Seen steps to E-business Success - 7 - Company Operations

Companies have to reinvent themselves to survine, and the need for Interdisciplinary thinking has never been greater

The e-business revolution is impossible to ignore. It is transforming businesses in virtually every industry and reshaping the global, economy. Organizational structures and operational practices that have served business well since the Industrial Revolution are suddenly obsolete. The entrenched distribution networks that once served as formidable barriers to competition may

suddenly become liabilities, unable to respond to the new demands of the marketplace. Who can blame a corporate executive for being bewildered when a newly public dot.com achieves a market capitalization exceeding many well-established Fortune 500 companies?

The heart of e-business is interconnectivity and interaction. The ability to reach more people while sharing information of increasing richness creates new opportunities for value creation in areas such as marketing, customer service, and operations. However, equal access to information eliminates long-held advantages in business relationships and drives pricing to commodity levels.

In this new world, status quo is not an option. Companies have to reinvent themselves to survive. Given the fast pace of e-business change, actions that once took years to accomplish must now be done in months or weeks. There isn't enough time to pursue business transformation in the classic sequential approach. Unfortunately, the desire for speed causes companies to skip essential planning activities in their drive to implementation. As always, however, planning is everything. New products and services cannot be created without a strategy. Strategy must be guided by vision. Vision cannot be developed without truly understanding customers, the market, and the competition. The effort saved from skipping these steps is lost many times over in missed opportunities and time recovering from mistakes.

The following seven-step process can help guide a company through its e-business transformation. These steps -- Start High, Think Fresh, Know Your Market, Set Vision, Define Strategy, Create, Refresh Regularly -- cover the gamut of e-business activities, from conception to operation.

1. START HIGH

E-business means more than developing a fancy Web site. Fully embracing e-business means radically changing your business. While the seeds of radical change may germinate in the lower echelons, bringing them to fruition throughout a company requires high-level executive involvement and commitment. Without this level of buy-in and sponsorship, an executive always has the power to quash an idea that he or she doesn't believe in, and subordinates may feel free to buck the e-business initiative. Involving the CEO and his or her direct reports is the only way to get an c-business concept off the ground.

To pursue e-business, a company must accept that it is a business rather than a technical endeavor. While technology is important to support the e-business initiative and to deliver results, it is a small component in the grand scheme of e-business issues and opportunities. In a 1999 Cutter Consortium survey of 134 companies, 49% of those doing e-business report that the business side owns the initiative, 32% share ownership between business and IT, and 19% vest ownership exclusively in IT. Clearly, technology is not the driving force behind most e-business endeavors.

If a company is serious about e-business, it must welcome the radical change that will ensue. Executives may have to jettison traditional, profitable business models, and recreate or even cannibalize their companies to tap their e-business potential. Witness the spinoffs of barnesandnoble.com arid toyrus.com from their parent companies.

E-business initiatives may also cut across corporate boundaries, shifting organizational structures, redefining job descriptions, and upsetting established processes. External parties, from shareholders to suppliers to business partners, will be affected by these profound changes. Only corporate executives can marshal the forces and commitment to launch an e-business program and to respond to the concerns of internal and external stakeholders.

2. THINK FRESH

The Internet revolution is radically changing the business game. Long-held rules and assumptions are disappearing, eliminating competitive protections and creating opportunities for the forward thinking. Rather than bemoan the loss of the past, use the e-business revolution as an opportunity to reevaluate your, and your company's, own assumptions about your markets and competencies. Start with a fresh viewpoint and assume that everything is open to question and change. Question what your customers are really buying from you. Is how you deliver your product more important than the product itself? This knowledge may lead to new ways of pricing your products and services. As businesses deconstruct and reform, which parts of your business are commodities and which ones differentiate you from your competition? E-business is not just about customers. Brainstorm about radically new ways to reach and serve customers, stakeholders, and business partners.

