Proceedings of the 34th Hawaii International Conference on System Sciences - 2001

A Methodology for Creating e-Business Strategy D. N. Jutla Faculty of Commerce Saint Mary’s University Halifax, Nova Scotia, Canada [email protected]

J. Craig Faculty of Commerce Saint Mary’s University Halifax, Nova Scotia, Canada [email protected]

Abstract In the “now” economy, knowledge, trust, technology, and the relationships among stakeholders are the keys to success. Although for almost eighty years, strategy literature stated that these concepts are important, we were not in a position to effectively leverage and/or effectively execute knowledge and relationship management in real time until the turn of the twenty first century. Many companies have not yet adjusted the way they work to the capabilities of the present-day knowledge management and technology enablers. Also widespread is that companies have not yet developed methodologies or models to create e-Business strategy to support corporate strategies, or to monitor the success of an e-Business strategy. This paper develops a methodology to create e-Business strategy based on a simple e-Business model for eBusiness. The primary stakeholders are the customer, operational partner, strategic partner, governance, and community. The value propositions for each stakeholder is outlined, and questions that business should ask are provided to guide in developing the e-Business strategy. A sample mini-case study is developed to illustrate application of the methodology. This methodology supports the eBizReadiness! framework which details infrastructure requirements for e-Business.

1. Introduction Positioning a company to acquire new market share and to retain existing customers today is a challenge. With the proliferation of new business models arising from the progression of the value chain into a value web, business is asking how will these new models change its industry, its company? Are these models threats or opportunities, or both? What strategy (ies) should my company adopt to remain competitive or to gain a competitive advantage? Competitors can acquire e-Business enablers as easily as your company can. Of course, the question that arises is

P. Bodorik Faculty of Computer Science, Daltech, Dalhousie University Halifax, Nova Scotia, Canada [email protected]

whether competitors will be able to organize or use the eBusiness solutions as well as your business does. There is no reason why your use of e-Business enablers could not contribute to sustainable competitive advantage, similarly to how Southwest Airlines low cost strategy could not be imitated by other airlines. How does e-Business change standard strategy execution? The major impacts are in the opportunities for creating value, shorter timeframes for processes, cost reductions due to reengineered processes, the real-time availability of information, the ease of making new and maintaining existing relationships, and the cheaper global reach. The main question that we address in this paper is how do you plan for enabling e-Business in a company, knowing that your e-Business strategy must align with your overall corporate strategies. The bottom line is that business cannot afford to ignore e-Business. A do-nothing approach is crippling to value creation and a recipe for decline. According to NerveWire Inc.[4], a leading consulting company focused on eBusiness digital strategy creation, “in the new economy, the only sustainable competitive advantage is learning – and acting - faster than the competition”. This paper is organized as follows. Section 2 provides some background in strategy types. Section 3 showcases the importance of core competencies and opportunities and threats in e-Business strategy. Section 4 presents the eBusiness stakeholder model and provides the value proposition for each stakeholder. Section 5 details the opportunities for each stakeholder with respect to eBusiness. Section 6 details the methodology - a step by step process for creating an e-strategy. Section 7 furnishes a mini-case to illustrate application of the methodology. Finally section 8 provides concluding remarks.

2. e-Strategies e-Business strategies or e-Strategies must address how partner, employee, governance, community, and customer facing processes can be e-Business enabled. E-Business

