THE INTERNET OPPORTUNITY

1
THE INTERNET OPPORTUNITY

• towards a vision for
• Sterling-Rice Group eSolutions
• presented by Doug Render
• 9 August 1999

2
OBJECTIVES

• Identify the opportunity for Sterling-Rice Group
  to provide clients with Internet solutions
• Build the foundation of knowledge necessary for
  SRG to evaluate this opportunity, and decide what
  type of Internet solutions company it wants to
  become

3
TABLE OF CONTENTS

• I. Backgrounding
• The Internet boom
• eBrand theory
• Role of brand online
• Web models
• II. Opportunity Assessment
• Market for eSolutions
• End-to-end solution profile
• Closest SRG competitor profiles
• III. Conclusions
• Brand online imperatives
• Online brand imperatives
• Recommendations to eService providers

• IV. Recommendations
• SRG eBrand, eService philosophies
• SRG investment, competencies, positioning
  concepts
• V. Next steps
• Create eSolutions champion team
• Decide what type of eSolutions player SRG wants
  to be
• Integrate goals into annual, LRP
• Address change management issues
• Communicate commitment through people, place
• Engage current clients their needs, our
  e-competencies
• Begin integrating web tools into current methods

4
PART IBACKGROUNDING
5
WORLD MOVING ONLINE
BACKGROUNDING

• the Internet economy grew at a rate of 174.5
  from 1995 - 1998
• at 300 billion today, it rivals sectors like
  telecom, autos
• US business spent 4.5B on Internet services in
  1998
• commerce conducted over the web will top 1
  trillion by 2003
• users who make purchases over the Web will jump
  from 31 million in 1998 to more than 183 million
  in 2003
• total number of hours spent on the Internet
  increased from 709 million hours in May 1998 by
  two-thirds to 1.2 billion hours
  in May 1999

6
BRANDING MISUNDERSTOOD BY ONLINE PROFESSIONALS
BACKGROUNDING

• Branding will not be viable on the Internet
• before 2002
• - Bill Bass, Internet Analyst, Forrester Research
• This is not the place to do branding
• - Bill Morris, Senior Marketing Manager, Dell
  Online

7
ONLINE BUSINESS FOCUS ON DIRECT RESPONSE
BACKGROUNDING

• Internet is worlds best direct response medium
• Targetability - Immediacy
• Measurability - Cost effectiveness
• Online advertising community highly
• direct-marketing-centric
• Number numbness

8
ONLINE BUSINESS FOCUS ON DIRECT RESPONSE
BACKGROUNDING

• The direct marketers don't give a damn about
  brand impression they only care about how many
  site visitors they generate and how many of those
  visitors convert into leads or sales.
• - Rob McEwan, M2K
• So You Want Branding and Direct Response, huh?
• ClickZ, 6/24/99

9
ONLINE BUSINESS FOCUS ON DIRECT RESPONSE
BACKGROUNDING

• The most-congratulated Internet players are about
  commerce
• Commerce sites focus upon driving web traffic and
  making sales, which has little to do with
  branding

10
BRANDING MISUNDERSTOOD
BACKGROUNDING

• Online professionals believe that branding
• is about adherence to identity guidelines
• is about creating awareness
• and direct-response efforts are mutually
  exclusive, and must be treated accordingly

11
BRANDING DISCOUNTED ONLINE
BACKGROUNDING

• Online branding erroneously measured by criteria
  of the physical world
• Branding requires relentless repetition
• Advertising most effective branding vehicle
• Powerful creative is required to create emotional
  brand ties
• powerful creative requires rich media
• rich media is limited by current bandwidth

12
ONLINE BRANDING DEMYSTIFIED
BACKGROUNDING

• The web does not break the core laws of marketing

13
ONLINE BRANDING DEMYSTIFIED
BACKGROUNDING

• At the end of the day, brands...are about
  relationshipsabout trust and service and insight
  into what people need...thats what the web is
  about as well. Its about building
  relationships.
• Denis Beausejour,
• VP-Advertising, Worldwide, PG
• Remarks at the Jupiter Spring 98 Ad-Tech
  Conference
• May 7, 1998, Chicago

