Portal with CISCO at OUBS

[This is one of the early proposals I prepared, working up the ideas which would have taken the OU into the .com age. Regrettably, after much work on my part, it was never implemented!]

OUTLINE (INTERIM DRAFT) 'PROPOSAL' FOR DISCUSSION

This is still largely open-ended. The final shape of any mutually beneficial collaboration, between the Open University (OU) and Cisco, along with the one or two other business partners who might join the consortium, will be the main subject of further discussions; when it becomes clear who these partners are, and what their specific needs might be.

What seems to be clear at this time, however, is that:

i) Our investigations have shown that the most valuable e-commerce organisations, in the medium to long term, are likely to be portals; whose values will be derived from the numbers of members they control and the strength of their relationship with them. Whilst the focus is now shifting to B2B, which accounts for 90+% of e-commerce, we believe that - again in the longer-term - the greatest sustainable value will be generated by relationships with individuals.

ii) Accordingly, there could be considerable value - both in financial terms and prestige - to be gained from creating a suitable portal for general use by the two million OU alumni, along with their families and friends, in addition to the 150,000+ OU students; most of whom are already members of the existing, specialised OU portal.

iii) The key dimension in the new relationships will be that of member loyalty, based upon trust, and the Open University (OU), and especially the Open University Business School (OUBS), are the holders of a near ideal brand for this task; based upon a very special relationship with their groups of potential members. In addition, the OU has the academic power, and resources, to produce many of the key products demanded by the coming Information Society.

iv) On the other hand, despite its relatively long history of developing such relationships at a distance - not least in recent years through its existing portal - it does not have the considerable technological expertise that Cisco has - along with the other potential members of the consortium. This expertise will be needed to build any mass-market, global portal; at the high levels of sophistication, and rapid response, needed.

v) In particular, the OU needs a commercially-oriented partner -such as Cisco, along with the other potential partners in the consortium - to profitably manage - with the flexibility and speed of response which is now needed - such a highly entrepreneurial venture.

vi) It seems likely that, in general, the most powerful portals in the longer term will also derive their strength from their relationships with strongly-bonded affinity groups. This venture could offer a proven - transferable - model for such developments; and, indeed, might easily extend to incorporate such other groups - which could maintain their own separate, strong brand-identities under the overall infra-structural umbrella.

Although little direct research has yet been commissioned, a great deal of indirect evidence (some of which is explored further in the appendix) is already available. Accordingly, the following pages examine the information which is currently available, starting with the 'core competences' which might be seen to underpin the success of the venture.

1) CORE COMPETENCES AND COMPETITIVE ADVANTAGES

The main competences of the new portal, and the major competitive advantage out in the marketplace, will come from the OU's brand, from its trusted image, from its relationship with its students and alumni, and from its relevance to its direct customer base of 150,000+ students and its indirect one of 2 million alumni (and, along with their families and friends, an ultimate potential in excess of 10 million individuals).

In the shorter term, it is now clear that the core management school alumni (including those of Cranfield Business School), perhaps with a potential of as many as 200,000[1] in number, are valuable in their own right. Even if the pilot - targeted on these alumni - goes no further, these alumni may individually be even more valuable in terms of their control over most of the FTSE 100 companies - and would justify significant interest by themselves.

BRAND

In the UK, though not yet in the rest of the world[2], the OU brand has very high levels of recognition - with over 80% spontaneous awareness - and then an image which contains almost every positive factor imaginable. Above all, in the context of a portal, it is trusted.

RELATIONSHIP

In the UK, at least, it has a uniquely positive direct relationship with 150,000+ current students[3]; and, beyond them, 2 million alumni[4]. Behind the latter are a further 10 million family and friends, who potentially have - through their indirect experience - much the same relationship. All of these fall into the demographic groups favoured by advertisers; being relatively rich, upmarket, and well-educated.

As important, the members of this largest of affinity groups share very similar needs and wants; a factor which has already been successfully exploited by Beneficial Bank in the financial products area[5]. The potential for the formation of networks and, in particular, even more tightly defined affinity groups consequently is high[6].

It is widely recognised, not least by alumni, that the OU is largely driven by considerations of fairness - most obviously in terms of its unique commitment, for an HE provider, to open access - and this should form the basis of the ongoing trust in this new venture.

