Covisint (A)
The evolution of a
B2B Marketplace
Submitted By
B2B (A)
Group: 11
Disha Vyas (181317)
Mahipal Shah (181330)
Ritika Jain (181349)
Shaili Thacker (181357)
Anurag Alok (181407)
Vishruti Gupta (181464)
Scenario of American
OEM
• Dominance of three major players:
• Ford motor company
• General Motors
• Daimler Chrysler
• American way of manufacturing: Cumbersome processes,
Inefficiencies, Distrust among industry players.
• During the 1970s, American OEMs started losing their market share
from their Japanese counterpart.
• The Japanese were using Lean, Flexible Manufacturing and Kieretsu-
Style supply to build and deliver cars more quickly and at much lesser
cost.
CASE FACTS
Covisint: Background
• To counter the growth of Japanese OEMs, the Big 3 launched Covisint
in February 2000 as an industry supply chain exchange.
• Vision was to use the Internet to increase value & efficiency to all
suppliers and OEM’s through collaboration, visibility, & integration.
• The dot-com crash delayed the plan of instant return on investment.
• Till 2003, the company was yet to turn profitable.
• In first 2 years of operations, the company had 6 different CEOs.
CASE FACTS
Launching Covisint
• The Big 3’s market share had been degraded over the past two decades mainly because of
the following reasons:
• No process in place to sense the fast moving customer trend.
• Presence of Global Competition, mainly from Japanese Manufacturers.
• Union contracts of US not favourable.
• Strategies then followed by Big 3’s:
• Followed Dell’s strategy to provide customer with customized product.
• A shift from non-modular to modular automotive designs.
• Limiting the no. of partners to tier 1 and using online technologies.
• Stockpiling and quality concerns were looked into.
CASE FACTS
Launching Covisint
• Covisint’s Initial Operations:
• No employee was hired but borrowed from parent companies.
• Company initially had large number of consultants to develop strategy and products.
• The company was run by three co-CEO, one from each founding company.
• Started by providing application infrastructure software initially then auction software.
• Even new technologies could not fix the cumbersome and convoluted process.
• Trust among the OEM and Supplier was still lagging.
Redefining the product / market
strategy
• Kevin English was hired as CEO.
• The board hoped that he would be able to prepare Covisint for an IPO.
• Kevin cut down monthly cash spending to $8.5 million and further planned to reduce to $5
million.
• Planned to achieve $60 million in revenue and to be profitable by Q4.
• He selected development of Industry Portal as the core product of Covisint.
• The Industry Portal will help to connect OEMs with 5500+ suppliers.
• CEO reorganized Covisint into two strategic business units(SBUs):
• Strategic sourcing
• Portal and Connectivity
The CEO shuffle: 2002-2003 Bob Paul’s
decision
• English announced his resignation in June 2002.
• Harold Kutner from GM group became the new CEO of Covisint.
• Bruce Swift from Ford Motor Company became the President and COO.
• Kutner claimed took some strict measures to cut down cost which included laying off one-third of Covisint
employee.
• Kutner remained CEO for 10 months and then he resigned.
• Bruce Swift was appointed new CEO whose tenure lasted for just 31 days.
• The board hired Kevin to built supply chain application needed by the OEM founders and formulate a strategy
for an IPO.
• Paul argued that Covisint’s top priority should be to supply a computer-to-computer messaging hub as a core
component of its portal.
• Paul believed that further rationalization of the product strategy would be needed.
• Paul knew the importance to address the thorny governance issues.
Questions
First-mover advantage
Larger and more established companies
EDUCATION
with significantly greater resources to
commit to R&D, marketing support etc
New markets and Acquisitions
Collaboration and diversified buyer
Growing Demand and Economy
portfolio
Access to larger customer bases
S W O T
Suppliers are reluctant to join-afraid International instability and foreign
exchange will fold. exchange rate fluctuation may hinder
growth and revenues
Don’t have small suppliers which
currently don’t use e-exchanges Possible government regulations on B2B
e-commerce
Large suppliers & other OEM’s are
exploring exchanges of their own
BUSINESS MODEL
• Electronic Marketplace & Collaboration Portal
• Collaboration-enabler model: Integration & initiation of innovation
• Products & Services
• Procurement solutions, Quality Solutions, Collaboration Manager portal
• Revenue Model
• Transaction and consulting fees; customization and integration fees; portal development fees, application
hosting fees
• Subscription fee, Membership fee, Private networks sponsorship & customization fees, Revenue Sharing
• Cost Model
• System development and R&D; auction coordination; marketing
How has Covisint Evolved over a
period of time?
