Andre Bezuszka

1

• Andre Bezuszka
• Dan Kempisty
• Shannon Mosier
• Mike Richards
• Ruby Tsai
• February 23, 2005

2
Case 4 - American Express

• MIS 524 Winter 2005
• Andre Bezuszka
• Dan Kempisty
• Shannon Mosier
• Mike Richards
• Ruby Tsai
• February 23, 2005

3
Agenda

• Introductions
• Company Background
• How important was AXI Travel to American
  Express? Evaluate the actions taken to implement
  AXI Travel. 
• What advice would you have given American Express
  senior management in the summer of 2000?
• Example from Flagstar Bank
• Questions

4
Company Background

• Founded in 1850 as Wells Fargo Stagecoach Co
• Evolved into the Pony Express
• Today divided into 3 segments
• Travel Services
• Financial Advisors
• American Express Bank

5
AMEX Travel Related Services (TRS)

• Wholly owned subsidiary
• Specializes in
• Consumer Cards
• Small Business and Consumer Travel
• Corporate Services (CS)
• TRS International
• AMEX Consulting Services
• CS 17.4 billion in travel sales
• Corporate Services Interactive (CSI)
• Develop new ventures to leverage the Internet and
  related technologies

6
Question 1

• How important was AXI Travel to American
  Express?  How has the business model for AXI
  Travel and the follow-on AXI Interactive online
  service offerings evolved over time?

7
Importance of AXI Travel

• Service that would help recognize the potential
  of using internet to complement traditional
  face-to-face service
• Help combat the erosion of AXIs traditional
  business profitability
• Decreased commissions from airlines
• Increased cost of recruiting, training and
  retaining travel counselors
• Online services would help reduce (not replace)
  cost of travel counselors and administrative
  infrastructure
• Solve industry wide shortages of travel
  counselors
• Outstanding platform to launch several other
  online business ventures
• Will create increase in revenue and market share

8
Evolving AXI Timeline of Events
9
Summary of Business Model Terms
10
Evolving Business Models
Extend Enter new line of business and / or add
new business models.
Enhance Add functionality or features to current
product / service offerings or improve
performance of existing business.
Expand Add new product / service offerings or
enter new geographic markets.
Exit Exit a business or market or drop a
product/ service offering.
11
Evolving Business Models
AXI Travel and Follow-on AXI Interactive Online
Evolution
Marketplace ASP Business Model
Enhance PRODUCT/SERVICE
AXI Travel
12
Evolving Business Models
Marketplace ASP Business Model
Expand Product/Service Category
AXI Travel Expense Management Purchasing
Solutions
13
Evolving Business Models
AXI Travel and Follow-on AXI Interactive Online
Evolution
Extend Business Model
Portal Business Model
Commerce Portal ASP Business Model
AmEx _at_ Work
MarketMile
14
Evolving Business Models
AXI Travel and Follow-on AXI Interactive Online
Evolution
Commerce Portal ASP Business Model
Portal Business Model
Marketplace ASP Business Model
MarketMile
AMEX _at_ Work
AXI Travel Expense Management Purchasing
Solutions
15
Question 2

• Evaluate the actions taken to implement AXI
  Travel.  How successful was the company in
  building, launching and then integrating AXI
  Travel within the companys traditional
  business?  What challenges did the AXI Travel
  team face?  What challenges did the CSI team face?

16
Actions Taken
If you do what you did, you get what you got.

• Paid attention to the world outside American
  Express
• Understood that the business world was changing
  via the internet and made a conscious effort to
  understand how it would affect American Express
• Did research to determine not how to cope with
  the new technology but how to take advantage of it

17
Actions Taken
Developed a strategy based concurrently on
current conditions and future opportunities
CONCEPT Strategy
Business Environment Internet competitors Traditi
onal Business Erosion
Market Opportunity Establish Leadership Develop
an emerging market
18
Actions Taken
Operating and Innovating

• Established the Corporate Services Interactive
  (CSI) business unit to develop and launch AXI
  Travel
• Separated current business from new
• Allowed for independent thought and focus going
  forward
• Eliminated potential negative influences on the
  development team

19
Actions Taken
Enhanced capabilities

• Understood that in this venture the technology
  behind the system was as a important as the
  system itself
• Teamed with Microsoft
• Provided expertise in the software development
  arena which helped ensure a functional product
• Also provided name recognition and lent
  credibility to those customers who may be wary of
  new technology

CAPABILITIES Resources
20
Actions Taken
Focus, Focus, Focus

• Moved the AXI Travel team offsite to further
  isolate them from politics
• Moved part of the team to Redmond, Washington to
  work side by side with Microsoft
• This allowed the business experts to work hand
  in hand with the technology experts

CAPABILITIES Resources
21
Actions Taken
Managing and Learning - Ensuring value

• AMEX/CSI/AXI Travel never lost sight of the
  customer
• Pre-announced AXI Travel to potential customers
• AMEX understood how their customers operated
• Pre-announcement allowed customers time to make
  necessary arrangements to USE the system