PRODUCT

The OU has a near monopoly on the main new product of the first stage of the information age; that of distance learning. Even without the value of the wider relationships, which the portal would open up, this alone would justify a high value for the venture. As an indication of the further potential available even in the shorter term, the planned launch of the FBA (Fellow of Business Administration), jointly with other top rank business schools (such as Cranfield Business School), will offer a very valuable new product to alumni; and one which will be especially suitable for internet delivery - which is already available, and is being progressively developed by the OU for mass education. In terms of specific e-commerce content, indeed, we are now well on the way to producing enough material for a full masters programme (which we and the Science and Technology faculties are asking the OU's Development Fund to underwrite with a seven figure sum).

PARTNERS

The OU, as a national institution (and, through Open University Validation Services - OUVS, already the validator of many FE and professional qualifications), is uniquely well placed to extend these affinity groups to students and alumni from other HE and FE institutions - with their own tailored portals; and our current negotiations with Cranfield Business School - on this basis - are showing how fruitful this form of extension might be.

ADDITIONAL NEW COMPETENCES

The major new elements, which could be profitably added to this potent existing mix, would derive from the orientation of the new portal; which should - contrary to the current strategies of most portal owners but in line with OU philosophies - be focused on service to its members rather than on sales on behalf of it vendors. In particular, the proposed in-depth profiling of members, and the resulting AI controlled interfaces (especially of the portal entrance itself), should be specifically (and obviously) designed to help members select the best services; rather than direct them to the services which are most profitable to the portal owner. On the other hand, they should also allow the best possible selection of relevant products to be 'pushed' to individuals; meeting their needs and wants rather than - again - selling the most profitable customers to vendors. These are elements where we expect our business partners to make significant technological (software) contributions.

Against these clear strengths - suitably enhanced by the involvement of our new business partners - are ranged a number of rather less sure-footed competitors.

2) COMPETITORS

There are now so many competitors in the B2C field, itself a weakness in the market, that only a sample is included below.

Thus, there are some - currently the most hyped - competitors who appear keen to sell only on price:

It seems likely that these will not be addressing the top-end of the market where the new venture will be targeted; and the proposed portal should, accordingly, be able to avoid the developing price war - though, with the lowest costs of all (both per unit, in terms of highly committed members, and overall, in terms of the low advertising spend needed), it should - if necessary - be well placed to win any such war.

Again, these are unlikely to target the top end of the market; and are more likely to compete with the cable and satellite operators.

along with retailers, the financial service providers (including banks and insurance) and catalogue houses.

These are limited in their coverage, even if Amazon has some wider (universal?) ambitions.

The other media involved, such as cable operators and news groups, have few links to portal offerings. Finally, other HE/FE providers are relatively unambitious; and even Pearsons' education link to AOL may be seen as a peripheral activity (for both sides).

The important point to make is that none of these have an offering which would compete directly with the proposed (OU) portal - and the few which might compete indirectly are niche players.

Members might initially be attracted by the range of educational offerings, and indeed in the case of the pilot (shared jointly with Cranfield Business School) this would be the main driver. On the other hand, ultimately the prime attraction - driving wider usage - should be a 'trustworthy' front-end which gives members the best, most useful, range of services and in particular allows them the easiest possible access to all web-sites.

i) CLEARLY MAPPED ENTRY PAGES - tailored to each individual member (and, in particular, to their affinity groups) and with direct to access to internal content, but also allowing easy access to those other (external) web-sites the individual chooses to use most.

ii) SOPHISTICATED PROFILING - which would be the key data warehousing/AI application, offering the best possible service to each individual.

iii) NO DOMINATION BY ADVERTISING - which, though possibly replaced by discrete sponsorship, should reduce confusion and allow the best mapping of choices.

iv) EVEN PLAYING FIELD - and clear evidence that there would be no distorting of access in order to skew sales to favoured vendors.

v) CLEAR MEMBER VIEWPOINT - and, in particular, offering tailored choices to meet individual members needs rather than any vehicle for billboard advertising.

vi) SECURE TRANSACTIONS - as with any reputable club, full members - at least - could be vetted for suitability; though, in view of the very diverse range of individuals involved, this might only be for probity. But that, possibly supported by a validated resumé, might be an invaluable asset where members were transacting business with other members - and companies registered with, and validated by, the portal.

