E-Commerce and the Internet : Concepts

MIT
Construction Engineering and Management
E-Commerce and the Internet in Real Estate and Construction
Spring 2001 - 1.961 Permanent - 1.464
John D. Macomber, Senior Lecturer

Summary Concepts

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Last Revised May 2, 2001
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Competitive Advantage: Core Concepts:

Value System
Market Segmentation
Five Forces: Attractiveness of a Segment or Industry
Generic Strategies: How to Compete
Firm Value Chain: Allocating Resources

Cortlandt Town Center: Understanding Risk and Capital Flows
Quicken Insurance: Business model with:

simple interface to appeal to the broad market,
focus on a product that is needed and is not beloved,
low cost commodity transactions on the Internet,
taking advantage of brand strength to build advantage, and
taking a risk position as opposed to just being a matchmaker

Freemarkets.com and ProcureZone: Business models that:

Implements on line auctions with many anonymous bidders, pure dollar oriented low relationship transactions
Has a high consulting component and a low frequency of deals, with high margins
In the case of ProcureZone, value proposition is aimed at reducing administrative costs

Li & Fung, Rentmaker, supply chain coordination: Business models that:

Orchestrate and coordinate efforts among multiple parties
Figure out how to allocate the savings, if any
Are based on enhancing existing relationships (even if they started in the auction business)

eBricks and Knowing a Winning Business Idea

What is being improved for whom?
How will the new business defend itself from competitors entering?

George B. H. Macomber Company and Knowledge Management

Advantage for the individual firm can be in how it captures and disseminates its knowledge
There are document based knowledge management systems and people/expert based knowledge management systems
Knowledge management should be able to flow beyond the bounds of the firm and into the project or chains of projects

Colliers, TwentyPounds, Consortia (and brokers)

Information helps brokers and others compete better together than separately
A consortia of firms can preserve entrepreneurship and independence while also sharing costs and benefits of developing further communication and knowledge
Finding the day to day motivation to share, as well as the politics of control among rival firms, can sink the whole idea.

Collaborative Structures and the Central Database: makes sense in the abstract, where is the business model?

Benefits to sharing are well known
Obstacles are contractual and social more than technical
How much difference does it make really?
How can the service be defended from competitive pressures?
How should the savings be measured and shared?
Can companies with existing brand presence leverage that presence?

Citibank, franchising, and internationalization

Is there a franchise model that will help a company get scale providing one portion of the value system,
While allying with many "on the ground" franchisees who deliver personal and unscalable services?
In the 3/4 of the construction world that is NOT the US?

PrimeContract, brands, and consolidators

How can the market awareness and resources of existing aggregators be applied to new competitive advantage?
To save money for the value system?

Beck/Destini

Will new business models with different risk allocation, alternative contract forms, and closed book pricing arise?
Can they do any better in "at risk" design and construction than have various other information businesses?

Real Estate, Design, and Construction: Core concepts

Low barriers to entry
Few economies of scale
Tradition of looking out for single firms and not for the whole value system
High economic risk (and high leverage)
Capital and people shortages constrain growth
Innovation is hard when there are multiple parties involved
Non-economic competitors exist
Can consolidation be achieved?
In the absence of industry change, focus is key to competitive advantage
What innovations address the bottom line:

Grow the top line
Increase margins
Do something differently

E-Commerce and the Internet in Real Estate and Construction: Core concepts:

Relationships matter
People comfort matters
When a benefit for the system is generated, who gets the benefit?
Segment markets by sensitivity to cost and sensitivity to time
Classify markets by contract type (traditional or alternative) and payment type (open book or closed book)
Intermediaries have value; how can they be supported, not disintermediated?
The causes of fragmentation might be changed by information technology, leading to industry structural change
New business concepts need a clear improvement in some aspect of business in some phase of business, to be adopted
The industry is aggregated at the service firm level with respect to non-principals: publishing, software, insurance, information - can this be leveraged?
In the event that proprietary advantage is gained at the firm level, how can it then be leveraged?