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enabled means how business processes are improved via technological advances, new knowledge management capabilities including content management and relationship management, and online trust capabilities. The deployment of the web channel is one of the most important areas in customer facing processes. Pure Internet companies by definition primarily use the web channel for marketing, sales, and support. E-Business observers are concluding that the most sustainable channel strategy is moving towards a clicks-and-mortar model, where the web is only one of several marketing, sales or distribution channels. In China, some born-on-the-Internet companies are taking a new brand-creation strategy. These companies are building brick and mortar storefronts that will be used to create a brand name. Then the brand will be extended to the Internet part of the operations. The web channel is particularly important to SMEs who do product customization or are specialists. As far back as 1996, Bulk Handling Technology Inc with 3 employees and 1 million in annual sales reported the world beat a path to its door after the company put up its web page. Within the subsequent 3 months the company was asked to bid on 2.5 million dollars worth of contracts from outside the United States – from countries such as Australia and Chile [1]. Knowledge management (KM) strategies targeting all eBusiness stakeholders are crucial for maintaining competitive advantage. A 1999 online survey of 314 senior IT strategists conducted by the Cambridge Information Network states that “while 85% of CIOs believe in the importance of managing knowledge, only eight percent of companies have an enterprise-wide knowledge initiative and only 7% have CEOs that consider KM a high priority.” This survey limited the definition of KM to intellectual assets management – employee knowledge. International Data Corporation research estimates that by 2003, Fortune 500 companies will lose over 31 billion dollars due to intellectual rework, inability to find knowledge resources, and substandard performance. The losses are deemed attributable to lack of tools and processes that actively capture, manage, and connect organizational expertise [3]. The partner stakeholder facing processes such as supply chain management must be an integral part of corporate strategy. The higher focus and ease in partnering, collaboration, product development, forecasting, and sourcing processes differentiates towards customer value. The characteristics of the customer stakeholder have changed. The customer is impatient and sensitive. The costs of switching to become a customer of another business are lower than ever. Customers are demanding exceptional value. They are exacting in their requirements for lower prices, better service, faster processes, and efficient activities. Market characteristics have also changed. News items are more available and make more

impact today on company’s value, profitability, and failure. Customers are more informed; markets are more informed. Business is required to give 24-hours, 7-days-a-week service to customers. E-marketplaces are enabling competitive bidding from a wide variety of suppliers. These marketplaces do not work for all types of products or customer-business relationships. Companies and individual customers still trust brands. Many will not buy on price alone; quality, service, confidentiality and reliability are equally important.

2.1 Core e-Business Competencies The identification of core competencies is essential to strategy creation at every level. The critical success factors and core competencies that provide a firm with a potential competitive edge in the offline world can be extended to the e-Business world. For example, traditional competencies can surround a brand, services, R&D, manufacturing, product development, cost and pricing structure, and/or sales and distribution channels. EBusiness can take traditional competencies and strengthen them. New competencies can also be created. Managing relationships with stakeholders is a key competency in the e-Business economy. Knowledge management and trust are key enablers for stakeholder relationship management. Information and knowledge transfer to other stakeholders facilitate value creation. Managing outsourced contracts with operational partners is another competency that is absolutely essential in eBusiness, particularly for real-time availability, and update of data at acceptable levels of network, video, and audio service. Knowledge management supports other core competencies such as channel management, brand management, and portal management. Portals represent one-stop shops, a phenomenon people like in business. Employee, or customer, or partner, or community portals must provide an easy to use, consistent interface with intuitive navigational ability. The stakeholder should easily find what she is looking for. Making the customer the central focus of the business – the priority – often requires cultural change. The change taps into a business’ level of adaptability and versatility. If the company’s culture is ready for e-Business – future oriented, very adaptable, and versatile - it is a core competency that can be leveraged. Specialist companies are leveraging technical competencies in exchange for the real revenue generator – business ideas. These companies are offering to create and host web sites in exchange for a percentage of revenue. eCompanies’ business is garnering competencies in the areas of strategy, finance, recruiting, creative, technology, business development and marketing, to launch new businesses from mere concepts.

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2.2 Barriers to Successful e-Strategies How hard it is to move a company, industry, country, or continent to e-Business? Creating a future oriented culture presents one of the biggest hurdles to moving a bricks and mortar business into the e-space. If there is a resistance in upper management to change, then resources for eBusiness will not be available and any e-initiative will fail. Traditionally enforcement of standards is not a widespread activity in and among companies. The mindset will need to change to facilitate e-Business interconnectivity. Internet and personal computer use is another issue that eBusinesses must overcome when dealing with smaller concerns such as contractors and professional service providers. The success of a business model for bringing home builders and building contractors together, for instance, could hinge on contractors personal computer or mobile device (e.g. cell phone) usage. Knowledge management in all its forms is done poorly across organizations today. For knowledge management to be successful across stakeholders, there must be a willingness to share information and transfer knowledge or information or data among the parties. For suppliers and retailers, there already exists numerous case studies that show supply chain visibility leads to more effective marketing promotions and more accurate forecasting and promised delivery dates. Businesses are often reluctant to share customer information with partners. It is perceived as a risk which means that some will not use intermediaries for maximum benefit. Willingness to share may be induced with successful, convincing and concrete examples of other businesses’ using sharing to increase profitability. Another impediment to immediate knowledge management capability is the need to integrate older legacy systems into new collaborative system from third party vendors. Some of these products have limited support for standards such as EDI. There is no single standard for interoperability between ERP and e-Business application bolt-ons. Relationship governance is another aspect of knowledge based collaboration. Who is responsible for what and what rules are used? Who governs the relationships among stakeholders? Compliance to the standards for product codes and formats for business instruments such as XML needs to be enforced for e-Business to work. Creating a customer centric business entity often means reengineering processes to focus on the customer. One to one marketing translates to creating mass customizable solutions for a group – a microsegment- but appearing personalized to one customer. German industry giant, Siemens, has a micro-web site for each of its hundreds of lines of business. Each line of business runs its own independent enterprise resource planning system. The