VALUE Performance
22
Actions Taken
Managing and Learning - Ensuring value

• Sponsored a client event in Washington
• Kept customers interested and apprised of
  progress
• Allowed AMEX to gain vital feedback to ensure the
  system offered everything customers wanted
• Implemented a trial program for clients
• Whet appetites for full launch
• Provided even more feedback to incorporate into
  the final product

VALUE Performance
23
Actions Taken
Managing and Learning - Ensuring value

• Recognized the need for Business Travel and
  Travel Arranger buy-in
• Provided benefits in the form of hotel locations,
  restaurant listings, and weather forecasts to the
  traveler
• Provided incentives (free flights) to travel
  arrangers to motivate use of the system
• Provided implementation service as well as
  consulting to ensure success for the customer

VALUE Performance
24
Integration

• Developed pricing strategy that took into account
  affect AXI Travel would have on traditional
  business
• Did not let excitement over AXI Travel cloud
  decisions regarding overall company profitability

25
Challenges Faced AXI Travel
Timing is everything

• Speed was critical
• Must be able to respond quickly
• Competitors were no doubt attempting to do the
  same things
• Real time sharing of info
• Provide value in part by becoming an IT Enabler
  for customers

26
Challenges Faced - CSI

• Managing Change
• Enabling an Entrepreneurial Operation (AXI
  Travel) l to exist within the structure of a
  Hierarchy (Traditional AMEX)

Networked
CSI
27
Challenges Faced - CSI
Business Incubators

• GOAL
• To nurture small firms through start up to ensure
  a successful launch
• PROVIDE ACCESS TO
• Management Expertise
• Financing
• Training
• Links to strategic partners
• Networking
• Overall business development tools

28
Question 3

• Evaluate CSIs role and actions to date as a new
  business incubator within American Express. 
  What role, if any, should CSI play in the future?

29
Incubation
Networked
CSI AXI TRAVEL
CSI

• Provided entrepreneurial atmosphere within a
  hierarchical organization
• Provided access to capital and expertise
• Acted as a buffer to allow for new development
  while aligning new business with current company
  goals
• Enabled customer involvement to ensure market
  requirements were addressed
• Accelerated the process

30
Incubation
CSI GOING FORWARD

• Continue to identify market opportunities related
  to information systems/technology
• Develop evaluation systems to quickly estimate
  new business returns
• Cultivate alliances with technology firms to stay
  informed
• Maintain a focus on core business erosion to
  identify needs

31
Question 4

• What advice would you have given American Express
  senior management in the summer of 2000?

32
What should AMEX do now?

• AMEX has a few decisions it can make in the
  regards to CSI.
• Cut CSI loose as a business of its own.
• Reabsorb CSI and creations into AMEX.
• Keep CSI as a separate business group.
• What do you think AMEX management should do?

33
Our Recommendations

• Roll Internet Businesses back into AMEX
• Keep the CSI subgroup separate
• Separation encourages creativity and
  out-of-the-box thinking
• Maintain competitive standing
• Continue to develop new e-business opportunities

34
Our Recommendations

• Migrate Current Managers to AMEX
• Move current CSI managers to new roles as head of
  new business unit
• Intense knowledge and training in line of
  business and competition
• Change CSI Management
• Ensure that new and fresh thoughts are always
  brought into the forum

35
Question 5

• Has your firm or one you have worked for in the
  past attempted to launch an Internet business? 
  If so, what business model was chosen, what
  approach or approaches to implementation was used
  and how successful was that decision?

36
Business Problem

• National presence of mortgage origination offices
  
• Bank branch blueprint
• Michigan Indiana
• Mortgage boom gone bust
• Scarce capital

37
Business Opportunity

• Investigate feasibility of Internet Bank
• Minimal banking capabilities through its existing
  website
• Few account types offered to open online
• Online Banking Outdated and efficient
• Competitors
• ING
• Netbank

38
Feasibility Results

• Unutilized capabilities in its current systems
• Procedure re-engineering
• Gain increased efficiency and a
• Reduce account processing and transactional costs

39
Business Model Selection

• Marketplace Focused Distributor model
• Offer banking accounts online
• Fixed rates and set fees
• Rates and fees generally exclusive to online
  accounts
• Profitably reduce overhead, processing, and
  transactional costs
• Generating interest and fee revenue for the bank

40
Team Tackle

• Small team of specialists
• Members of the team specialize
• business development
• marketing
• online commerce
• and account processing
• Senior management support
• Team goal
• Re-engineer the online process to allow the bank
  to be a pre-eminent leader of online banking

41
Ready? Not yet!

• Team had begun to re-engineer the account
  processes
• Senior management felt it crucial to gain quick
  entry into the marketplace
• Strategy
• Promote HIGH rates
• 1 in the nation for rates
• Search Engine Marketing

42
Results???

• Highly successful
• ROI far greater than any previous campaign
• Customers soon realized that the account opening
  and managing process was very cumbersome
• Competitors quickly responded
• No plan to maintain competitiveness
• No ability to be agile in response

43
Future

• Firm commitment to continue
• Team continues to work diligently and
  expeditiously
• Re-launch the effort with an expanded selection
  of products and rates

44
Questions

• Thank You