E-Strategy

The Current age, we now recognize as the information age which differs markedly from the industrial age in several important respects. These are as below

Over the past 40 years or so, many business analysts have tried to determine what has been driving these changes. At first, it was thought to be the automating power of computers and computation. Then, it was the ability to collapse time and space through telecommunications. More recently, it is found to be the value creating power of information, a resource which can be reused, shared, distributed or exchanged without any inevitable loss of value; indeed, value is sometimes multiplied.
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Information & strategy

We can recognize that today every business is an information business. The "content" companies try to acquire related content businesses, not only because of their thirst for information but also because of the opportunities for synergy created by repackaging, reuse and navigation. More significantly perhaps, content companies acquire or build alliances with communication companies, and vice versa. It is not just the obviously information-intensive companies that are trying out these new strategies. More and more "traditional" companies follow some of the same logic. So, when SmithKIine Beecham acquired Diversified pharmaceutical Services in 1994, the purchase was as much about buying the data embedded in prescriptions and healthcare administration processes-which could then guide research and development programmed and sales management-as about more conventional synergies Indeed, it becomes difficult in the world of intangible assets and electronic distribution channels to be clear to define vertical or horizontal integration. Microsoft takes stakes in software, communications and information-providing businesses, and America Online acquires Netscape. Are these "horizontal" or "vertical" maneuvers?
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The integrated e-strategy, exemplified in Figure depicts In other words, brand, technology, market and service are the four aspects of e-strategy. In some cases this happens because the product is information-based, as in the case of Disney and ABC. In other cases, it is because processes are information-based, such as in our pharmaceuticals examples. In still other cases, it is simply because market understanding or decision-making is information-based. So retailers, financial services, organizations and airlines will form alliances because of the information (and sales) potential of customer cards. Information can be captured at all stages of the physical value chain. Such information can be used to improve performance at each stage of the physical value chain and to coordinate across it. However, it can also be analyzed and repackaged to build content-based products or to create new lines of business. Thus, insurance companies, for example, are becoming adept at analyzing customer and claims information and then tele-selling both financial and physical products. A company can also use its information to reach out to other companies customers or operations, thereby rearranging the value system of an industry;

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Today no business strategy is complete without an information strategy, or that business strategy and information strategy need to be integrated. IT, information systems and information as a resource no longer just support business strategy; they indeed help to determine it. But what does an information strategy look like? Figure shows a conceptual framework which distinguishes Information Systems (IS) strategy from IT strategy. IT, which was about the "how"-the technology infrastructure or platformoften seemed to distract attention from IS, which was the "what"-the identification and prioritization of systems or applications for development. Then comes information management strategy, which was about the "who"-the all important question of roles and responsibilities in the delivery, support and strategic development of IS and IT. All of these were influenced by the business or organizational strategy, which "as concerned with strategic intent ("why") and organizational architecture. In a perfect world, corporations strove for a good fit between these four domains. Now we can see that a fifth domain is missing-one we still find difficult to formalize but in which companies increasingly have objectives, principles and policies. The fifth domain is the domain of information as a resource, or of Information Resource (lR) strategy. It is perhaps the "where" question: where are we going? Much value creation can come from information, but it is not always clear what the end result will look like.

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Data, Information & Knowledge

a) One aspect of IR strategy is the increasing interest in the distinction among data, information and knowledge. To some degree, information is derived from data, and knowledge from information, and thus we are reminded that data has enormous potential-far beyond just being representative of a transaction. Information has characteristics, particularly of human interpretation, above and beyond data. Knowledge has something more than information, perhaps learning. A logical test of the value of an additional piece of knowledge could be whether it provides new understanding. Articulating and seeking to classify these intangible resources at least alerts people to their value and, more particularly, to the different sorts of investments they require. Technology is. suited to data processing. Knowledge processing is much more of a human activity.

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Seven Dimensions of E-commerce Strategy

In order to understand the process of e-commerce strategy, systematic examination of the strategic factors involved has to be considered. Looking at the most successful e-comrnerce companies, we see a strategy emerging, which is modeled in Figure above. The bonds of an e-strategy lie in the preparation of the ground before the functional issues are addressed. Leadership, organizational learning, and infrastructure form the bonds as shown in figure below. Clearly, there is a strong interaction among these three components.