Don't limit thinking by traditional organizational boundaries or lines of business. Breaking traditional operational molds can offer many benefits. For example, Dell Computer Corp. achieved explosive growth by exploiting this richness to enable their customers to purchase computers customized to meet their individual needs. The ability to offer highly customized products in an otherwise commodity market is an enormous competitive advantage. Dell's build-to-order capabilities offer an even greater advantage by eliminating the need for finished goods inventories. By building computers only when it has buyers, Dell saves inventory costs and has removed the risk of carrying an inventory of unwanted and rapidly depreciating products.

Breaking organizational boundaries does not have to be limited to your business. The Internet facilitates the construction of virtual corporations composed of "state-of-the-art" providers in each competence area. Consider outsourcing noncore operations to companies with strengths in those operations and using e-business capabilities to provide the informational "glue" to efficiently integrate internal and external operations.

3. KNOW YOUR MARKET

Before choosing an e-business path to pursue, pause to assess your company's current market. Consider the needs of your customers, partners, and suppliers, and how you can meet or exceed their needs through e-business capabilities. Then expand upon this market awareness by identifying possible new products, services, and business lines, as well as encroaching competition from existing and unknown sources. Only when this exercise is complete is a company ready to begin formulating its e-business vision and strategy.

Knowing your market means exploring your:

* Branding. What does the market think of your company? How do they identify you? When you enter the e-business fray, how will they find you? How will you promote your new e-business image?

* Customers. What do your current customers need and want? What are their buying patterns? Which customers are your most profitable and why? How can you attract additional, profitable customers?

* Competition. Who are your current competitors? How do they compete with you? What are their e-business initiatives like? Where will new e-business competition likely arise?

* Supply Chain. What are your current supply sources? Can they supply your new e-business needs? Are there nontraditional, creative sources of supply to be exploited? For example, Amazon.com started by putting a traditional, wholesale book catalog online and then expanding their business around this source of supply.

* Demand Chain. What are your traditional strategies for selling and delivering products or services to the end customer? Are there disintermediation opportunities available? For example, auto manufacturers could eventually sell cars online directly to consumers, with auto rental agencies providing test-drive services.

4. SET VISION

It is essential to set a long-term vision to guide your company as it enters the e-business world. The vision defines what a company wants to do and what it wants to be. Too often, companies are tempted to skip this stage; they want strategies, action, and results. Without formulating a vision, however, a company will not be able to determine if a given strategy promotes its overall mission or whether it is progressing in the right direction.

After securing executive commitment, brainstorming about new possibilities, and understanding the market, your company is ready to set a series of goals that will guide it through its transformation. These goals will also serve as a screen to evaluate whether potential strategy options or projects are synergistic with the company's vision. The goals must also be inspirational; incremental steps and improvements are not sufficient to launch a company into the e-business world.

Setting an e-business vision is not a simple task. Companies are generally so set in their ways and inwardly focused that they cannot see the opportunities lying just beyond their horizons. An objective, outside advisor often can see these opportunities and help the company incorporate them in its e-business vision. Management consultants are especially adept at the kind of broad, breakthrough thinking necessary to realize a company's potential.

Everyone within the company must be imbued with this new corporate vision. Complete executive buy-in is essential; executives must promote the vision and make it part of the corporate culture. They are also best-suited to examine the implications of the vision on company employees, customers, and stakeholders, and to reconcile these implications with where the company is headed.

5. DEFINE STRATEGY

The next step for the company is to define, select, and prioritize the initiatives needed to implement the company's e-business vision. This is where strategy comes into play. The vision states what the company wants to be; the strategy states how the company is going to get there.

Remember that incremental actions are not enough to compete today. Selected strategies should focus on those opportunities with high potential returns. A company cannot justify going through the painful, expensive, and radical changes to transform itself into an e-business if it expects only modest returns and advantages.

When choosing strategies, there are a number of factors to consider:

* Process Changes. The company will likely have to embrace entirely new ways of doing things. Older processes will be eliminated or changed to meet the demands of the new business.

* Organizational Changes. Organizational structures will also have to change to support the new processes and business models. The company will have to decide how it will move and/or allocate resources to perform the new functions and processes.

