Making Business Sense of the E-Opportunity
Most corporate executives are convinced by now that the scale and pervasiveness of today’s technological change require a fundamental review of business strategy. Web-based technology —through the Internet, intranets and extranets — offers universal connectivity at astonishingly low cost, with a simple, standardized user interface. The new technology is creating opportunities to rethink business models, processes and relationships along the whole length of the supply chain in pursuit of unprecedented levels of productivity, improved customer propositions and new streams of business.
But the scope of the potential for change is daunting. The burgeoning e-business literature bombards executives with ideas competing for their attention. It is hard to make collective sense of it all or to know where to start the strategic analysis. Moreover, e-business ideas are described in unfamiliar terminology — “portals,” “infomediaries” and “aggregators” in “B2C/B2B/BTE” settings. Behind the new language, how new are the strategic concepts? To what extent are the old dogs of the established economy required to learn new tricks?
The success of Amazon.com, Dell Computer, eBay and others served as a wake-up call for many executives. But companies in, say, chemicals, helicopters or credit-card services are likely to find their strategic opportunity taking a different form.
A first step in confronting the challenges is to construct a coherent map of the e-opportunity. With the mood swings of the financial markets and the faltering fortunes of New Economy icons, the business community at large still feels uncertainty about the future shape and scope of e-business. A comprehensive map of the e-opportunity and its three domains (operations, marketing and customer services) can become a platform for exploring the new strategic landscape. In each domain, the technology can enable a radical new vision of what a business can accomplish. (See “The Domains of E-Opportunity.”)
The Domains of E-Opportunity
E-operations opportunities are uses of Web technology that are directed at strategic change in the way a business manages itself and its supply chain, culminating in the production of its core product or service. For example, technology underpins BP Amoco’s initiatives to troubleshoot more effectively by sharing the learning of its businesses around the world. General Electric Co. improved its purchasing by posting requirements on a Web site and having suppliers submit bids electronically.
1. K. Melymuka, “Ford’s Driving Force,” Computerworld, Aug. 30, 1999, 48–50.
2. R.L. Nolan and K. Porter, “Cisco Systems Inc.,” Harvard Business School case no. 3-98-127 (Boston: Harvard Business School Publishing Corp., 2000); and A.-M. Diamant-Berger and A. Ovans, “E-Procurement at Schlumberger,” Harvard Business Review 78 (May–June 2000): 21–22.
3. For an introduction to the language of parenting and a full set of parenting ideas, see A. Campbell, M. Goold and M. Alexander, “Corporate Strategy: The Quest for Parenting Advantage,” Harvard Business Review 73 (March–April 1995): 120–142.
4. S.E. Prokesch, “Unleashing the Power of Learning: An Interview with British Petroleum’s John Browne,” Harvard Business Review 75 (September–October 1997): 146–168.
5. J. Magretta, “The Power of Virtual Integration: An Interview with Dell Computer’s Michael Dell,” Harvard Business Review 76 (March–April 1998): 72–84.
6. J.I. Cash and K. Ostrofsky, “Mrs. Fields Cookies,” Harvard Business School case no. 1-89-056 (Boston: Harvard Business School Publishing Corp., 1989).
7. For the origin of the ideas on information’s role, see M.E. Porter and V.E. Millar, “How Information Gives You Competitive Advantage,” Harvard Business Review 63 (July–August 1985): 149–160.
8. For a discussion of value-chain configuration concepts, see M.E. Porter, “Competition in Global Industries: A Conceptual Framework” in “Competitive Strategy in Global Industries,” ed. M.E. Porter (Boston: Harvard Business School Press, 1986), 15–60.
9. For more on the effect of the first construct and the relevance of the second, see J.M. de Figueiredo, “Finding Sustainable Profitability in Electronic Commerce,” Sloan Management Review 41 (summer 2000): 41–51.
10. Only 2.7% of buyers of new cars in the United States in 1999, for example, used the Internet to conclude sales, even though 40% used it as part of the purchasing process. The Economist, “Survey of E-Commerce,” Feb. 26, 2000, 6.
11. S. Vandermerwe, “How Increasing Value to Customers Improves Business Results,” Sloan Management Review 42 (fall 2000): 27–37.
12. L. Copeland, “Ford Drives Employees to the Web To Help Connect With Online Customers,” Computerworld, Feb. 3, 2000.
13. B. Ives, P.R. Rane and S.S. Sainani, “Customer Service Life Cycle,” http://isds.bus.lsu.edu/cvoc/projects/cslc/html/; Vandermerwe, “Increasing Value,” 27–37; and D. Feeny and B. Ives, ”In Search of Sustainability,” Journal of Management Information Systems 7, no. 1 (summer 1990): 27–46.
14. For a definition of strategic intent, see G. Hamel and C.K. Prahalad, “Strategic Intent,” Harvard Business Review 67 (May–June 1989): 63–76.
With so much now being published on e-business, a time-efficient way of keeping track of developments is to read the authoritative and balanced special surveys published periodically by The Economist. Those dated June 26, 1999, and Feb. 26, 2000, are still valuable.
Within the e-operations domain, insight into the role of infrastructure in competitive advantage can be found in Peter Weill and Marianne Broadbent’s book “’Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology” (Boston: Harvard Business School Press, 1998).
E-marketing ideas can be stimulated by discussion of the scope for differentiation. Theodore Levitt’s “Marketing Success Through Differentiation — of Anything” in the January–February 1980 issue of Harvard Business Review remains a classic. Another excellent discussion is contained in part two of Shiv Mathur and Alfred Kenyon’s “Creating Value: Shaping Tomorrow’s Business” (Oxford: Butterworth-Heinemann, 1997).
Some issues relevant to the e-service domain are discussed in Philip Evans and Thomas Wurster’s Harvard Business Review article “Getting Real About Virtual Commerce,” published in the November–December 1999 issue.