Resources/Papers/E-Business Approach for Global Enterprises
Applying e-business strategies to established businesses usually entails addressing the impact of the "e-business phenomenon" on the business and devising and implementing a strategy for integrating the business into the Electronic Age. The goal is to help the company understand what the Electronic Age means to the company and how the ubiquity of information affects its traditional business strategy. Because electronic communications have the imperative to transform the way in which business is conducted, the focus is on identifying—at strategic and tactical levels—the unique opportunities that exist within the business to use an "e-business model" to drive to competitive advantage.
Because the Electronic Age is still new, numerous definitions exist. I generally define e-commerce as conducting business transactions electronically (usually over the Internet), while e-business seeks to put electronic communications at the center of the enterprise and often focuses on linking the company electronically with its partners, suppliers and customers.
Engagements often begin with an e-business readiness assessment in which the business is evaluated in light of e-business "best" practices (the speed of market development does not permit best practices in the traditional sense). This usually leads to a plan to realize the opportunities. In e-business, implementation poses special challenges because new processes usually coexist with legacy processes while the enterprise is undergoing transformation.
Addressing the Unique Challenges Posed by E-Business
Paradigm shifts are notorious for creating chaos within the established order, and electronic communications certainly supports the generalization. One of the key truths of the Electronic Age is the ease and universality of communicating, which has the effect of breaking down organizational structures and leads to unexpected results across the board. However, a paradox is that, despite myriad new communications tools and techniques, many of the intentions that people have as they conduct business remain the same. The insight to create leading edge strategies is often found by looking carefully at the interplay between the new and the old and applying the best of both in a new synthesis.
Legacy v. entrepreneurist
Widespread change, however difficult, pales in comparison to the selective change of established practices and systems, which is precisely what the Electronic Age challenges us to do. A "net" start-up may have few traditional assets, like brand recognition, but as several case studies have shown, the knowledge of e-business itself can allow a new business to take the market by storm. An established business has numerous assets that it utilizes to grow or maintain its enterprise. The question is, how does e-business affect the value of these assets? For example, the retailer's motto of "location, location, location" may look quite out of place in an e-business scenario. Depending on the business, yesterday's carefully chosen properties, designed buildings and supply chain can actually put the retailer at a competitive disadvantage when a competitor's web site costs far less to operate and sells far more per customer visit. Another key issue is, how are brands affected? In the traditional model, brand is often equated with mass marketing, which usually does poorly on the web. Therefore, brand management must often be totally rethought when practiced within an e-commerce model. Discovering how to reinvent and reapply assets is the order of the day.
And what of customers?
Markets themselves are often defined by economists as interactions between producers and consumers. Historically, producers have been better informed about the market than consumers, which has given them the advantage. Electronic communications, however, have enabled consumers to become far more informed about the market, independently of producers, and consumers have become unified in many cases. This has served to empower consumers and has given rise to a new term, "prosumers," which indicates their more proactive role in how products come to market. E-Business challenges producers and consumers to transform their relationship from producer/consumer to partner/partner. In fact, producers can become more profitable if they enlist the advice of consumers about their products, and consumers can gain more utility from products by cooperating so that producers bring to market what they want. Although this concept is fairly simple to grasp in theory, educating complex, marketing-driven organizations about how these new rules affect their business processes is a formidable challenge.
Top down or bottom up?
Elements of e-business have grown within companies wherever people with the most understanding have been grouped. Generally speaking, "web site/Internet development" has been led by younger people because they have not been subject to most of the assumptions imposed by legacy processes. Meanwhile, business leaders have been grasping with e-business processes at the strategic level, but their task has been far more complex because they have had to unlearn many things about their businesses. Consequently, e-business is still only beginning to be addressed at the strategic level. Most forward thinking companies have numerous Internet, intranet and extranet applications in development, even while they question how these efforts integrate with their corporate strategy. Therefore, much value can be produced by aligning ongoing Internet- and knowledge-related projects with corporate strategy; this is often done in parallel with the assessment and revisioning of the business at the strategic level.
Inside out or outside in?