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The primary drivers and the creators of strategic vision in an organization are the CEO and the senior executives. Once the need to develop e-strategy is identified, the single most important issue facing the executives is the IT infrastructure. This spans the technology spectrum from a single Internet file server connected to an ISP to the information-intense online transaction processing. Leadership with vision facilitates, encourages and allows an environment to develop within the organization, where institutional learning and memory thrive.

Internal Technology Leadership

THE McKINSEY 7S FRAMEWORK

The essence of the McKinsey's 7S model is that a firm is the comprehensive sum of its parts, and the internal dynamics of an organization clearly determine that organization's ability to compete, the premise being that both the strategy and the structure of the organization determine the management's effectiveness. The McKinsey 7S model attempts to create an awareness of the factors that, when utilized together, will assist in the formation of an organization that is greater than the sum of its parts. The hub and spokes unite the seven factors, as can be seen above. The factors are defined in the Table
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SEVEN FACTORS OF THE McKINSEY 7S FRAMEWORK

Component of the 75 framework Strategy Definition Strategy can be defined as the determination of a course of action to be followed in order to achieve a desired goal, position or vision.
An organization's structure is the interrelationship of processes and human capital in order to fulfil the enterprise's strategic objectives. The organization's information systems and infrastructure Human resources management. Corporate style is a synthesis of the leadership philosophy of executive management, the internal corporate culture generated, and the orientation the organization adopts to its markets, customers, and competitors. The unique or distinctive characteristics associated with an organization's human capital. The concepts that an organization utilizes to drive towards a common goal through common objectives and a common value set.
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Structure

Systems Staff Style

Skills

Shared Values

The Alignment of Technology and Corporate Planning

The whole basis of technology formulation is the ability of the organization's executive to achieve alignment between the technology strategy and the strategy of the enterprise as a whole. The second key issue that organizations need to address in leveraging technology towards reaching a position of market space leadership is their ability to manage their internal structural dimensions, generally characterized by a company's organizational chart. Structure - Organizations must ensure that their structural characteristics facilitate their ability to be flexible and agile enough to effectively and efficiently meet the needs of their markets as they change. Systems - In developing an e-strategy, one of the hidden strength an organization can create is a flexible systems infrastructure. The three major dimensions of technology infrastructure are: Enterprise Resource Planning (ERP) systems - ERP systems can help cut costs across the value chain by reengineering their processes. Data warehousing - Data warehousing can be seen as the basis of a knowledge repository that, when used effectively, enables cost reduction strategies to be identified, added-value services to be achieved at a manageable cost, and the delivery of an improved data effectiveness within the organization. Knowledge management knowledge management, is an area that can be defined as the formal management of an organization's knowledge resources.
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Staffing - Human capital is the bedrock of any organization. As organizations evolve towards becoming knowledge-based, the value of an organization's intellectual assets cannot be overstated and magnified by a scarcity of IT skills. So, outsourcing has been a trend in many organizations. Skills - The two skills that form the pillars between which the Information Systems structure is supported are the technical skills and relationship management skills. Style can be defined as 'characterization of how key managers behave in achieving the organization's goals, and also the cultural style of the organization'. Managers succeed and fail in inspiring peak performance, not only according to their ability to appreciate the values and motives of those they direct, but also according to their willingness to align their own managerial styles to the personal, situational and organizational environment. The bottom line for every effective manager is to deliver results. Since management is also an art, every manager has a personalized way of doing things. . Shared values - can be defined as the significant meanings or concepts that an organization utilizes to drive towards a common goal through common objectives and a common value set. Key to achieve these are the driver for flexibility in process, for lower transaction.

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Value Chain and E-strategy

The intensity of information in the value chain and in the product offers some clues to the role of e-commerce in an industry. Industries that have high information intensity are much likely to develop quickly into e-commerce than those that do not. An industry with information intensity, like the computer business, is much more likely to depend on ecommerce than one with low information intensity, like the sand and gravel business. Value chain activities are the things that the company does to design, produce, sell, and service products. Typical value activities for a manufacturing firm would be things like: Gathering customer needs Designing products Purchasing materials Producing products Promoting products Selling products Servicing products Servicing customers

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Assessment of Information Intensity

Assessment of the intensity of information in the value chain and value activities takes the next priority. The industry that has high information intensity in the value chain would have characteristics like those listed below: . A large number of direct suppliers or customers A complex product line A product that needs a lot of information to sell A product composed of many parts Many steps in the production process A long order fulfillment cycle time.
Next, if there is high information intensity in the products of your industry, it is reasonable to adopt e-commerce. Characteristics of high information intensity in the product would be a product that: 1. Provides information 2. Involves information processing 3. Requires the buyer to process a lot of information 4. Has high user training costs 5. Has many alternatives uses. Most of the early adopters of e-commerce have come from industries that would score highly if rated on the information intensity scale; those with low scores have not participated so far. Software business embraced the Web from the beginning and today, much of their business is conducted online.

