E-Business Strategy Topic 3: The e-business strategic plan
Schumann et al. (1994) identify seven key traits that are drivers of successful organisations.
Stakeholder: Blend of both internal and external parties who may be affected by organisational activity, e.g. investors, labour unions and communities. Varied metrics, often qualitative rather than quantitative.
Customer: Focuses on meeting the needs of its customers; assumes the organisation understands customers' needs. Processes will be focused on customers rather than internal considerations. Metrics heavily loaded with customer satisfaction measures.
Technology: Often caught up in the 'technology chase' that can become the dominant force at the expense of satisfying customers. Competitive advantage arguments based almost exclusively on technological innovation. Often managed by technical people or via a very strong R&D department. Low use of meaningful metrics.
Project: Dominated by a need to experience the 'accomplishment' of successful project completion. Projects are often large and complex and take on a life of their own. Task-completion is a driving force. Standard project assessment metrics used (time, budget, specifications).
Resource: Organisation often view themselves as constrained by resources (money, people, facilities, intellectual property, strategic relationships, etc), i.e. 'mental bondage'. Heavy use of benchmarking metrics.
Culture: Culture is developed to optimise performance. May be breakthrough-oriented (e.g. Genentech) or incremental (most governments). Often no metrics, or may use traditional HR measures.
Competition: Carefully tracks competitor moves and responds to them. Strategy is usually initially reactive, but with maturity, becomes predictive. Often managed by operations, focused on getting product out. Metrics include factors such as market share and cycle time.
The most important point that Schumann et al. (1994) make is that for optimal organisational performance, these traits need to be balanced and integrated.
In the technology S-curve—actually a pair of curves—the relative cost (solid line) of adopting new technology in the pursuit of competitive advantage starts out very high. Deploying new technology may cause expensive correction and repair costs in what is affectionately known as not the leading edge, but the 'bleeding' edge of technology. At the same time that the cost is very high, customer (and other stakeholder) adoption of the technology is low. Over time, the cost of the technology drops as consumption volume decreases unit price. Proven and cheaper technology is adopted by a larger proportion of customers and other stakeholders. This finally creates the business circumstances in which the initial costs of your early adoption can begin to be recovered.
Tools and concepts
Many managers believe firmly in the strategic concept of first-mover advantage - an organisation's ability to be better off than its competitors as a result of being first with a new product or business approach. If you wish to be the first-mover in an e-business initiative, you had better be very sure of your competencies and of your market projections. Otherwise, it would be wiser to allow others to trial new technology and watch it mature a little before adopting it yourself. The risks in being the first-mover in a technological development for e-business are great, and the rewards are likely to be short-term.
The Internet is actually an opportunity for very few companies... However, for other companies, the Internet is not an opportunity (Morris 2005). The Internet-as-opportunity is one of the most common mistaken assumptions managers make when considering their e-business strategy. Catalysts are external or environmental factors—outside the company's control— that may sway the decision. The Internet is therefore a catalyst rather than an opportunity in most cases [Nota bene: In SWOT analysis, "opportunities" - and "threats" are external]. The real 'opportunities' are the value that an initiative is expected to provide. It is this opportunity to deliver increased or new forms of value that drives the e-business strategic plan, not merely the fact that the Internet exists. Focus on the economics of relationships, Leverage immediately all the proven value drivers, Understand that the established accounting methods were never designed to handle the world of intangible assets and the Internet, and Above all, view marketing, customer acquisition, and support infrastructures as capital.
Porter's Five Forces model: Threat of New Entrants, Power of Suppliers, Power of Customers, Threat of Substitutes, Industry Competition.
Similar issues arise in the use of the SWOT model (Strengths, Weaknesses, Opportunities and Threats), and the PEST model (Political, Economic, Social and Technological forces). In using these models, you must not simply write a list of points and move on. You must consider, interpret, rate (importance) and analyse the points and what they mean for your organisation and its e-business future.
To deal effectively with uncertainty, Von Oetinger recommends the following approach:
1. Be prepared by developing industry scenarios that attempt to anticipate trends and develop suitable options to address them.
2. Be fit by developing effective and active managers and focusing the enterprise on continual improvement so that the organisation is productive. Strategy without productiveness renders you lame, while productiveness without strategy leaves you blind.
3. Be bold by having the courage to act. As a manager, you have to act, not just react. Invest in R&D, advertising or other appropriate activities that help to strengthen the firm's performance.
Uncertainty—a fact of life in any case—can be your friend if you can make better use of it than your competitors. Attempting to 'constrain' or 'control' uncertainty, on the other hand, can lead to undesirable results.
The important message here is: The greater the uncertainty, the more important it is to write specifications for project deliverables that describe them in terms of desired outcomes, rather than in terms of how those outcomes might be achieved through specific technologies and processes.
There are criteria for the development of enduring and mutually beneficial co-opetitive relationships (Zinelding 2004): willing to be engaged in an interactive exchange relationship, possesses something of value that the other party wants.
