, about getting a wireless network card for your laptop (I want mine so I can work on the porch), you might want to think again. Turns out it’s quite easy to hack the data stream running over the most popular wireless LAN protocol, 802.11b. Guardent Inc., an Internet security firm in Waltham, Mass., routinely pulls data out of the air while testing clients’ security. The problem is that most companies using wireless networks neglect to turn on the security built into the systems. But even that security is inadequate, according to posters on the Zealots mailing list. Called Wireless Encryption Protocol (WEP), the scheme is easily defeated just by simply listening to the traffic stream. “After scanning several hundred thousand packets, the attacker can completely recover the secret key and thus decrypt all the ciphertexts,” says Adi Shamir of the Weizmann Institute of Science. So if you’re considering a wireless LAN, be sure to add some other, more secure, encryption software to your setup or you could be sorry.
    Zealots Mailing List Thanks to Alert SNS Reader David Dabbs for the ping.

Can’t Get Enough of ME?

In the unlikely event that you want more of my opinions, I’ve started a Weblog. It’s the fashionable thing for pundits to do, and I’m doing it too. A Weblog is a datestamped collection of somewhat random thoughts and ideas assembled on a Web page. If you’d like to subject the world to your thoughts, as I do, you can create your own Weblog. You need to have a Web site that allows you FTP access, and the free software from . This allows you to right click on a Web page and append your pithy thoughts to your Weblog.

I’ve dubbed my Weblog entries “Stratlets”, and they are available at . Let me know what you think. Also check out the TrendSpot for ranking of the latest emerging trends.

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