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The commerce value chain

As shown in Figure, we have a very general value chain for Internet commerce. This value chain is focused on the interactions of a business with its customers. The details will certainly be different for different businesses (and for some different business models), The components of this general value chain are the following: Attract customers by means of advertising and marketing; invite and retain the interests of the customers; Interact with customers by means of sales, and convert their interests into 'orders'; Act on customer instructions and manage orders such as order capture, payment and fulfilment; React to customer requests and involve in customer service and offer technical support.

1. 2. 3. 4.

Looking at the value chain for a business helps to define areas of focus such as what the business is best at, or where the most emphasis should be given. Even in businesses that appear to be very similar, differences in emphasis can have major effects, both for internet commerce and for more traditional forms.
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Components of commerce value chain

Attract customers or the catchword today is addict' the customers. This component of the generic Internet commerce value chain is to attract customers. By this we mean, whatever steps we take to draw customers into the primary site, whether advertisements on other websites, e-mail, television, print, or other forms of advertising and marketing. The point here is to make an impression on customers and draw them into the detailed catalogue or other information about products and services for sale. Interaction - By this we mean, turning customer interest into orders. purchase is generally content oriented and includes the catalogue, publication, or other information available to the customer on the Internet. The content may be distributed by different mechanisms, such as the World Wide Web or e-mail. In some cases, there may be links between Internet commerce and contents distributed by other media, such as CD-ROMs. Editorially, contents may change infrequently or frequently. Content may be static or dynamic. Static content typically consists of prepared pages, such as those from a catalogue, that are sent to a client upon request. These pages must be recreated and updated whenever the information on them changes. Dynamic content, on the other hand, is generated at the time of the request, drawing upon one or more information sources to produce an appropriate page of information for the client. Some sources of information for dynamic content include databases, such as a parts database with pricing information, the capabilities of client software, such as what graphic formats can be used or even who the clients are, or what organizations they are with. Dynamic content is often used when the editorial content changes frequently, or when the natural storage medium for the information is a database, or when the information is used for multiple purposes.
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Act on customer instructions The next component in the commerce value chain is to act. Once a buyer has searched through a catalogue and wishes to make a purchase, there must be a way to capture the order, process payment, handle fulfillment and other aspects of order management. Order processing. Often a buyer wishes to purchase several items at the same time, so the order processing must include the ability to group items together for later purchase. This capability, sometimes called a shopping cart in the case of retail transactions, usually includes the ability to modify the contents of the shopping cart at any time. Thus, the buyer is able to discard items, add new ones, change the quantities, and so on. When the buyer is ready to complete the purchase, it is often necessary to compute additional charges, such as sales tax and shipping costs. The order processing system then presents the buyer with an itemized order form including all charges, so that the buyer can pay for the items. Payment. Depending on the terms of the order, the buyer may pay for it (or provide payment instructions) as part of the order capture. Once an order is finalized, the buyer can make the payment. As in the real world, there may be many ways to pay for an item. Some of the methods may be online analogues of those found in the real world: credit cards, purchase orders and the like. Other methods of payment may exist only on Internet commerce, using new technologies developed especially for a networked system. For example, in an online publishing system, it may be feasible to charge a small amount for a single magazine article, rather than requiring someone to purchase the entire magazine. The most important property of an online payment system is that the seller can use it to collect payment from the buyer. Credit cards are commonly used for consumer retail transactions, but businesses often buy from each other using purchase orders.
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Fulfillment.- When the order has been placed and the payment made (or at least a satisfactory promise of payment). The next step is fulfilling the order. How that happens depends on the type of thing purchased. If the item ordered is a physical good (sometimes called a hard good), it will be delivered to the buyer. The order is usually forwarded to a traditional order processing system, with the result that someone picks up the object, packs it, and ships it. In this case, the online commerce system must have a method for forwarding orders. This step could be as simple as printing out or faxing an order form for a person to handle, or it may use a more complicated interface, such as EDI, with another computer system. The precise mechanism, of course, depends on how orders are handled by the rest of the business. A second kind of order is a request for a service to be performed in the real world. For example, one might order a singing telegram online. Although the fulfillment happens in the physical world, this is a service, not a physical good. For our purposes, however, we can think of these as being handled like physical goods. The order is passed on to a system or a person who fulfils it. The third kind of order is more closely tied to the Internet commerce system. We call this category, digital goods. Digital goods include a wide variety of online delivery, including software that is delivered online, magazine or news articles, reports, access to a database for a period of time, and so on. React to Customer Inquiries Finally, after a sale is complete, the customer may have some questions or difficulties that require service. Although many questions require a person to answer, others can be answered with the appropriate information system. For example, a transaction system that keeps track of all of a customer's purchases, can generate a statement summarizing them. Customers who wonder whether or not their orders have been shipped, might check back with the system.
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A more complicated example is how the system handles a failure when delivering a digital good. Suppose that a customer buys a software package online. While the software is being downloaded to the customer's computer, an error in the network causes the download to fail. What can the customer do? Clearly they should not buy the item again, so they need some "proof of purchase"-such as a receipt-that the fulfillment server will accept in order to allow the customer to attempt another download. Using people to answer customer service calls can be very expensive, so it is worth investing in systems that eliminate questions that do not require the capabilities of a person. It is very important to design the system to cater to the needs of the customer in solving any problem that may arise in the process of transaction.