14
BRANDING IS CRITICAL ONLINE
BACKGROUNDING

• Branding is more important on the Web at this
  point, ironically, because of the glut of
  information. People need some way of simplifying
  to sift through the glut out there."
• Erik Brynjolfsson
• Co-Director
• MITs program on Electronic Commerce and
  Marketing

15
BRANDING FOSTERS ONLINE RELATIONSHIPS
BACKGROUNDING

• Relationships are built around experiences
• On the Internet, relationships are built,
  managed, developed and destroyed on the basis of
  the interactive experience

16
RELATIONSHIPS ARE BUILT AROUND ONLINE
EXPERIENCES Online experience components include
BACKGROUNDING

• Content
• Navigation
• User interface
• Functionality
• Affiliations

• User engagement
• Site responsiveness
• Customer service
• Sense of community

17
BRANDING IS MORE CRITICAL ONLINE THAN IN
PHYSICAL WORLD
BACKGROUNDING

• Internet lacks physical presence
• Three of the five senses have no expression on
  the Internet
• No other context around which to build
  relationships, trust, loyalty

18
INTERNET IS A POWERFUL BRANDING MEDIUM
BACKGROUNDING

• The Internet enables organizations to present and
  build brands in the most powerful way possible
  by allowing people to interact with the brand
• Internet capable of shaping carefully
  constructed, deliberate experiences
• Internet capable of creating dialogue

19
POWERFUL BRANDING MEDIUM
BACKGROUNDING

• Never before have marketers had so much control
  over brand experience. Brand interaction has
  typically occurred on the telephone, in
  face-to-face sales meetings, or at the point of
  sale -- all domains where centralized marketing
  has little control. Increasingly, however, brand
  interactions are taking place online -- an
  environment over which marketing does have
  control.
• Rob McEwan, M2K
• Ten Rules for the Customer Century
• ClickZ 7/1/99

20
INTERACTIVITY KEY TO ONLINE BRAND
BACKGROUNDING

• Interactivity is an online brand's strongest
  asset, enabling the brand owner to form a
  one-to-one relationship with the consumer

21
BRANDING TACTICS CHANGE WITH MEDIUM
BACKGROUNDING

• The Internet does not transcend branding
• Branding tactics are as unique as the medium

22
ONLINE TACTICSPRINCIPLES
BACKGROUNDING

• Mass marketing is becoming mass customization
• The Internet is a participator sport
• help more people play bigger roles
• Create experiences
• Build community
• Drive traffic

23
LEARNING THE LINGOBRANDS ONLINE vs.ONLINE BRANDS
BACKGROUNDING
24
LEARNING THE LINGO3 TYPES OF CORPORATE WEB
PRESENCE
BACKGROUNDING

• Brochure ware
• Branding
• Commerce

25
BROCHURE WARE SITESPROVIDING INFORMATION
BACKGROUNDING

• Static, non-interactive
• Purely informational
• Reinforces relationship, but limited capacity to
  extend relationship

www.ivory.com
26
BRANDING SITESEXTENDING RELATIONSHIPS
BACKGROUNDING

• Dialogue, interactivity, personalization,
  community distinguishes from
• brochure ware
• Elevates discussion from product to emotional
  relationship
• Relationship extends beyond the profiled product

www.dove.com
27
COMMERCE SITESFACILITATING TRANSACTIONS
BACKGROUNDING

• INTRANET
• a WAN hosted on the Internet, accessible only to
  employees, who access it remotely from the net
• EXTRANET
• a controlled-access Intranet for your trade
  partners (distributors, vendors, customers)
  reduces transaction costs, streamlines
  distribution channels
• MERCHANT
• organization dedicated to online retail selling

28
PART IIOPPORTUNITY ASSESSMENT
29
FRONT and CENTER on CORPORATE AMERICAS AGENDA
OPPORTUNITY ASSESSMENT

• ''I don't think there's been anything more
  important or more widespread in all my years at
  GE. Where does the Internet rank in priority?
  It's No. 1, 2, 3, and 4.''
• - John Welch, Chairman, General Electric
• in Nanette Byrnes and Paul Judge, Internet
  Anxiety, Businessweek, June 28, 1999

