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Strategic Approaches: BAMs
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Here is a discussion of key topics that pertain to e-business strategy for
global enterprises ("Bricks And Mortar" companies). For contrast and
comparison, also see Business Strategy for Startups
and Spinouts.
Print version
here.
E-Business Approach with Global Enterprises (i.e., Bricks and Mortar)
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.
E-Business knowledge
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.
Integration
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.
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