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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Bruce Brown who wrote (24611)	5/12/2000 4:18:00 PM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

Bruce, You continue to be a vital source of perspective in the folder. I look forward to the day that we meet, which is an eventual inevitablility in my opinion. Your response to Moore's comments make all sorts of sense. Thanks for clearing the situation up for me. Looking forward to your detailed thoughts after attending Vienna Planet2000, I look even more forward to your report on i2. To avoid the cigarette smoke, you should have attended the one in San Diego. :) --Mike Buckley

To: Bruce Brown who wrote (24611)	5/13/2000 2:32:00 PM
From: Luu	Read Replies (1) \| Respond to of 54805

There is a misconception here. The B2B market is far from being adopted by major companies, not to mention by the mass. IBM and Fluor announced on March 8 an e-marketplace. Thus far, no other companies express interest in joining. And why not? Boeing announced an e-marketplace with a few other manufacturers, with the conspicuous lack of participation of other major manufacturers, such as GE. A few e-marketplaces in operation are about excess inventory (PartMiner, ColMart), or fragmented markets (Chemdex). Companies are struggling developing a business model for a B2B marketplace. No one has yet come up with value props that would attract other companies. There are several questions regarding a B2B commerce. For example: if you establish an e-marketplace to improve the efficiency of procurement, you are facing with two issues: 1.- You can only improve efficiency that much. It may take a couple of years. But after that, what's next? Sure, the savings would go to your bottom line, initially, but then due to competition, you would have to reduce the price to customer, hence no improvement in profit margin. It may be good for the economy, but may not improve your company's valuation. 2.- Others would do the same. How do you differentiate yourself? One of the major themes of the Gorilla Game and also Warren Buffett is competitive advantage. If you can't differentiate yourself, how can you compete? Imagine this scenario: Home Depot is a successful manufacturer of tools, much like Black and Decker, or Makitta, or Dewar. They decided to open a store to sell tools. They invite other tool manufacturers to join their store. They also make known that they would be able to access other manufacturers pricing policies, customer relationship practice, etc. and that they have the ability to push their products ahead of those by other manufacturers. Would B&D, Makitta, Dewar be happy to join? So you need a neutral entity to set up an e-marketplace. How many e-market places were set up by neutral entities so far? The answer is NONE (except for a few small ones like Sciquest). The dilema is that you need certain expertise in the industry to set up an e-market place. But if you have expertise, chances are you are not neutral. You are either a buyer, a seller, or both; which makes you a competitor to the members of the e-marketplace you are trying to set up, which causes them not to participate. For those companies who jumped on the B2B bandwagon, it was because the fear of being left out, or left behind. They themselves found no positive reasons for why they should be part of B2B commerce. They could only articulate reasons for what happens if they are not part of B2B commerce, but not for why they should. And fear is an emotional reason. I2, Ariba, CommerceOne, etc. rode the hype of B2B. Companies (whether they are part of B2B or not) are reevaluating the value of B2B commerce. Until they can articulate value props for B2B commerce, they will proceed cautiously. I2, Ariba, C1 must work hard to show companies why they should adopt a B2B commerce strategy. Short term, companies might agree to pay the like of I2, Ariba, C1 significant dollars just to be part of the B2B commerce. Long term, they need to justify for the expenses. That would affect their willingness to pay these "enabling" companies. The Internet will alter business landscape and practices. But how it will do so remains to be seen. The old business models may not be valid, but the new busines models have not been defined, validated in the market place yet. There are a lot of trials and errors and theoretical debates until certain business models arise and are accepted by companies. I2, Ariba, C1 took advantage of the hype. They could evolve themselves to provide tools and services to the newly-adopted business models. But the models are not defined yet, and there is still a long way to go for these companies to establish themselves as a major force in the B2B arena. Hence, it is premature to think that the chasm is crossed. I don't think there is a tornado either. So, what would one do regarding investing in the B2B commerce? In the long term, it is never too late ONCE the tornado forms and you can identify the leaders. At the moment, the picture is as fuzzy as it should be due to the infantile stage of the Internet. Luu Nguyen