Quantitative approach for e-strategy

Speed, round-the-clock availability, and security are the most common indicators of quality of service of an ebusiness site. Management faces a two-fold challenge. On the one hand, companies must meet customer expectations in terms of quality of service. On the other hand, companies have to keep site costs under control to stay competitive. Therefore, capacity, reliability, scalability, and security are key issues to e-business site managers. E-business sites are complex computer-system architectures, with multiple interconnected layers of software and hardware components, such as networks, caching proxies, routers, high speed links, and mainframes with large databases. The nature of e-business workload is also complex due to its transactional nature, secure requirements, payment protocols, and the unpredictable characteristics of service requests over the Internet. Planning the capacity of e-business sites requires more than just adding extra hardware. It requires more than intuition, ad hoc procedures, and rules of thumb. There are many possible alternative architectures and one has to be able to determine the most cost-effective architecture. This is where the quantitative approach and capacity planning techniques for e-businesses comes into play.
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Planning the E-commerce Project

A successful business plan for an e-commerce initiative should include the following activities. 1. Identifying the initiative's specific objectives 2. Linking objectives to business strategies 3. Managing the implementation of business strategies 4. Overseeing the continuing operations of the initiative, once it is launched. In setting the objectives for an e-commerce initiative, managers should consider the strategic role of the project, its intended scope, and the resources available for executing it. Common objectives that a business might hope to accomplish through e-commerce could include increasing sales in existing markets opening new markets serving existing customers better identifying new vendors coordinating more efficiently with existing vendors recruiting employees more effectively. Resource decisions for e-commerce initiatives should consider the expected benefits and expected costs of meeting the objectives. These decisions should also consider the risks inherent in the e-commerce initiative and compare them to the risks of inaction (a failure to act could concede a strategic advantage to competitors).

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Linking objectives to Business strategies

Businesses can use downstream strategies which are tactics that improve the value that the business provides to its customers. Alternatively, businesses can pursue upstream strategies that focus on reducing costs or generating value by working with suppliers or inbound logistics. Although the Web is a tremendously attractive sales channel for many firms, companies can use e-commerce in a variety of ways to do much more than selling: they can use the Web to improve their business strategies and their competitive positions. e-commerce opportunities can inspire businesses to undertake activities such as: Building brands Enhancing existing marketing programs Selling products and services Selling advertising Improving after-sale service and support Purchasing products and services Managing supply chains Operating auctions Creating virtual communities and web portals In the early days of e-commerce-businesses that had good ideas could start a business activity on the Web and not face competition. Successes and failures were measured in broad strokes. A company would either become the amazon. com or the eBay of its industry, or it would disappear, either slipping into bankruptcy or be acquired by another company. As e-commerce is now beginning to mature, more companies are taking a closer look at the benefits and costs of their e-commerce projects.

