The e-Enabled Company — Creating Business Transformation Through eBusiness Technology

Author(s):

Arthur P. DeMonte
Arthur P. DeMonte, Global Director eCommerce Technology Center, The Dow Chemical Company, Midland, MI

86th Annual International Conference Proceedings - 2001 

Abstract: The use of eBusiness tools and strategies provide the opportunity for companies to sharpen their competitive edge in a myriad of ways — some very apparent, others less obvious and buried deep within a organization's infrastructure work processes. Early discussions of eBusiness focused on the eCommerce aspects of streamlined, levered procurement and the efficient use of web-based marketplaces — the buying and selling goods on-line. And while the technology advances both realized and forecasted will continue to directly impact a company's business model, they will also profoundly impact the management and effectiveness of supporting working processes. Technology driven shifts in how these work process are executed will further drive new business model options that can transform a company's competitive position.

Building upon the momentum created by the zeal of dot.com entrepreneurs, companies are comprehensively transforming how business is done through e-enablement — the concerted effort to uncover opportunities to lower internal costs, improve service levels and create new business models though the application of information technology in general and the internet/intranet specifically. This paper will highlight some of these activities and suggest a model of an e-enabled company transformed to compete in the future.

The Digital Economy. We have learned that the pendulum of the "digital economy" swings both ways as pundits became pariahs as fast as you could say "Sock Puppet". The bold predictions that revolutionary eCommerce upstarts would displace the incumbents and the promised flood of internet commerce did much to catalyze the bricks and mortar companies to action.

Now in the light of the first year of the new millennium, the popular refrain is to discount this episode as just another chapter in a series innovations adopted by industry from the advent of the steam engine to the use of the mini-computer. If in fact, "internet speed" only served to justify the venture capitalist's haphazard decision making and the real benefits of these new capabilities would be slow to accrue, why bother? At least, why rush?

Simply put, the potential benefits of e-enablement are real and powerful. eBusiness tools, concepts and strategies are and will affect every business strategy, drive the next generation of work processes for every function and monetize core competencies and intellectual know how within your entire organization. The results of more loyal customers, lower operating costs and value growth will yield a more competitive, focused and truly transformed company.

The e-enabled company will apply the new e-business capabilities to internal business processes with the same strategic intent, commitment and rigor that would be applied to customer interfaces (eMarketplaces and direct portals) and e-procurement processes. Company e-enablement is concerned with both 'making it happen': ensuring that the overall e-business strategy can be implemented in a timely and effective manner while uncovering new formats in which to compete. This means establishing the right change management program at all organizational levels, and developing appropriate policies, systems and processes that support the e-business strategy.

Information Technology Driven Change. Information technology has become as potent of a business strategy lever as are product innovation, globalization and mergers and acquisitions. In the 1990s, information technology fought hard to cost effectively deliver the capabilities demanded by the business requirements. IT departments were challenged to satisfy the innovation required by MRO and ERP solutions as well as provide basic desktop hardware and software tools. In today's environment, information technology has moved from one of simply supporting the business model to one that can enable business performance and create strategic options unavailable in the past.

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Beyond the overwhelming and obvious role of the internet as a delivery channel and interactive platform, two additional factors have contributed to this changing role of information technology.

First, companies can now manage data electronically more cheaply and faster than ever before. Driving this phenomenon is Moore's Law that states very two years twice as many transistors can be packed onto an integrated circuit. The amazing part of this prediction is that it has held true since 1972! and shows no signs of let up. Biological solutions to this challenging quest seem to point to the next phase of this innovation. Speed and capability continues to accelerate even as the cost to perform these operations continues to fall.