challenge for Siemens is how to provide a consolidated view of various lines of businesses to a single customer. This barrier can be turned into an opportunity for a company to specialize in creating intermediate e-Business application solutions for integration hubs. Customer focus means understanding the needs of every customer; it means managing many more, possibly a few hundreds or thousands, micro-segments of customers thereby introducing a new overhead. Knowledge management software aids to a certain extent, but middle managers also need to understand and take responsibility for these micro-segments. It may mean adding human resources to manage the emerged customer microsegments. A problem that arises is the duplication of effort inherent to deployment of numerous, different, and noncoordinated e-Business solutions. Businesses sometimes approach the web channel as a mass marketing medium instead of leveraging one-to-one possibilities. Indeed some companies do not collect sufficient data to personalize customer information, and customers will need to understand how they benefit from releasing their data. Channel conflict is another problem to handle when adding a web channel. Reselling partners particularly will say that, in fairness, prices should be the same at the physical and virtual storefronts. It is often not the case; many businesses offer reduced prices online in order to gain market share. Indeed it is possible to do so because web channel costs are often lower than other channels' costs. It has been reported that suppliers have experienced a downward pricing of as much as 15 percent online. Price discrimination is not a new phenomenon that propped up in the online world. Airlines, for example, refer to pricing services based on the customers' willingness to pay as yield management. Systems infrastructure is well implemented by a handful of companies. Other companies will need to learn the lessons of a total architectural solution approach, and the importance of technical standardization, consistent and convenient interfaces for users. Management often fails to recognize when the in-house IT units do not have expertise for certain areas. Sometimes the “close eyes” approach is taken when management is reluctant to assign more funds (perhaps due to budgetary constraints or current resource allocation priorities) to addressing a system need. Click and mortar businesses that do not integrate the computer applications for the physical store with web systems fail to take advantage of the opportunities inherent to having a storefront. Customers easily and often switch over channels. As far as the customer is concerned, they are dealing with one business regardless of whether it is over the web or via telephone or in person. The customer would like to return merchandise bought over the web without hassle at a physical store. In the US, such a service

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would jeopardize the sales tax advantage of an online catalog or separate web company. Management sometimes fails to recognize that one of the characteristics of a web channel is customer traffic arrival in bursts. Bursts on the web can scale into the hundreds of thousands, unlike at a physical store that clearly does not have that type of capacity. Not only does the web site solution need to scale to allow all these customers entry while maintaining acceptable quality of service levels, but all associated business processes connected to a sale must scale as well. For example, as shown in the 1998 and 1999 Christmas seasons, the fulfillment process did not scale for many online retailers. Additionally, businesses are in a quandary to estimate how many and what types of suppliers, strategic partners, community members and customers will be accessing its applications at any given time. How to divvy up responsibilities in a partner cost-sharing plan is difficult. Occasional or low use option pricing is also an issue. Software licensing agreements as they stand are not suitable to the new collaboration anticipated in e-Business. It is almost impossible to budget for a roll out of applications with suppliers and partners whose infrastructure support requirements and levels of eBusiness readiness are all different and changing from month to month.