• On Feb 25, 2000, Ford Motor Company, General Motors and
Daimler Chrysler announced Covisint
• Within 2 months, Renault of France and Nissan of Japan also
announced to take equity stake of 5% in Covisint
• In Oct 2000, they launched their first live auction. Initial
product suite included software and services for conducting
auctions, managing catalogs and managing quotes
• On Dec 8, 2000, it because a legal entity, structured as multi-
member joint venture limited liability corporation
• April 18, 2001 – Kevin English was appointed as the CEO of
Covisint
How has Covisint Evolved over a period
of time?
• Covisint started expanding to Europe, Japan and Asia from
May 2001
• In starting 2002, they announced their 5 major solution suites:
collaboration, procurement, portal, supply chain and quality
• In April 2002, they organized into 2 SBUs: Strategic Sourcing
(supply, pricing, auctions) & Portal and Connectivity
(communications between manufacturers and suppliers)
• In June 2002, English resigned and Harold Kutner was
appointed as the CEO. Also, approximately 100 employees
were laid off
• However, continuing with English’s strategy, Covisint was
able to achieve best results and profits in Dec 2002 quater. By
Jan 2003, Covisint’s membership surpassed 76,000
Explain how modularization has helped Covisint and its
effects on suppliers?
Effects of Modularization on Covisint
• Creation of business to business exchanges in which
group of manufacturers create an electronic hub linking
suppliers and manufacturers.
• It promised greater efficiency, reduced design cycle
times and other benefits for partners.
• Helped Covisint in standardization
• Reduced cost in respective supply chains
• Tier 1 suppliers are large and have primary orders who
subsequently procured from Tier 2 and 3
Explain how modularization has helped
Covisint and its effects on suppliers?
Effect of Modularization on Suppliers
• Suppliers developed dashboard components and
delivered them to a Tier 1 module supplier
• Further assembly and delivery to an OEM
• OEM does further installation and assembly
• Compared to a non modular design Supplier directly
delivers to an OEM
• There are no Tier 1 supplier and this entails complexities
and time driven approach.
helped Covisint and its effects on
suppliers?
What are the contributions of Kevin English,
Harold Kutner, Bruce Swift
Kevin English- Takes the Helm
• Helped in cost reduction of Covisint monthly expenses
and chalked out new profit targets
• Realized the need to change the product mix which has a
major component of Auction/ Catalog product and
redefine product strategy
• Created a ‘Repatriation Process’
• Reduced the no. of products and focused only on
successful ones
• Got a major contract of Delphi
• Divided Covisint into two SBU’s
What are the contributions of Kevin English,
Harold Kutner, Bruce Swift
Harold Kutner- The CEO shuffle
• Razor sharp negotiator and well known in supplier
community
• Was a hard master and equally supported English’s view
of cost cutting
• He did not find it best in class in auctions, didn’t own
the intellectual property and has lost suppliers trust
• His appointment was believed OEM’s attempt to
increase their power over the Supply Chain
English, Harold Kutner, Bruce
Swift
Bruce Swift- An Herculean to Swift movement
• Successor to Kutner- Joined during turbulent times
• He took charge as President of Metaldyne’s Incorporation
• His departure was at a critical time as he had a significant role in
keeping the OEM’s line
• He was optimistic that Covisint would increase its revenue from
25% of total revenues
• Also expected funding from the Big 3
What governance issues Bob Paul needs to
address?
• Hundreds of thousands of business documents such as 830
were exchanged via electronic data interchange.
• The more trading partners an OEM or supplier had, the more
connections it had to establish and greater the variety of
documents it had to process.
• This business documents created a large complexity for the
suppliers and OEM , and the level of investment for
procurement was high.
• To overcome the complexity , Bob Paul wanted to use
message hub for short term basis , while using a common
messaging format was the long term goal for Bob.
• Obtaining support for this important project was critical for
Bob.
What governance issues Bob Paul needs to
address?
• Focus on the consumer instead of on the individual demands
of the OEM’s.
• Bob had the challenge of inducing Covisint culture among
employees who have a fear of being laid off.
• Deliver results with limited resources.
• Bob needed to maintain the relation and build the trust of the
investors and suppliers of Covisint.
• Bob needed to maintain intellectual property and legal risks.
• Bob also needed to check on the succession planning.
THANKS!