The modern organization developed within the context of manufacturing and mass production, which grew to prominence by separating a complex endeavor into processes that could be perfected, controlled and therefore scaled. The focus of the organization was attaining economies of scale through the production and distribution of products to the mass market. Markets were perceived to be blocks of "consumers" of products. Consequently, the modern organization has historically been internally focused, usually on its own hierarchy, processes and activity. Communication with the marketplace was limited through controlled access points. Electronic communications are rapidly changing this state of affairs. Companies that understand and take advantage of the potential of e-business are growing at unprecedented rates. Consequently, companies can produce extensive value by utilizing an "outside in" (market, not organization focused) approach to organizing their e-business initiatives. Initiatives often involve customers, suppliers, alliances and even competitors.
It is not surprising to me that investors value at unprecedented levels companies that understand e-business, a fact that is communicated through the financial markets. Intuitively, investors understand the tremendous potential of the e-business model. A growing list of examples shows that start-up e-business companies can challenge entrenched market leaders and take away market share in months that would have taken years under "normal" circumstances. Due to the ease and ubiquity of communications, time frames required for change are sharply compressed, which leads to tremendous opportunities and threats. Understanding what this means in terms of the organization is another area of focus of e-business.
The profundity of the changes proffered by e-business is nevertheless not an indication of any "mass solution" ;-). In practice, once companies go through a re-visioning of their business, they create a plan of action that aims to leverage the unique value that an e-business model holds for them. The plan anticipates an "adoption period" for whatever e-business processes are planned, and it addresses the fact that the organization will contain legacy and e-business processes, often for an extended period of time. In fact, a core competency of e-business is creating and implementing an adoption process that optimizes the transition between e-business and legacy models.
Giving knowledge a mission beyond "management"
There is significant confusion in the marketplace about what "knowledge" is and how it can best be leveraged within an e-business context. It is my view that knowledge is nothing less than the currency of e-business itself. In fact, an organization's ability to create, organize and share knowledge is one of the key indicators of its eventual success in transforming itself as an e-business enterprise. Therefore, I believe that "knowledge management" is an activity that takes place at the tactical level much as "cash management" does at a bank; at the same time, however, it is necessary to determine what knowledge is most relevant to satisfying principal customer segments, whether internal or external. As I have written elsewhere, business value is increased by creating a strategy to leverage knowledge among customer segments so that it flows along a knowledge value curve.
A New look at service/product strategy
Electronic communication among producers revolutionizes how products and services are conceived, designed and introduced to the market. Where the "manufacturing" model had product development following a diligent, largely internal process prior to production and introduction, the e-business model potentiates real-time, knowledge sharing between consumers and producers. Total Quality Management changed the economics of manufacturing by conducting continuous quality monitoring, real-time, during the manufacturing process, rather than checking the product at the end of the line. Catching defects at they occurred significantly reduced costs caused by "mistakes made on top of mistakes" (for example, the disassembly that had been required to fix the defect that had occurred up the line). Constant communication with customers enables e-business enterprises to reduce errors in products themselves as well as in the ways that they are brought to market and serviced.
It also engenders another profound change: a focus beyond the product or service itself, to its actual utility for the customer. Part of the internal focus of organizations based on the manufacturing model was an emphasis on the product's design, features and "personality." However, few consumers buy products for the products' sake; rather, the products carry some utility for them, which is the real prize. Of course, producers have attempted to study consumer utility for years, but such attempts have primarily relied on out-of-context, reported information rather than in-context, real information. Electronic communications now make it possible to interact with a far greater number of consumers. In addition, consumers tend to share voluntarily once they understand how their input will produce a better product or service.
Flexibility and creativity
My experience with enterprises in many industries constantly reminds me that there are many ways to achieve a goal. I observe that organizations are at all points on the spectrum of integrating e-business into their operations. Some begin at the strategic level by reorganizing their businesses from the top down while others choose to take a more tactical approach. Still others create a new business to pilot e-business while keeping their traditional businesses operating as before. Consequently, I strongly feel that there is not "one way" for a company to profit from the potential of the Electronic Age.