2.3 Opportunities Traditionally, opportunities were qualified on whether your company can influence an Industry or not. Think about what a surprise Amazon must have been to the book retailing segment in 1996! e-Business provides the top level opportunity for moving towards or retaining market leadership. For some businesses, it will ultimately mean the difference in a survival strategy. For traditional business, many of the opportunities inherent in opening up a new marketing, sales and service channel are similar to other traditional channels, but the web channel raises some unique opportunities. Businesses can develop new complementary or alternative - revenue sources through advertising, syndication, or subscription to online services or communities. Community sites and “market breakers” depend heavily on advertising revenues. Market breakers are businesses that sell products and services below cost in order to attract eyeballs to their sites. However there is no reason that click-and-mortar companies like Wal-Mart or Sears could not receive supplementary revenue from advertisers on their sites. Another revenue stream is the careful sale of your customer's data. Business component enablers such as access to a complete view of customer information provide new marketing opportunities. Contextual marketing and selling is possible at many customer contact points. While the

customer is on the phone with a customer service representative, a software agent can suggest which product the CSR could market to the client during the time spent in direct contact with her. Through innovative service, companies can foster ongoing sales relationships, which will increase the opportunity for future revenues. The increase in supply as well as demand, as seen on the web, presents an opportunity for a company to affect product and service pricing. The web enables the creation of value added services in many industries. For example, online bill presentment is a popular value-added service for customers in the energy industry. It also saves costs since mailing costs are eliminated. The opportunities in the clicks and mortar business model is in the carry over of brand to the online world, the complement and interchangeability of services and customer information at both physical and virtual storefronts, and the leveraging of existing infrastructure for facilitating delivery. The clicks and mortar business can experiment with the web and fail, but survive to launch another experiment as exemplified by Wal-Mart’s IT spinoff. The opportunities for the pure dot com companies are in collecting revenue from electronic transactions, advertising, subscription or sponsorship. The risks grow when physical warehousing and delivery infrastructure is needed for the business. Building totally online brands are expensive but not impossible especially if the business is a first mover into an area. Successful pure dot coms include Yahoo, eBay and AOL. The net market business model strictly facilitates transactions from business to business. Revenue comes from a percentage of the transaction cost, a flat transaction fee, or a periodic subscription fee. The model leverages transaction dollar amount forecasts, for B2B e-commerce, that predict billions to trillions of business conducted online. The main current opportunity of the net market model is in e-procurement. Every industry is looking at setting up an e-marketplace to bring suppliers together to service the industry. The creation of these micro-marketplaces is a new e-commerce opportunity. Businesses within the same or similar industries are using e-Business to move into other areas. A good example is that of the energy industry. Power companies are transforming into telecommunication companies. The telecommunication companies are becoming e-Business enablers. An article entitled “Don’t call Worldcom a Telco" [5] illustrates the story. MCI Worldcom announced its move from a communications services carrier to an eBusiness enabler. Many telecommunication companies worldwide are banking that more than half of their revenue will come from emerging e-Business related services. Most of the current leaders in your Industry are aggressively looking at e-Business opportunities as well in order to hang on to their dominant positions. Assessing what they are doing will showcase opportunities for your business to

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translate in other markets. The globalization trend in eBusiness can allow previously untapped markets to become accessible for all players. On a global scale, there is opportunity for one company’s brand to be more powerful in one country than in another. As businesses become more skilled at deploying eBusiness initiatives, a new competency is developed, and a new opportunity presents itself. General Electric spun off its IT unit into a separate e-Business consulting services entity. Wal-Mart also did something similar. One opportunity is in taking these separate businesses to equity offering or initial public offering (IPO). Share price valuation of the dot com companies is nothing to sneeze at despite market corrections and bubble effects. Partnering with dot com or traditional companies, or acquiring eBusinesses for marketing and/or technology resource sharing also opens up a Pandora box of opportunities and risks. Examining technology and regulatory scopes for future events can provide a roadmap to possible future opportunities. Having a sense of what are the important information applications and technologies and what impact they can have in the future is necessary in providing the right building blocks. For example, your business should think about what impact network appliances, smart products that can get in touch with manufacturers and voice technology will have on products and services. The e-Business stakeholder model presented in the next section gives a structured approach to creating, assessing and monitoring e-Business. You can use the model to refine opportunities into customer, operational partner, community, governance, strategic partner and employee facing opportunities. The assessment questions in section 4 highlight the opportunities for an example stakeholder as well.

fill competency gaps. The gap in hybrid business and technology skills availability is a universal problem. Online competitors are sometimes new and from unexpected quarters. For example, British Airways found that its biggest online competitor was not other airlines but Microsoft’s Expedia.com. People also compare service at a web site differently than in the physical world. Companies are finding that they are not being compared to other businesses in the same industry, but may be compared to experiences at booksellers or banks. There are no guarantees that the business models you have chosen will be viable in the future. How do you know whether you are right?

