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).
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- 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.
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- 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.
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- 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.
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- 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:
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- 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.
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- 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.
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- 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.
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- 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.
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- 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.
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- 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.
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- 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.
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