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Cost benefit analysis of e-commerce project

Measuring both benefits and costs is becoming more important. A good business plan will set specific objectives for benefits to be achieved and costs to be incurred. In many cases, a company will create a pilot website to test an ecommerce idea, and then release a production version of the site when it works well. These companies must specify clear goals for the pilot test, so that they know when the site is ready to scale up

Measuring Benefit Objectives

Many companies create websites to build their brands or enhance existing marketing programs. These companies can set goals in terms of increased brand awareness, as measured by market research surveys and opinion polls. Companies that sell goods or services on their sites can measure sales volume in units or dollars. Challenge is in measuring is that the increases in brand awareness or sales can be caused by other things that the company is doing at the same time or by a general improvement in the economy. A good marketing staff or outside consulting firm can help a company sort out the specific causes and effects of marketing and sales programs. Companies that want to use their web sites to improve customer service or after-sale support might set goals of increased customer satisfaction or reduced costs of providing customer service or support. Supply chain managers can measure supply cost reductions, quality improvements, or faster deliveries of ordered goods. Auction sites can set goals for the number of auctions, the number of bidders and sellers, the dollar volume of items sold, the number of items sold, or the number of registered participants. (The ability to track such numbers is usually built into auction site software)
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Measuring Benefit Objectives contd.. Virtual communities and Web portals measure the number of visitors and try to measure the quality of their visitors' experiences. Some sites use online surveys to gather these data. However, most settle for approximations provided by measuring the length of time that each visitor remains on the site and the frequency of his visits. Common measures of benefits provided Surveys or opinion polls that measure brand awareness. Change in per unit sales volume.

MEASURING THE BENEFITS OF E-COMMERCEINITIATIVES

E-commerce initiatives Build Brand Enhance existing marketing programs

Improve customer service

Reduce cost of after sales support Improve supply chain operation Hold auctions

Customer satisfaction surveys, the number of customer complaints.

Quantity and type (telephone, fax, e-mail) of support activities. Cost, quality, and on-time delivery of materials or services purchased. Quantity of auctions, bidders, sellers, items sold, registered participants; dollar volume of items sold. Number of visitors, number of return visits Per visitor, and duration of an average visit.
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Provide portals & virtual communities

No matter how a company measures the benefits provided by its website, usually the measurements are converted to dollars. Having the benefits measured in dollars lets the company compare benefits to costs and compare the net benefit (benefits minus costs) of a particular initiative to the net benefits provided by other projects. Although each activity provides some value to the company, it is often difficult to measure that value in dollars. Usually, even the best attempts to convert benefits to dollars yield only rough approximations.

Measuring Cost Objectives

At the first glance, the task of identifying and estimating costs may seem much easier than the task of setting benefits objectives. However, many managers have found that information technology project costs can be as difficult to estimate and control as the benefits of those projects. Hardware & Software - Since Web development uses relatively new hardware and software technologies, managers have little experience on which they can make estimates. Most changes in the cost of hardware are on the decline, but the increasing sophistication of software provides an ever-increasing demand for newer hardware. This often yields a net increase in overall hardware costs. Human Resource - In addition to hardware and software costs, the project budget must include the costs of hiring, training, and paying the personnel who will design the website, write or customize the software, create the content, and operate and maintain the site. As more companies build e-commerce sites, people who have the skills necessary to do the work are demanding increasingly higher compensation. Technology - The initial cost of building an e-commerce site is not the whole story, since Web technology continues to evolve at a rapid pace, to remain competitive, most businesses will want to take advantage of what that technology offers. The annual cost to maintain and improve a site once it is up and running, will be between 50 per cent to 100 per cent of its initial cost.
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Comparing benefits to costs

Most companies have procedures for an evaluation of any major expenditure of funds. These major investments in equipment, personnel, and other assets are called capital projects or capital investments. The techniques that companies use to evaluate proposed capital projects leads to a comparison of benefits and costs. If the benefits exceed the cost of a project by a comfortable margin, the company invests in the project. A key factor in creating a business plan for e-commerce initiatives is the process of identifying potential benefits (including intangibles such as employee satisfaction and company reputation), identifying the costs required to generate those benefits, and evaluating whether the benefits exceed the costs. Companies evaluate each element of their e-commerce strategies using this cost/benefit approach. A simplified of the cost/benefit approach is represented in the figure.

Although most companies evaluate the anticipated value of ecommerce initiatives in some way before approving them, many see these projects as absolutely necessary investments. Thus, they might not subject them a close examination as they do to other capital projects. These companies fear being left behind as competitors stake their claims in the online market space. The value of early positioning in a new market is so great that many companies are willing to invest very large amounts of money with no near-term prospects of profit.
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