3. The e-Business Stakeholder Model The e-Business stakeholder model is customer focused as the business stakeholders work together to create value to meet the customers' demands, and boost outcomes such as increased customer satisfaction, acquisition and retention rates. The external stakeholders or linkages identified in the model, as illustrated in Figure 3.1, are the strategic partner, operational partner, customer, community, and governance. The internal stakeholders are the employees of the company. These stakeholders play central roles in the value web. According to [4], “… value web analysis provides a total view of fund flows, product flows, margins across links and reveals where to play and where to outsource.” Community Partners Strategic

2.4 Risks

Operational

Customer

Governance Enablers

Risks naturally accompany opportunities. There are risks in forming new relationships with new partners, with existing partners, with new communities, with new markets and new countries. The new competitors are not as well known as before. In the non-domestic market, competition from other global players with deeper pockets can be a real threat. The greatest risk in e-Business is losing existing and new market share and revenue to a competitor due to strategic mistakes, inability to execute strategies quickly, or an unanticipated technology event that made your product or service less useful or obsolete. Legal or regulatory events can translate to nasty surprises. The introduction of heavy Internet taxes, bit taxes, or prohibitive regulation costs can have adverse effects on projected revenues. Problems can be exacerbated by a company’s inability to

Business

Knowledge Management Trust Technology

Figure 3-1 e-Business Stakeholder Model . The e-Business components for each stakeholder are summarized in Table 3-1. Recall that the 3 main enablers for all these components are knowledge management, trust, and technology. For details on the components please see Craig and Jutla 2000.

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Table 3-1 Summary of e-Business Stakeholders and Components Major Components Stakeholder Research and Analysis, Content Agents Management, Sales, Marketing and Service, Community, Education and Entertainment Community Engage, Community Interaction, Community Services, Community Governance Engage, Order, Fulfillment, Support Customer (Stability of Governance Socio / Economic Geographic Area), Marketplace rules (Stability of the Market), Privacy / Trust (Stability of the Customer), Technological (Stability of the Architecture) Productivity, eCulture, Information Internal Operations Systems Infrastructure and Services Management, Operational Contracts Partner Identification Mechanism, Assurance, Dispute Resolution, Relationship Management, Transaction Management, Content Management, Intellectual Asset Management New Alliances, Account Planning, Strategic Partner New Market Research, Macro Resource Planning, Product or Service Development A summary for customer value propositions per stakeholder follows. • The strategic partner allows you to plan for the addition of new markets, new channels, brand awareness, new product and service development, increased speed to market, resource pooling, targeted segments, increased market share, and increased wallet share. • Operational partners add value through lower supply costs that are translated to lower customer costs, on time delivery, product or service availability and reliability, increased product/service quality, shorter lead times, product customization, personalization, non-core expertise and/or provision of technology infrastructure. • Governance is the system of ruling by an act, manner or function of a government whether it is a nation, province, district, organization or institution. This is a very important stakeholder because some rules are required to create and sustain an e-Business framework. Governments and governance have a crucial role to play in developing trust and legality for the e-Business applications. Trust builds customers

•

•

from community and helps to ensure they retain as customers for the future. Elements grouped together for trust to occur are comprised of privacy, security, and consumer protection. A good example of this is the CPA WebTrust initiative. This program is a collaboration by the CPAs and CAs (professional accountants in the US and Canada) to give accreditation to online businesses that are complying with the three areas. In a nutshell, governance stakeholders add trust, ombudsmanship in policy making, global opportunities, and provides the rules to make e-Business happen. The online community value propositions to the customer are fast knowledge access, leveling the field for making new and possibly rewarding contacts, aggregation of content, access to useful, often free services, and ability to compare a business’ services and products with competitors. The community stakeholder adds team spirit, enhances customer service through extended product and service support knowledge base, enhances trust and perception of increased clout to change governance policies through focus, and increases the number of preferred customer profiles. The customer stakeholder value is primarily as a direct or indirect revenue source. The customer can provide added value in a recursive fashion by providing feedback, giving input into a product or service development process, adopting self-serve habits and facilitating negative cash to cash cycle times through use of efficient payment systems.

