E-business Strategy

Case Studies, Benefits and Implementation

E-business Strategy: Case Studies, Benefits and Implementation Paul T. Kidd 2001, ISBN 1-901864-07-3

Executive Summary Although electronic business (e-business) is often associated with the World Wide Web, this is only one aspect of the subject. In fact e-business technologies cover a wide range of technologies and applications. E-business technologies are a collection of technologies that make use of the Internet. They include web sites, browsers, electronic procurement software, desk-top video conferencing tools, intelligent database search engines, computer supported co-operative working packages, and many other technologies, as well as the web-enabling of more traditional and familiar software such as Enterprise Resource Planning (ERP) Systems. The Internet itself is just a collection of computers networked together using public telephone lines, leased lines and other equipment (for example, routers that direct packets of information to their destination).   Because a wide range of technologies is encompassed by e-business, the scope of applications is large. E-business affects product definition, in that it becomes possible to redefine existing, as well as to propose new good and services. E-business also affects all aspects of the enterprise: the way new products are developed; methods of working with suppliers and distributors; delivery of goods and services to customers; and so on. This makes the choice of a starting point more difficult. Moreover, copying what competitors are doing is not necessarily a good starting point as many firms have followed fashion and started their journey into e-business by creating a company web site that enables customers to place orders on-line. Yet for some companies this may not be an appropriate or a good investment. For example, some firms might be better off using the Internet to support their supply side operations, whilst others might find that internal operations are a more appropriate starting point.   When new information technologies appear, they are often perceived as a means of improving current practices, for example by saving time or reducing costs, etc. However, many of the new technologies that have appeared since the early 1980s have often provided the opportunity to radically modify accepted practices or offered the potential to enable entirely new approaches. Commonly, these innovative aspects of new technology have not been fully exploited or have only been slowly understood by firms. E-business technologies are an example of new technologies that present industry with the potential to create a discontinuity with the past, and hence an opportunity for firms to innovate and through this to gain a competitive advantage over their rivals.   Rapid change and uncertainty in the business environment are becoming an increasingly important issue. This rapid change and uncertainty are caused by many factors, including the pace of technological developments, more diverse and ever-changing niche markets, increased competition, and demanding customers with increasing expectations. The rapidly changing, uncertain and unpredictable nature of the business environment has exacerbated the prevailing high-risk nature of business activities. E-business technologies must therefore be addressed within the context of these market conditions. These technologies are both a source of rapid change and uncertainty as well as a means of dealing with increasingly difficult competitive business conditions. The key question to consider is how e-business technologies can help firms deal with this type of environment, for example, by helping to improve knowledge of customer's requirements and supporting customisation of goods and services.   The real value of these new technologies therefore has to be assessed strategically. The technologies have to be viewed from two perspectives. The first is attainment of business objectives like reducing costs. The second is the potential to enable new business and marketing strategies and provide capabilities to respond to unexpected changes in the marketplace. There are several dimensions to this. For example, the technologies could be used, among other things, to:   help firms enter new markets, for example, by lowering entry barriers by creating a web site that customers in far off countries can use to order products; increase market share, for example, by using the Internet to save time in the new product development process and then using this time to explore more design options to create more innovative products that customers will value; change the rules of competition, for example, by offering customers individually customised products with no time or cost penalty by providing product configuration tools that customers can access over the Internet.   Only through considering the strategic potential can the full range of benefits be accurately determined. This also implies that a strategic decision needs to be taken about whether to develop in-house capabilities or to outsource to e-business service providers, for example, by using web site hosting agencies or application service providers, and other organisations. The choice however is not one of "either/or", but a case of positioning a firm on a continuum ranging from a total in-house approach to one entirely dependent on external services. Development of supply chain partnerships is also relevant should some degree of outsourcing be adopted.   As there are hidden benefits, so there are hidden costs. These stem from two sources. The first source of hidden cost results primarily from several areas: the need to possibly modify existing computer software to Internet-enable older packages; the requirement to add technologies to increase security; legal costs arising from consultations with lawyers; and so on.   The second source of hidden costs stems from organisational and human resource issues. These amount to more than just the obvious training costs associated with learning how to operate new software. The main additional cost is that associated with organisational changes which are likely to be needed for several reasons. First, technical features of the technologies will create new demands upon the organisation for co-ordination, communications; etc. Moreover, because of the wide range of potential applications, the technologies could affect many different parts of the enterprise: new product development, sales and marketing, manufacturing, service deliver and so on. This is bound to create needs for cross-functional integration, more team working, co-ordination, etc.   Organisational changes are considered an important factor for the successful application of e-business technologies. Such developments should be designed to promote culture change, team working, more open communications, and so on. These will bring benefits such as improved cross-functional understanding, shorter lead times and lower costs.   These types of organisational changes will also help to enable the full achievement of the potential benefits of e-business technologies. For example, some of these technologies offer the potential to significantly reduce procurement costs as well as the actual cost of purchased items. However, if an adversarial relationship or lack of mutual respect and trust exists between designers and procurement people, then it is unlikely that electronic procurement is going to be fully successful. Likewise, if procurement processes across the enterprise vary, then capturing the benefits of electronic procurement is going to be more difficult as different systems will be needed. But to harmonise procurement procedures is not an easy task and is certainly not largely a technological issue that will be solved by installing Internet enabled procurement software. Thus electronic procurement technologies, on their own, are unlikely to deliver the sought after benefits. As with many other information technology projects, business process design, change management and culture change, organisational design, and technology implementation, also need to be successfully addressed.   Given the complexity of the business and organisational issues involved, a comprehensive analysis involving strategic, technical and organisational assessments is recommended. At the end of these assessments an accurate cost/benefit analysis can be undertaken and decisions taken on the basis of strategic analysis and return on investment calculations. If the benefits are not significant enough to justify capital investments in the technologies then an appropriate way forward may be to make use of external e-business services. However, if the services of external firms are used, it is important to review this decision regularly. Rapid changes in the technologies may quickly render invalid, the assumptions used in the business case justification. Supply chain management issues such as alignment of vision, development of open and effective communications, development of commitment to generating long-term mutual benefits, etc. also needs to be considered. The costs associated with these issues must therefore be factored into the cost/benefit analysis.