30
DEMAND FOR eSERVICES WORLD US1997 4.5B 2.9B2
002 43.6B 22.0BCAGR 57 50 Internet and
E-Commerce Services Market A Competitive
Segmentation and AnalysisIDC Corporation,
Analyst Meredith McCartyDocument 17641,
December 1998
OPPORTUNITY ASSESSMENT
31
DRIVERS OF DEMAND FOR eSERVICES
OPPORTUNITY ASSESSMENT

• Organizations increasingly outsourcing eServices
• increased technical demands
• increased profile of project within the
  organization
• desire to focus on core competencies

32
THE END-TO-END eSERVICE SOLUTON
OPPORTUNITY ASSESSMENT

• Business strategy alignment
• Interface architecture and design
• Integrated marketing services
• Application development and integration
• Network, software and hardware integration
• Hosting and ongoing support

33
END-TO-END
OPPORTUNITY ASSESSMENT

strategic
creative
technical
envision
architect
construct
operate
design
define
integrate
deploy
maintain
market
34
END-TO-END
OPPORTUNITY ASSESSMENT
design
define
integrate
deploy
maintain
market
35
DEFINE
OPPORTUNITY ASSESSMENT

• apply business diagnostic
• define business objectives
• identify fit with strategy
• identify fit with processes
• determine user needs, expectations
• define user experience, context
• define technology strategy

36
DESIGN AND MARKET
OPPORTUNITY ASSESSMENT

• marketing strategy
• media strategy
• advertising
• knowledge/relationship
• marketing
• data mining

• design architect
• functional requirements
• technical requirements

37
INTEGRATE
OPPORTUNITY ASSESSMENT

• applications
• software hardware
• legacy systems
• business processes

38
DEPLOY
OPPORTUNITY ASSESSMENT

• site hosting
• site deployment
• systems deployment
• channel deployment

39
MAINTAIN
OPPORTUNITY ASSESSMENT

• content management
• transaction processing
• fulfillment
• customer service
• performance metrics
• site upgrades

40
eSERVICES PROVIDER MARKET FRAGMENTED
OPPORTUNITY ASSESSMENT

• Low cost of entry has created highly fragmented
  industry
• IDC categorizes providers by market heritages
  firms have leveraged experience from other lines
  of business to deliver e-commerce offerings

41
1) INDUSTRY ANALYSIS
OPPORTUNITY ASSESSMENT

• Track, research, publish and sell analyses

42
2) SYSTEMS INTEGRATION
OPPORTUNITY ASSESSMENT

• the Enablers
• Come at the market with a technical solution
• Competencies in application development
• Application integration with existing systems

43
3) INTERACTIVE AGENCIES
OPPORTUNITY ASSESSMENT

• a) WEBSITE DESIGN/ADVERTISING
• Structured as traditional agencies
• Some new, others spun out of big agencies

44
3) INTERACTIVE AGENCIES
OPPORTUNITY ASSESSMENT

• b) MEDIA/NETWORK MANAGEMENT
• Media purchases, metrics
• Content provider networks

45
4) TECHNOLOGY PROVIDERS
OPPORTUNITY ASSESSMENT

• IT product/hardware or software heritage
• Expanding to business services

46
5) MANAGEMENT CONSULTANTS
OPPORTUNITY ASSESSMENT

• Business strategy, organizational change
• IT system development

47
6) ISPs and TELECOs
OPPORTUNITY ASSESSMENT

• Networking perspective
• Expanding beyond access services

48
WHERE COULDAN INTEGRATED BRAND DEVELOPMENT
MANAGEMENT ORGANIZATION PLAY?
OPPORTUNITY ASSESSMENT

• Profiles of closest competitors

49
OPPORTUNITY ASSESSMENT
www.bcg.com

• Our electronic commerce team is a focal point of
  excellence and intellectual leadership within the
  firm. We assist our clients in issues related to
  entry strategies, branding, navigation,
  competitor and partnership strategies, market
  research, pricing, privacy and security, and
  selling and merchandising.