The core of the strategic planning exercise is to identify new opportunities to grow a business in terms of market, profitability, product-service orientation, and company reputation. Figure 3-2 illustrates the process. Our strategic map is to focus on the e-Business components identified in each stakeholder, and try to grow some subset or all of the components to a future state, as illustrated in Figure 3-2.

Difficulty Index - am I right? - how quickly? - how much?

Governance

Governance OP Partner gic Strate er Partn

OP Partner

Customer

ni mu Com

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Strategic Partner

ty

Community

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Figure 3-2 – Company Growth through Stakeholder Focus Once you decide to move the company from “here” to “there, " four key questions arise: • What is the difficulty (barriers and constraints) in achieving the move? • How quickly do we make the transformation? • How much of what is possible do we do now? • Which stakeholders or combination of stakeholders will be affected? As part of strategy creation, we suggest that you list opportunities and risk questions, grouped by stakeholder, which may help to identify a company's focus. Because of space constraints, we illustrate these questions for one just one stakeholder in the next section.

• • •

•

• • •

4. Stakeholder Opportunity Assessment Questions for the Customer The stakeholder opportunity assessment questions, provided below, address opportunities and difficulties in eBusiness with respect to the customer stakeholder. These questions may also be useful in the quest for answers to the bigger “how quickly can a company move to e-Business”, “how much of your business can you move right now – which processes” and “what hard costs are involved” issues. In addition to the opportunities assessment questions, the business and technology competencies, processes, infrastructure, personnel skills, culture, governance inherent to the business and to its partners and community should be evaluated. Redefining and refining value and supply chains, and reinventing corporate culture around e-Business are achievable through a combination of internal and external initiatives. According to a year 2000 Information Week survey of 600 executives (see www.informationweek.com), changing customer-facing processes is the second most highly transformational effort under way in companies. The number one effort is the more active role of IT in the overall business. Below are some questions that highlight business opportunities for the customer stakeholder.

•

•

• •

4.2 Sales • • • •

4.1 Marketing • •

Are ad campaigns, promotions, product launches, and/or seminars cheaper or more effective over the web channel? Can new markets be developed for both traditional and web sales channels?

Can you create niche or specialty markets more cheaply and effectively due to the Internet channel global reach? Is there an opportunity to reinforce or build brand reputation in another channel Is there an opportunity in so far as tools scale more than in any other medium – instantaneous reach to thousands and millions of prospective customers. What are the trade-offs with respect to other media? Is there an opportunity to target who are the “right” customers for your company. Are you able to collect far more data than in any other medium (can follow clicks, data mine etc.) Is the opportunity for mass customization and “one-toone marketing” greater on Internet channel? Are you taking the opportunity to provide a one-stop shop – convenience – to customers Are there unique tools on the web for engaging customers, example software agents? What are the opportunities for agent technology use in B2B and B2C eCommerce? For research, sales, marketing and service, commiunity building, entertainment? We know that agent applications of customer profiles include news service, Amazon’s Eyes, Pointcast network, newspage, ZDNet’s Personal View, tracking stock portfolio on quote.yahoo.com etc. Thus personalization is a primary factor for agent use in B2C eCommerce? What are other key factors, opportunities? What are the opportunities for agents use of customer, partner and community profiles? Will supply chain visibility offer improved marketing opportunities?

• • •

Will the web geographic reach create more sales from a dispersed customer base? What percentage of sales is targeted to come from Internet commerce? Are the cost of sales lower over the web? Are reseller channel partners more effective than the web channel? Can they be complemented? For instance, can you lower channel conflict by creating a co-branded web site along with reseller partners? Is there an opportunity created for better customer service by directing customers to a local reseller from a co-branded web site? What are the opportunities in combining inside sales with the Internet? Call centre with field sales? In general the support of multi-channel sales? Are field sales more effective?