Year
Computer
MIPS Per $1,000 (million instructions per second
MORAVEC
BrainPower Equivalent
1920
IBM tabulator
0.000000001
Manual calculator
1945
ENIAC
0.000001
Manual calculator
1970
DEC PDP-10
0.001
Bacteria
1978
Apple II
0.01
Bacteria
1990
IBM PS/2
1
Worm
1992
Gateway 486
100
Spider
1998
Mac G3/266
1,000
Lizard
2010
-
100,000
Mouse
2015
-
1,000,000
Monkey

Source: Deloitte Research and Moravec (1999)

The second factor results as lower transaction costs and greater ease to store, communicate and transact electronically creates new services to capitalize on the technology's scalability. Application Service Providers (ASPs) and Business Service Providers (BSPs) have taken the outsourcing service partner model of non-valued added work processes to a new level. Transaction costs can be defined as the costs of finding information about available goods and services, negotiating and contracting for those services, and the ongoing management of the relationship. Nobel Laureate Ronald Coase has argued, transaction costs are a major determinant of the scope of company operations, i.e. companies will bring an activity 'in-house' because of the lower transaction costs that result when compared to those incurred when the service is obtained from an external market. These costs are considerable: in 1998, two other Nobel Laureates, Douglass North and J. Wallis, estimated transaction costs to be 45% of the total economy.

Most companies understand the benefits of Business Process Outsourcing as a means to lower the cost of a specific corporate function or work process. These providers lower the external transaction costs to their clients and the need for companies to keep the service "in-house", while taking over the management of not only the IT infrastructure, but also the workflow, best practices, labor and management of that particular service. These services can provide unit cost efficiencies because of their ability to electronically optimize the work process and spread the cost of maintaining its quality over many more users than that of a single company.

Some of the high transaction, low strategic work processes ripe for this model follows:

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Gartner Dataquest has projected that the value of the services these BSPs sell will grow from $107B in 1999 to over $300B by 2004, with logistics and human resources leading the way. Companies can now focus efforts on its core competencies and strategic decision making critical to its success, allowing more cost effective solution providers to manage the high cost, non-strategic areas.

The Role of the Company Intranet. The company intranet will evolve into the corporate central nervous system by linking modular work process components together. Corporations will require an increasingly flexible IT infrastructure linking employees via intranet portals. As knowledge management and decision making become the essence of the e-enabled corporation, cross functionally generated data will be aggregated from all sources — both internal and external / BSP and eMarketplace alike — and delivered to workers in an actionable format.

Many industrial companies have already started to evolve their knowledge management efforts from e-mail centric and intranet "brochureware", to collaborative workspaces integrating voice, video and net meeting tools.

Work Process Opportunities. Opportunity areas for eBusiness to impact work processes will vary from firm to firm. IT infrastructure, company size and competency set all play a role in identifying the fertile areas for transformation. Clues to finding these opportunities are below:

Opportunity Clues

  • Coordinate
  • Collaborate
  • Distribute
  • Report
  • Research
  • Consolidate
  • Re-key
  • Reconcile
  • Route
  • Approve
  • Core competency
  • Brand
  • Industry Leadership

E-business Enablers

  • ASP
  • BSP
  • Collaborative Tools
  • Portals
  • Commerce Tools
  • Buying Group
  • Auctions
  • Marketplaces
  • "bots"
  • Internet
  • Intranet
  • Value-networks

The Future?

  • Customer-Driven Production
  • Unbundled Services
  • Paperless Company
  • Expert Systems
  • Enhanced Decision Making

The acid test, however, is to determine if the work being done is value-added in the eyes of the customer. If it is not a factor in the customer's decision to become your client, then clearly it becomes a candidate to outsource.

The Transformed Company. Our e-enabled and transformed company will change the definition of what we today define as a company. The knowledge capital of these firms will be levered through a variety of business models. Customers will transact seamlessly through their preferred communication link(s) and choose the service level to match their needs. One can envision this knowledge-based company focused on its core competencies using a modular, scalable IT infrastructure and outsourcing to best in class business service providers its non-value creating activities.

Real time information about the company's markets, customers, partners and internal positions will utilize smart systems and analytical tools to convert this data into actionable decision options to drive optimum delivery of the company's value.

Instead of asset based organizational structures, companies will serve customers from a needs based orientation. And functional silos will disappear into integrated core work processes with process-centering organizations taking hold.

How far are we from making these forecasts a reality? Looking to companies like ENRON, Dell and Cisco, not very. While empirical performance data tying all aspects of the e-enablement tool kit together is difficult to find, Slywotzky and Morrison have summarized in their book, How Digital is Your Business?, the superior financial performance of digitized leaders in various industries have over their nearest competitors. Clearly, capitalizing on the transformation tools available can handsomely reward those willing to take the leap.

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