50
OPPORTUNITY ASSESSMENT

• We are in partnership with shop.org, the
  association for leading on-line retailers, to
  develop the first comprehensive study in North
  America on the on-line retail industry. This
  joint survey provides a detailed assessment of
  the size and growth of the on-line retail channel
  and an analysis of the industry's key financial
  and operational performance metrics.

51
OPPORTUNITY ASSESSMENT
www.prophet.com

• It is our belief that the great brands of the
  21st century will be those companies with the
  best Internet strategies. We help companies
  build a coherent digital strategy along with
  digital implementation plans that are integrated
  with other brand initiatives and operations.

52
OPPORTUNITY ASSESSMENT

• Prophet Brand Strategy assists clients with the
  implementation and ongoing management of their
  web efforts by acting as the client's project
  manager, orchestrating the efforts of third party
  vendors, internal technical resources and support
  functions under the direction of the project
  sponsor.

53
Here at Landor, we believe that a brand is a
promise of quality and satisfaction...in the age
of interactive communications, companies face
both exciting rewards and sharp rebukes as they
attempt to translate a brand's appeal into an
enticing but unbridled interactive world.
OPPORTUNITY ASSESSMENT
www.landor.com
54
At Landor, we apply our six decades of strategic
design and branding expertise to help bridge the
gap between the tangible and virtual, creating
Internet and Intranet Web sites, corporate and
brand identity guidelines on CD-ROM and
Intranets, identities for interactive services,
and on-screen graphics and icons for computer
software applications.
OPPORTUNITY ASSESSMENT
55
OPPORTUNITY ASSESSMENT
www.nua.ie

• Nua is a leading Internet strategy, research and
  development company. Nua builds brands online.
  Nua combines its marketing, communications,
  creative and technical expertise to deliver
  online brand solutions to the world's leading
  organizations committed to winning online. Nua is
  an Internet specialist with expertise in the
  management of online relationships and brands.

56
OPPORTUNITY ASSESSMENT
Siegel Gale
www.siegelgale.com

• Siegel Gale is the worlds largest independent
  strategic branding, communications, and
  interactive media consultancy. Our award-winning
  specialists extend the reach, meaning, and impact
  of a clients brand promise. Electronic
  shopping, online banking, communities of
  professional interestwe create the right format
  for electronic dialogue.

57
PART IIICONCLUSIONS
58
BRANDS MUST MIGRATE
CONCLUSIONS

• Unprecedented avenue to build relationships
• Web population increasingly mainstream
• Consumer expectations that leading brands online
  --in touch with their customers needs
• Innovative brands must look to reinforce the
  experience their brand offers by recreating the
  experience on the web
• Elimination of distribution channels means
  minimization of communication opportunities

59
MIGRATION IMPERATIVES
CONCLUSIONS

• There's a revolution under way, and mastering
  the Net has moved front and center on Corporate
  America's agenda. The Internet model...offers a
  new level of speed and operational efficiency for
  those who master it--and huge dislocations for
  those who don't.
• - Byrnes and Judge, Internet Anxiety,
• Business Week, June 29, 1999

60
MIGRATION OBJECTIVES
CONCLUSIONS

• As the big blue-chip marketers move online,
  they're not gonna be interested in just selling
  stuff. They're interested in maintaining the
  value of their brands and understanding how
  brand images might differ between those who've
  seen online ads
• and those who haven't.
• - Susan Goodman
• Executive VP, THINK New Ideas

61
MIGRATION EXPECTATIONS
CONCLUSIONS

• The web has the potential to be a dramatically
  more effective way for us to communicate with the
  people who buy and use our products
• - Denis Beausejour,
• VP-Advertising, Worldwide, PG
• Remarks at the Jupiter Spring 98 Ad-Tech
  Conference
• May 7, 1998, Chicago

62
BRANDS ONLINE HOLD SOME ADVANTAGES OVER ONLINE
BRANDS
CONCLUSIONS

• Advantages of an established brand in an online
  market
• Established market presence
• Years of brand equity
• Loyal customer base