Eventually, though, the member might also be able to choose access routes, to the (knowledge) offerings, based on the input from experts and other members; and possibly underwritten by independent 'peer' review (including by other members).

The key USP, especially at launch, would probably be (OU/OUVS) supported access to the widest range of education offerings - based on a core of OU/OUBS material, but also the whole range of suitable HE/FE offerings; where other HE institutions are likely to follow the Cranfield lead.

On the other hand, the knowledge base should probably be configured differently, using a combination of search engines and the database of members experiences. In addition, based on the member's profile, 'pushed' data, especially tailored news and intelligence reports, could also be provided.

The target market (globally - English speaking) will probably be up-market (ABC1) individuals (with their families) aged 30+ years; who are well educated (to degree level or equivalent), readers of the broadsheets and are relatively wealthy (with income at least in the $40,000+ range), as well as being existing users of the internet (and potential users of ADSL technology).

The most important key to the image will probably be trustworthiness, based initially on academic (alma mater) relationships; supported by education also being the main initial offering. Beyond this, though, the possibly shared (co-operative, public/private) ownership, with its related emphasis on community, could reinforce this; and justify allowing the portal into their homes to, in effect, set key aspects of members' lifestyles.

Further elements should be openness, with a level playing field. There should - for instance - be no barriers put in the way of easy access to (publicly available) offerings from 'competitors'; since, not least, capturing the initial (portal) access route will still enable the most valuable subsequent 'push' operations to take place. But the internal (individually tailored) ease of usage, and intelligently guided access to the comprehensive knowledge databases and affinity groups, should also be seen as being important; and the member (orientation) should not just be obvious but should be blatant.

Finally, the very (civilised) 'Englishness' of the operation should a major selling point globally - where the English image (reinforced by it owning the lingua franca of the internet) may be seen as mature and sophisticated (albeit laid-back); an antidote to the brashness of most e-commerce!

A key longer-term objective should be to allow members to network with others who have the same interests; since, our research shows, this may be one major new element of 'e-commerce' in the future.

i) ONE-TO-ONE - mutual support from other club members, especially (when available, in the next two or three years) in the form of video-conferencing between remote family members and friends, along with new 'pen-pals'.

ii) DISCUSSION GROUPS - computer conferences among sub-groups, as usual, possibly backed by face-to-face (or video-conference) meetings of local 'chapters'.

iii) ACTION GROUPS/NETWORKS - for those with similar aspirations, not least networking amongst OUBS alumni but also those of a quasi political nature.

iv) SELF-EMPLOYMENT (& SMEs) - as service providers to the rest of the network, with portal supported administrative systems.

v) DISTRIBUTORS & AGGREGATORS - again allowing individual members to build offerings for other members.

viii) 'EDI' - fully supported gateways between large corporations and members (including some of their SMEs).

Although the venture would - interestingly - bridge the public/private divide, it would still need to generate significant financial returns.

In this context, a number of potential sources of income for portals in general have emerged recently:

This is the AOL approach, for example, but - in the form of 'popular' services it now seems to be almost irreversibly undermined (by Freeserve and the other commodity-priced portals).

Accordingly, it will probably not feature in this proposal. On the other hand, the OU (especially OUBS), and its partners, could still sell valuable educational products direct to members.

In turn, the Freeserve approach, taking a share of revenue from call charges, also now seems to be undermined.

Only if special deals - from PTTs - once more reappear (possibly related to ADSL broadband services) will this become relevant.

The net effect is that most portals now have chosen to rely on advertising, which clutters the web-site screens - making use of them difficult, and fatally undermining any chance of 'trust' being built. Members are well aware that the portal owner will sell them to anyone who has the price! In any case, the anecdotal evidence is that currently most of even this advertising space is being given away as 'sweeteners' for other more profitable media deals.

On the other hand, the OU portal should, in the light of its very valuable audience, be able to obtain equivalent revenue from sponsorship of its various sites; without damaging its image.