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• • • • • • • • • • • • • •

Are products/services easier to configure and customize over the web channel? Is competitive selling enabled because information is available in real time? Can you find buyers more easily ?– e.g. in emarketplaces What shipping or other export/import issues will you have to deal with? Can you use the e-Business platform to distribute knowledge that occurs outside as well as during sales time? Do you achieve better customer satisfaction due to more realistic and accurate promise times obtained from integrated supply chain visibility? Does supply chain visibility mean that the time capital is invested in products and services is reduced? Is there a smaller requirement for warehouse space and thus real estate as the sales process is changed? Are there opportunities for better forecasts as there is more information available? Will the payment methods over the web enable shorter cash to cash cycle times? Are delivery costs lowered due to the offer of an alternative delivery channel for digital goods? What are the opportunities for comparative shopping agents in e-sales, and will they harm your margins? Can you use the e-appliance as a point of sale device, thereby extending sales relationships? Which of the following agent opportunity can you take advantage of?: customer needs identification, product brokering, merchant brokering, negotiation, payment and delivery, service and evaluation?

4.3 Service • • • • •

• •

Can you reinforce and build brand reputation through better service? Is web service perceived as giving more “convenient” service – no delays at getting information as in waiting for call center personnel to respond? Can you provide lower cost and more effective support over the Internet? Are product updates and upgrades, alert and execution cheaper? Are your customer touch points integrated? That is, if a customer were to cross channels such as phone as well as make an Internet report of a problem, would both these contact points be aware of the other? Also can salient customer history be viewed electronically at each touch point? Is your site easy to navigate? Will you facilitate natural language querying? Will you provide customer personalization services?

• • •

How often will you provide new personalization services on your site? Will you allow the business customer to view his/her history of transaction/interaction with your business in a secure area, or is this data only for business use? What types of product warranties are available to your customers? How will you provide proof of purchase in the online world?

5. Methodology for Creating an e-Strategy Below we propose a methodology for creating a strategic plan for enabling e-Business in your company. Some of the steps we propose may be done in parallel or may not be applicable to your company. You will have to tailor it to your situation. The main point to keep in mind is that a strategy for e-Business enablement or an e-Strategy should be aligned to the overall corporate strategy. 1. Assess your business’ current standing. There are many rules in standard business literature that guides this assessment. Examine and know intimately what your industry leaders are doing. 2. Outline your existing corporate, business, and functional strategies. Determine what your directional corporate strategy is. To consider eBusiness, growth or retrenchment turnaround strategies must be targeted. 3. Identify the opportunities for your company in moving to e-Business or in becoming more eBusiness enabled. The questions presented in this paper may act as a starting point for opportunities’ identification for the customer stakeholder. Create a laundry list of opportunity/risk questions for each stakeholder. 4. Prioritize the opportunities you determine as most significant to your firm. 5. If your corporate growth strategy involves market diversification or development of new products/services for new markets, then the propensity to spend in these industries/markets is assessed – often through available or purchasable research or analysis reports on the state of an Industry or a foreign market. 6. Identify your important stakeholder (employee, supplier, partner, governance and community) facing processes. You may find it useful to examine the stakeholder components in the EbizReadiness! framework (see Craig and Jutla 2000) to refine the processes. 7. Examine the targeted stakeholder processes and associated stakeholder components in the context of your target markets. You may find that the eBizReadiness! framework (Craig and Jutla 2000)

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is too generic and you may have to fine-tune or add components that are of significance to your target market. 8. Rank the power among your various business stakeholders. 9. List your business’ core competencies. Decide where it makes sense for emphasis among the stakeholder groups to be placed. 10. Identify the gaps that currently exist in your organization and identify the barriers and difficulty involved in closing them. 11. Formulate your plan based on the outputs from the previous steps. Executing a strategic plan requires vendor involvement. For each stakeholder process targeted in your e-strategy, get product and services information from the leading technology vendors in the Industry for your size and type of business. There are also consulting firms that keep on top of and specialize in e-Business enabling processes. Getting the advice of such a firm, even if it is to confirm existing corporate thinking, is often money-well spent.

6. A Mini-Application of the Methodology Again, because of space constraints we show application of the methodology for only one stakeholder, the customer. Also the case company is a small to medium sized enterprise (SME). The requirements for SMEs are much less complex than big business.