63
MIGRATION HURDLES
CONCLUSIONS

• Key impediments to migrating brands online
• Lack of understanding of business IT strategy by
  consumer goods brand managers
• Inability of their traditional agencies to think
  through the brand management aspects of online
  product marketing
• - Susan Nolan, Blue Sky International Marketing
• Reporting on the Jupiter European Online
  Advertising Conference in ClickZ

64
MIGRATING BRANDSMODEL SITE UNILEVERS DOVE
CONCLUSIONS
www.dove.com
65
ONLINE BRANDS NEED BRANDING, TOO
CONCLUSIONS

• Branding is integral to commerce and the Internet
  will not change this
• The technology is new, but the things that make
  people buy have not changed

66
ONLINE BRANDS NEED BRANDING
CONCLUSIONS

• eCommerce Trust Study, published January 1999 by
  Cheskin Research and Studio Archetype/Sapient
  identifies brand among six components
  determining trustworthiness of a site
• Concludes that brand attributes increasingly
  matter more than the medium in which they are
  established

67
ONLINE BRANDS BRANDING EFFORTS HAVE FAILED
CONCLUSIONS

• Research firm Harris Black International released
  in June, 1999, ecommercePulse, a survey of more
  than 100,000 Internet users
• Found that 40 of online consumers could not name
  an online retailer in 12 out of 13 categories

68
ONLINE BRANDS NEED BRANDING HELP
CONCLUSIONS

• The ecommercePulse survey suggests that online
  consumers are oblivious to most online retailers
• Branding initiatives have failed

69
BRAND FOSTERS RELATIONSHIP, TRUST
CONCLUSIONS

• Relationship component of commerce as critical as
  transaction component
• Without relationships, there can be no trust
  security concerns still the 1 impediment to
  online commerce
• Brands create trust, become fortresses in an
  insecure world

70
ONLINE BRANDS VULNERABLE
CONCLUSIONS

• "Right now is the cheapest time to build a brand
  that it's ever going to be sic
• on the Internet.
• Erik Brynjolfsson
• Reacting to the ecommmercePulse study
• Margaret Kane, Brand Wide Open,
• Zdnet, June 24, 1999

71
ONLINE BRAND PRESSURES
CONCLUSIONS

• Window of opportunity closing for many categories
• Category leadership not yet firmed (with
  exceptions)
• Thinning margins, commoditization--organizations
  must differentiate with brand
• Established players now reassessing efforts

72
EVEN THE LEADING ONLINE BRANDS NEED HELP
CONCLUSIONS

• "We've got a long way to go before we can be
  considering ourselves successful in establishing
  our brand," said eBay spokesman Kevin Pursglove,
  adding that eBay had done some brand building to
  date, including ads on the radio and in niche
  magazines. "Brand building is in its nascent
  stages. There's a long way to go before anybody
  feels successful in this area."
• - Kim Girard, Net Consumers Oblivious to Most
  Brands, CNET News.com, June 24, 1999

73
RECOMMENDATIONS TO eSERVICE PROVIDERS
CONCLUSIONS

• Maintain a multidisciplinary perspective
• Provide end-to-end solutions, either through
  practice or partnerships and alliances
• Scale operations to meet market demand
• number of consultants and skill sets
• Focus on attracting and retaining employees
• particularly tight labor market for these skills

74
RECOMMENDATIONS TO eSERVICES PROVIDERS
CONCLUSIONS

• Formalize marketing/merchandising of eService
  solutions
• Focus on follow-on business (more predictable
  revenue)
• Establish global presence Internet is
  international
• Demonstrate ROI on projects
• Understand all constituent groups within client
  organization marketing, LOB managers, IT
• Rapid deployment is criticalthe primary focus

75
PART IVRECOMMENDATIONS
76
SRG eBRAND PHILOSOPHY
RECOMMENDATIONS

• The great brands of the 21st Century will be
  those with great Internet strategies. This
  strategy must be built into the organizations
  Brand Vision.
• Brands are about relationships about trust and
  service and insight into what people need.
  Thats what the web is about as well its about
  building relationships.
• Branding is more important on the Web today
  because of the glut of information. Brands are
  lighthouses in a sea of information.