Business referred on to organisations such as Amazon will continue to generate commission.

Though, a better - more open - approach here may be to pass on the full discounts to members; who then might be required, as part of the up-front conditions of membership, to pay back some part of this to the portal.

Similarly, business within the portal/network could also support small charges (for internal 'vendors' and 'distributors'); which, in view of the large numbers of members, could eventually provide significant income.

One key to developing a suitable image might be how the net profits would be allocated; after members received guaranteed lowest-cost services. A uniquely attractive model for this could perhaps be based on the philosophy behind the UK Lottery; with benefits going to members, partners and the community (in the form of their assigned 'charities') - with only a small proportion going to the operators. On the other hand, as with the Lottery, that small proportion could still become valuable over time.

A further advantage is that the development, and testing, of the portal could be carried out progressively, with minimal risk (and few security problems), within the OU 'family'.

The necessary qualitative and quantitative research, especially that leading to the key profile parameters, and development of portal software could most easily be carried out in partnership with OUBS (and then OU) alumni; where these individuals are already used to participating in such academic research.

Virtually all the systems could then be tested, and debugged, with the 8,000 OUBS MBA alumni. They offer a valuable, and enthusiastic, market for our existing offerings. They are adventurous, already demanding new offerings, and used to trying new ideas, and are (in view of their senior positions in industry) valuable in their own right. As they form a closed group, and a relatively inaccessible one, it is unlikely that the development process (if suitable camouflaged as an alumni-only offering) would leak to the wider world.

In addition, our discussions with Cranfield indicate that even the initial core, of management school alumni, could perhaps add up to a potential of as many as 200,000 individuals; and these are valuable, for B2C, in their own right. Even if the pilot goes no further, which is unlikely since the rest of the OU is just as keen as OUBS and Cranfield, these alumni are even more valuable in terms of their control over most of the FTSE 100 companies, and - in terms of B2B, would justify significant interest by themselves.

The next stage could then be to all categories of (150,000) OU students - in the form of a rapid (progressive) roll-out; based on mailings to existing students (along with emails, where most of these are already on-line to the existing OU portal).

Thereafter, the most substantial move would be to the widest grouping of (two million) OU alumni - which would in turn require, for the first time, the fullest possible advertising push; and possibly market capitalisation to fund this - though the levels of investment needed, even then, would be proportionately much smaller than those needed by other equivalent ventures.

These would be recruited only slightly later than alumni, to allow for different promotional approaches to be used.

Parallel with the previous stages, deals could be set up with other suitable affinity group partners; especially those on the HE & FE sectors.

Finally, extension overseas would probably require further partners in different countries; though the BBC, possibly as a financial partner (with a long relationship with the OU and with its portal complementing that of the OU), might be one obvious global partner.

Depending upon the results, at each stage, the final offering could range from a niche portal - with a few hundred thousand members albeit very valuable ones in terms of B2B - to a national (or beyond) B2C portal open to a significant proportion of the most valuable groups in the population.

For the best part of a decade, the OUBS Futures Observatory has been exploring the long-term (25 years ahead) future; in conjunction with representatives of several thousand organisations operating across society in general. Inevitably, key elements of this work have focused on the future of ICT and the Knowledge Society; and latterly on e-commerce. In the context of this document, however, the most important have been the close relationships with a range of leading edge companies, especially with the corporate planning staffs of three of the sponsors (Barclays Bank, BT Labs and ICL) along with the President's office in the EC and the DTI (Foresight Programme) in the UK. These have allowed privileged insights into their e-commerce planning. This expertise has now been extended by the recent work, on the new e-commerce course(s), with academic partners which include Cranfield, Warwick, City, UWE and the RCA.

As a result, the OU is becoming internationally recognised as a key academic player on the e-commerce scene.

Despite all of this research, or perhaps because of it, we are much more aware than most others that the future of e-commerce is difficult to predict; even when we are much more certain about many of the other trends in society. The problem is that our society is still only just at the leading edge of the knowledge revolution. We do, though, share the view that the related post-modern, post-industrial developments will transform society; but we recognise the uncertainty in forecasting these developments in detail - and, indeed, much of our education is now focused on preparing managers to handle this uncertainty.