6.1 The SMEVideoStore Mini-Case SMEVideoStore is a local video rental store. It is a franchise of a large company that distributes videotapes. SMEVideoStore sells videotapes as well as rent them. They also rent CDs and game cartridges. Candy, soda pop, magazines, and movie merchandise are also sold in-store. There are 2 other local video rental stores in the vicinity. SMEVideoStore differentiates itself through a wider variety of tape offerings and through its parent’s brand name. SMEVideoStore’s corporate strategy is a differentiation-focus growth strategy. Management has set about to create an e-Business strategic plan to support the company’s corporate strategy. Because it is a small company, SMEVideoStore only has the resources to grow one stakeholder at a time. The company targets the customer stakeholder. They use the customer stakeholder questions provided in section 5 to assess opportunities and threats. On a three-year planning horizon, management assesses that their opportunities far outweigh the threats.

Due to current limited resources, management target using the web as another marketing, sales and service channel. The local client base can be extended through offering new web-based services. For example, allowing customers to: • check videotape availability over the web • get online recommendations • make reservations for videotapes over the web • join community to discuss rental • make rental transaction • review their kids rentals for the last 6 month or one year period • review late charges details • review latest movie offerings • buy gift certificates • purchase movies or other merchandise • search and sort inventory. For example, obtain listings of all movies with a particular actor/actress in them, obtain listings of all 1971 movies, or obtain listings of all movies that had Oscar winning roles • pay for rental Management is not getting into fulfillment for the web channel as yet. Customers must stop by to pick up their movies and/or merchandise when reserved, rented, or bought through the web. However, SMEVideoStore anticipates that they may win over some of the local competition’s customers, particularly those who are excited by its first mover service offerings. The reach of the web will conveniently allow family members abroad to purchase gift certificates for local members. SMEVideoStore plans to offer a service to package the gift certificates and mail them out to members. The web channel will keep customers continuously advised of special promotions and discount nights. Members can opt to be included on an e-mail distribution list also. Agent software will be used to notify members when videotapes that they may like to watch are received in stock. Presently, the videotape store operations are computerized: inventory, loans, customer, and human resource base. It would be a straightforward matter to extend to the web and integrate the web front system with the store’s backend systems. A looming threat is a possible future event that movie house originated video-on-demand over the Internet would become firstly viable, and secondly, viable at lower prices than at a local video store. Viable means that • enough households will have to be connected to the Internet, • there will be sufficient bandwidth to service every household, • digital protection schemes against movie piracy would be available and effective

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• video quality would be acceptable, that system availability would be 99.9999%, • the origination of the download may be controlled by the big movie houses, or local theaters. Intertainer is a current business that delivers movies over cable modem and DSL systems. They have strategic partnerships with eight major media companies. However networks’ performance are not currently up to the task. Intertainer also has a distributor, Zoomtown.com that is working on providing VCR-like functionality such as fast forward, rewind, pause and stop. Management thinks that the threat is mitigated by geographic considerations and channel cannibalization. A movie house or intermediary such as Intertainer would still have to host infrastructure locally to ensure good response times. Instead of having a vanilla operational partner such as an ASP provider, the franchisees make sense as operational partners even for a video-on-demand model. The franchise adds value by “localizing” or tailoring advertising for the local community. Having assessed the opportunities and threats within the Industry due to the impact of new technology and processes, the management of SMEVideoStore concludes that the company should be able to sustain a competitive advantage through provision of superior customer service. A contract with an e-Business solutions service company to provide the necessary process changes and enhanced technology infrastructure is all that is necessitated in executing the plan for this small business.

[5] Max Smetannikov , “Don’t call Worldcom a Telco,” Interactive Week Online, April 13, 2000, http://www.zdnet.com/intweek/stories/news/0,4164,25 42361,00.html

7. Summary and Conclusions The methodology for e-strategy creation presented in this paper supports a larger work on e-Business readiness called the e-BizReadiness! framework (Craig and Jutla 2000). The framework defines components and metrics instrumental in the creation and implementation of eBusiness in a company, an industry, and on a country level. As technology evolves, more applications are developed, and learnings increase for e-Business, we expect the framework and supporting methodologies to also evolve.

References [1] Catherine Arnst, “Wiring Small Business,” BusinessWeek, 1996. [2] James Craig and Dawn Jutla, "e-Business Readiness: A Customer-Focused Framework", Addison Wesley Longman, New York, December 2000. [3] Heather McLatchie, Knowledge MisManagement, ClipMagazine, November 1999. [4] Nervewire 2000; www.nervewire.com

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