77
SRG eBRAND PHILOSOPHY
RECOMMENDATIONS

• The Internet lacks physical presence three of
  the five senses have no expression on the
  Internet. Beyond brand, there is no other
  context around which to build relationships,
  trust, loyalty.
• The Internet enables organizations to present and
  build brands in the most powerful way possible
  by allowing people to interact with the brand.
• Interactivity is an online brand's strongest
  asset. It allows the brand to enter into
  dialogue, enabling the brand owner to form a
  one-to-one relationship with the consumer.

78
SRG eBRAND PHILOSOPHY
RECOMMENDATIONS

• Branding is integral to commerce and the Internet
  will not change this. The technology is new, but
  the things that make people buy have not changed.
  
• Building a brand online requires attention to the
  entire realm of user experience.
• A company's web site IS the brand. It's the hub
  of consumer experience, the place where all
  aspects of a company converge in a way that
  cannot be duplicated in the analog world.

79
SRG eSOLUTIONS PHILOSOPHY
RECOMMENDATIONS

• Winning in the digital economy does not
  necessarily require an in depth understanding of
  the underlying technology, but does require the
  ability to analyze sources of competitive
  advantage, identify points of sustainable
  differentiation, recognize unique customer
  desires, build consumer relationships, and create
  emotional and sensory experiences.

80
SRG eSOLUTIONS PHILOSOPHY
RECOMMENDATIONS

• SRGs strength in building emotionally
  sustainable, differentiated brands, and in
  creating strong sensory experiences, can be
  leveraged to migrate brands online and to create
  online brands
• SRG maintains a multidisciplinary perspective, if
  not a multidisciplinary practice
• SRG is a leader in identifying new ways to do
  business in a digital economy

81
SRG eSOLUTIONS PHILOSOPHY
RECOMMENDATIONS

• SRGs eSolutions practice area focuses upon
  Internet branding sites and merchant commerce
  sites
• Where relationship building and sensory
  experience are as important as functionality
  (less so Intra/Extranets)
• Develop branding sites, improve merchant sites

82
SRG eSOLUTIONS PHILOSOPHY
RECOMMENDATIONS

• SRG provides eSolutions to Fortune 1000 companies
  seeking to transform businesses through the
  strategic use of Internet technologies
• SRG delivers solutions that help clients improve
  operations, enable resources, realize long-term
  savings, and enjoy increased competitive
  advantage

83
RECOMMENDATIONS
SRG GROWTH FRAMEWORK
INVESTMENT
Level V
Level IV
Level III
Level II
Level I
OPPORTUNITY
84
GROWTH FRAMEWORK
RECOMMENDATIONS
competencies
investments
opportunities
competitors
partners
85
PART VNEXT STEPS
86
NEXT STEPS

• Appoint/recruit a multidisciplinary team to
  champion eSolutions effort
• Decide what type of eSolutions player SRG should
  become
• Refine the SRG eSolutions philosophies and
  positioning
• Identify skill competencies, gaps
• Identify eSolutions acquisitions, partners, if
  appropriate

87
NEXT STEPS

• Integrate eSolutions goals into annual and long
  range plans
• Address the change management issues
• Human resources
• eConsulting/IM-e/Creative relationships

88
NEXT STEPS

• Consider how to communicate our commitment to
  eSolutions through people and place
• People
• younger? more technical or entrepreneurial
  backgrounds?
• more goatees?
• Place
• look and feel of the offices? virtual offices?
• create interactive environment for clients
  treatment of the 4th floor entryway

89
NEXT STEPS

• Engage current clients in discussion their
  needs, our e-competencies
• Begin to integrate web as a tool into current
  methodologies

90
RESOURCES

• Glossary of Internet terms
• News sites links
• Brand strategy competitor links
• Industry analysis links
• Interactive design links
• Interactive media links
• System Integrator links
• Internet at a glance fact sheet