In traditional markets, intermediaries serve three main functions: matching buyers and sellers, facilitating transactions, and providing institutional infrastructure for business. Giaglis et al. (2002) suggest that there are three main intermediation scenarios in the e-commerce world:
1. Disintermediation: dynamics favour direct buyer-seller relationships, i.e. the middleman is no longer required.
2. Reintermediation: traditional intermediaries are forced to differentiate themselves for e-business.
3. Cybermediation: wholly new markets for intermediaries emerge.
Although there has been a great deal of comment about how the Internet can change the nature of particular business relationships or an industry category, Giaglis makes the point that intermediaries provide many value-adding functions that cannot be easily substituted or internalised in direct buyer-supplier relationships.
The strategic planning process
There are two broad circumstances in which an enterprise will strategise its e-business initiatives: (a) on a periodic, formal, scheduled basis and (b) when a crisis or significant event occurs. The timeframe of periodic scheduled strategy development depends on your own organisation's policies.
Managers need to be aware that developing a strategy in isolation—failing to include stakeholders—significantly increases the risk of failure. Risks are increased for two main reasons.
Firstly, failing to engage stakeholders minimises or even eliminates the ability to gain a wider understanding of the problems at hand. Stakeholders of all kinds can provide insights that help build a more complete picture of the competitive e-business landscape.
Secondly, failing to engage stakeholders adequately can create a future problem for strategy implementation. Stakeholders who are either required to implement the strategy or are directly affected by it but have not been consulted in its development are unlikely to feel any ownership of the project.
An important but often overlooked aspect of strategy development is to decide how to decide. Who is going to make the decision? How will it be made? ... To help avoid this situation, managers should be aware of the four ways decisions can be made, and make proactive choices about which to use. It is possible to use more than one method at once for different parts of a major decision. The four decision methods are command, consult, vote or consensus.
When formulating e-business strategy—or any particular sub-function strategy—it is important to ensure that all initiatives are compatible with the organisation's vision and mission. Incompatible initiatives generate only chaos, poor investment and commitment cycles, and substandard performance. Where new e-business technologies and methods create new classes of opportunities, it may be wise for the organisation to revisit its vision and mission.
A vision statement is an enduring and precise word-picture of what the organisation strives to be. It is something to be pursued. A mission statement is an enduring and precise word-picture of the organisation's purpose. It defines the scope of its operations in product and market terms and describes its values and priorities.
Having collected valuable internal and competitive intelligence the information must be analysed, integrated and interpreted.. leading to the identification of valuable new strategy alternatives. The objective is to create several alternative strategies that can then be assessed for comparative value.
In any case, managers should heed this important advice from Hindle and Dulmanis (2000):
1. E-business must be integrated and not isolated. You can't separate your e-business strategy or any implementation of it from the totality of
operations. If you try to 'rope it off' (by, for instance, treating it as a specialty for your information technology experts to mandate), you will get
2. E-ventures demand development of a business model as a predicate to a business plan. You simply can't make a meaningful plan if you have not first developed a thoroughly well-wrought sense of corporate persona.
3. An e-venturer's business model will require constant updating, adaptation and change. This is why the process of model generation is more important than its current output. Organisations must continually re-design themselves. Yesterday's business model may not serve you well tomorrow.
4. So, the key to success in e-business is robustness of the process used to keep producing a stream of appropriate business models—plural!
Every strategy must be measured in some way. Failing to measure strategy outcomes invites disaster. Managers can use a wide range of qualitative and quantitative measures to assess the effectiveness of an e-business strategy, including metrics such as:
Sales: number of customers, visits, purchases (including conversion ratios)
Financials: costs, revenues, profits (including financial ratios)
Inventory: production cycle times, inventory turnover, percent stockouts, etc.
Distribution: delivery and channel assessment
Strategy metrics must be built into the strategic plan so that everyone is aware of what the critical success factors are, and how they will be measured. A key element of metrics is to activate them early and use them often.
Putting the plan together
The senior executive team—or at least someone within it—is responsible for creating the e-business plan document. This document forms the basis of the execution of the strategy. However, it does not spell out the technical details of how the plan will be implemented: it is a strategy document; although it will take technology, resources and so on into account. A separate document, the Project Plan, will determine the precise skills, resources, detailed technology specifications, timeframes, budgets and deliverables for implementing the strategy.
Implications for Managers
When managers contemplate developing an e-business strategy for the enterprise, keeping the following in mind will help you to develop a more robust, realistic strategy:
e-Business is not just about technology. It's about value. Look for places you can improve the value chain or reconfigure it.
First-mover advantage is not guaranteed. Balance the risks of the cost of being the first-mover carefully against the potential benefits. Don't overstate the benefits.
Use the strategising tools wisely. Look for opportunities to integrate and interpret the information. Ask 'so what?' and translate the information into potential actions for the
Gather as much competitive intelligence as you can. Deciding in the dark is unlikely to make you market leader.
Create a number of strategic alternatives, not just one strategy. Assess them comparatively and adopt the best one(s).
Remember that models come before plans. An e-business model is an overall approach to how the business intends to generate or improve revenue streams—and profit. The
model drives the plan; not the other way around.
Involve key stakeholders. The best strategy and plan is useless if it is undermined and fails to reach its full potential (or be implemented at all).
Be confident but not arrogant in your projections.
Incorporate assessment metrics in the e-business plan so the organisation can determine whether objectives are being met. Measure early and often. Ensure that there are action alternatives that can be taken should any of the metrics indicate a poor performance.