What we are certain of, however, is that many of the current e-commerce offerings, especially those in the B2C field (which is the main focus of the proposal), are addressing too narrow a range of opportunities:

1) COMMUNICATION - from the point of view of many of the ISPs, the real model for current development should not be the PC but the telephone. This aspect is (quite correctly) being exploited incrementally by users; by emails between individuals and, in particular, by extension of EDI between organisations. It is, indeed, proving to be a quite viable model for the early stages of the revolution; though it is rarely the focus of the hype surrounding the new portals - nor is it typically featured in the business plans of the start-ups.

2) ENTERTAINMENT - from the point of view of the media giants, the availability of 1,000 films on demand - along with a similar number of games and other entertainments - has often been seen to be the most valuable model; certainly in terms of the hype generated by some of the new portals hoping to piggyback on this demand. Unfortunately, there is little evidence of this coming to pass, as Time Warner's expensive Florida experience indicated. It is possible that the emergence of broadband (ADSL) links may help; though, even then, this also should best be seen an incremental addition to existing cable and satellite channels.

3) KNOWLEDGE - this is supposed to be one key to the future, and the Web is supposedly flooded with it; but, as yet, it is so poorly organised that only dedicated surfers seem at home with it. It is widely recognised that it should be the source of the radical developments over the horizon, but - so far - no clear picture of these has emerged.

Our own position, and the basis for the project, is that - while detailed developments cannot be predicted - the shape of some of the supporting infra-structures can be:

a) INDIVIDUAL POWER - despite the current (90+%) position of B2B within e-commerce, in the longer term the fundamental building block of most future developments is likely to be the individual rather than the organisation. As a result, those in control of access to the largest numbers of such individuals potentially hold a very valuable franchise; as the superstore operators currently have, and Freeserve etc. clearly hope to have in future. The problem, which the price-cutting portals have yet to recognise, is that maintaining control over them will require development of much richer relationships. Where the members' portals will, in some important respects, shape their lifestyles, if not their lives, they will want long-term relationships which they trust will meet all their needs. The portals which build such trustworthy relationships, as this one is designed to do - not least by its OU legacy combined with its profile based approach - will be the ones which are most likely to survive.

b) NETWORKS OF COMMUNITIES - paradoxically, where the internet will be driven by its empowerment of individuals, its major 'product' may be support of on-line communities; especially affinity groups of like-minded individuals. The new infra-structures will, therefore, need to be able to handle the very complex relationships which will result; as those proposed here will be designed to do.

c) SOPHISTICATED INFRA-STRUCTURE - indeed, the key need for the infra-structure is likely to be a 'many individuals to many individuals' network, as the model proposed here would recognise, rather than the single organisation to many individuals model, which currently exists. Indeed, the distance-learning model (over the internet) is probably one of the best approximations yet available, as a guide to future developments.

d) KNOWLEDGE PRODUCTS - clearly what the Knowledge Society will become is the least understood quantity of all. It is unlikely, however, to revolve around the current random collection of unconnected facts; or even the few (largely academic) organised databases which do exist. Instead, there will be a need for a new infra-structure to be developed; one which, for instance, captures the intrinsic ('gold in the head') knowledge of network members - and, in particular, uses this to organise the random data elsewhere. The structure of this project is designed to encourage this; and, in any case, the distance learning model may once more offer one of the best short-term guides to long-term needs.

e) EDUCATION - in the short-term, at least, LLL (Life-Long-Learning) will be a major driver; and indeed the major new product. The project is, of course, ideally placed to take advantage of this; where the OU (and OUBS) is already the leading global provider of distance learning.

[1] With, in the case of these alumni (especially the MBAs amongst them - who are typically senior managers), significant economic and political power (including ministers and at least two prime-ministers!)

[2] Where the BBC brand may, as yet, hold this position.

[3] Including 20,000+ OUBS students

[4] Including 100,000+ OUBS alumni; where the 8,000 MBA alumni, in particular, are pushing us to develop new offerings to keep them involved with OUBS

[5] With the OU, in turn, benefiting to the tune of almost £2 million; and setting an important precedent for this proposed consortium.

[6] with the OUBS alumni, in particular, potentially capable of forming a very powerful business network.