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308 Part 2 Strategy and applications

To sound a note of caution, flexibility in the business model should not be to the company’s
detriment through losing focus on the core business. A 2000 survey of CEOs of leading UK
Internet companies such as Autonomy, Freeserve, NetBenefit and QXL (Durlacher, 2000) indi-
cates that although flexibility is useful this may not apply to business models. The report states:
A widely held belief in the new economy in the past, has been that change and flexibility
is good, but these interviews suggest that it is actually those companies who have stuck
to a single business model that have been to date more successful. CEOs were not
moving far from their starting vision, but that it was in the marketing, scope and partner-
ships where new economy companies had to be flexible.
So with all strategy options, managers should also consider the ‘do-nothing option’. Here a
company will not risk a new business model, but will adopt a ‘wait-and-see’ or ‘fast-follower’
approach to see how competitors perform and respond rapidly if the new business model
proves sustainable.
Finally, we can note that companies can make less radical changes to their revenue
models through the Internet which are less far-reaching, but may nevertheless be worth-
while. For example:
Transactional e-commerce sites (for example Tesco.com and lastminute.com) can sell
advertising space or run co-branded promotions on site or through their e-mail newsletters
or lists to sell access to their audience to third parties.
Retailers or media owners can sell-on white-labelled services through their online pres-
ence such as ISP, e-mail services or photo-sharing services.
Companies can gain commission through selling products which are complementary (but
not competitive to their own). For example, a publisher can sell its books through an affiliate
arrangement with an e-retailer.

Decision 5: Marketplace restructuring

We saw in Chapter 2 that electronic communications offer opportunities for new market
structures to be created through disintermediation, reintermediation and countermediation
within a marketplace. The options for these and countermediation should be reviewed.
In Mini Case Study 5.4 we review the example of 3M (www.3m.com), manufacturer of
tens of thousands of products such as Post-it notes and reflective Scotchlite film. These
options can be reviewed from both a buy-side and a sell-side perspective.

Mini Case Study 5.4 3M innovates in the e-marketplace

3M was founded in 1902 at the Lake Superior town of Two Harbors, Minnesota when five businessmen set
out to mine a mineral deposit for grinding-wheel abrasives. But the deposits proved to be of little value, and
the new Minnesota Mining and Manufacturing Co. was formed to focus on sandpaper products.
Today 3M is a diversified technology company known for product innovation with a worldwide pres-
ence in consumer and office; display and graphics; electro and communications; health care; industrial
and transportation; and safety, security and protection services. In 2005 it had a turnover of $21 billion
and 69,000 employees. With 3M products sold in nearly 200 countries and over 60% of its turnover occur-
ring outside its US base, 3M has risen to the challenge of using e-channels to distribute its products and
services worldwide.
The following are some of the strategies it has pursued to use online channels to change its relationship
with its marketplace.