* Technical Architectures. The company will need an underlying technical infrastructure that will support the new systems, processes, and functions, and integrate with any legacy systems.

* Creative Needs. Talent will be required to design the new marketing, promotional, and technical programs. The company may not already have this expertise internally, and may need to hire assistance or outsource the functions.

* Fit Within Overall Vision. As each strategy is developed, a company should continually evaluate it against its vision to ensure that every action it takes moves it further toward its ultimate goal.

6. CREATE

Following its vision and strategy, a company transforms itself through a set of coordinated initiatives that implement the needed organization, technology, and process changes. While this step contains the greatest number of parallel activities and accounts for the majority of people effort, it is relatively straightforward if the previous five steps have been conducted properly. This observation is not meant to undercut the importance of technology nor underestimate the complexity of the implementation, but to highlight that the most difficult part of an e-business transformation is changing the underlying business model.

When building your e-business site, consider the following:

* Design. Visual appeal is essential in the online world. Dedicated graphic designers replace technologists when creating e-business sites.

* Content. A Web site's informational content provides its richness and attracts its viewers. Finding, creating, and maintaining this content is a major portion of any e-business project.

* Promotion The "build it and they will come" model no longer works in today's overloaded world. E-business ventures need to be promoted through a series of traditional (print media, TV, etc.) and Web-based (links, affiliations, banner ads, etc.) methods.

* Legacy Integration. E-business does not immediately replace or eliminate legacy applications, but draws much of its content from those applications. Integrating legacy applications to e-business applications can be quite effort-intensive.

* Development. Every e-business application development effort involves installing and customizing packages, selecting and combining components, and developing new code from scratch.

* Organizational Change Implementation. Companies generally underestimate the effort required to implement organizational change. E-business transformations often involve major organizational change as roles are shifted and noncore activities are outsourced.

* Training. Training must be developed and staff members must be trained in the new processes and technologies.

7. REFRESH REGULARLY

A smart company realizes that once it achieves its e-business vision, it cannot stand still Speed, innovation, and change are implicit parts of the e-business world.

To be viable, a company must continually review, reexamine, and revise its vision, strategies, and implementations. Ideas and strategies that were sound two years ago may be outdated and even harmful today. Many brick-and-mortar companies learned this lesson the hard way. Some mall booksellers with sound business plans and rosy futures found themselves penniless two years after Amazon.com appeared on the horizon.

You cannot determine whether your vision, strategies, and implementation are working unless you spend the effort to measure results. A company needs to survey its customers continually to learn if it is meeting their needs. It needs to know if it is meeting its goals -- making money, reaching prospects, satisfying stakeholders -- in order to know when and what to change. Taking the pulse of the market will alert a company to early shifts, and let it capitalize on the changes rather than react to them after the fact.

All "outward-facing" products and services must be periodically revamped to meet changing tastes and styles. The company must keep its Web site design and content fresh and exciting to attract new visitors and to keep them coming back for more. It must launch promotional campaigns to drive traffic to its Web site, products, and services; to maintain and enhance its brand identity; and to garner a greater share of a market where switching costs are low or nonexistent.

We are fortunate to live in interesting times. We have witnessed many changes over the past few years and we'll see even more dramatic transformations as e-business takes root at all levels of the economy across the globe. The e-business revolution is as fundamental a change to current society as the industrial revolution was to its preceding agrarian society. In the new c-business world, competition will be more intense and companies will have to reinvent themselves on an almost daily basis to survive. But in their wake, e-business promises lower prices and better selection for consumers, and unlimited opportunities for new businesses.

The need for interdisciplinary thinking has never been greater. Companies that can continually combine innovative business thinking, creative design and content, and advanced technology will lead the way in e-business success.

Ian Hayes, founder and president of Clarity Consulting Inc., Hamilton, Mass., specializes in strategic consulting on issues surrounding the management and support of corporate business systems. He is the co-author of two best-selling Year 2000 books, The Year 2000 Software Crisis: Challenge of the Century, and The Year 2000 Software Crisis: The Continuing Challenge (Prentice Hall).

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