IT managers are often excluded from making the key e-business
decisions, but the Economist Intelligence Unit has found ways for
them to become more influential in business transformation. Guy
Campos explains
A very odd thing is happening in e-business, according to a
report released by the Economist Intelligence Unit (EIU) last
week.
A survey of 327 international companies found that, while at
many companies the IT departments did not fully understand business
strategy, there were some exceptions.
The report said, "In many cases, a savvy and involved IT
director is being asked to lead the e-business project."
What did these IT directors know about business that set them
apart from those who were not so highly regarded? One key finding
is that e-business leaders know that they are not simply trying to
make the company's existing business more successful.
They know the Internet revolution creates entirely new business
opportunities, such as moving into markets that were previously out
of reach and extending a company's range of products and
services.
To illustrate its point, the EIU has developed a three-stage
model of e-business. Stage one, dubbed e-commerce, amounts to
putting the marketing department on the Internet.
"For many, the Web is simply a platform to strengthen the brand
or drive in-store sales. This effort aims to expand existing
business by cross-selling and up-selling to customers and
prospects," the researchers said.
Stage-one companies use the Web for sales, marketing,
order-taking, delivery, payment, customer service and post-sales
support.
Stage two is to put business processes online. This appeals
particularly to companies that sell to business.
Stage-two companies use the Web to inform users and suppliers
about inventory levels quickly. They use it to publish up-to-date
product catalogues. They also use it to cut the cost of raw
materials, components or contracted services, speed-up delivery and
payments, cut inventory and improve sales forecasting, allow buyers
to assemble and submit orders and make customers more knowledgeable
about how products are made.
Value chain
Stage three, described as value chain recreation, is rethinking
the way the company works with suppliers and customers. The Web
makes it easier to manage outsourced functions, making it possible
to contract out core manufacturing and service delivery in the
manner of Dell Computers.
The Internet makes it easier to take on more functions for the
customer, in the way that FedEx in the US has gone from providing
transport services to providing warehousing and inventory
management for some customers.
If IT managers are not getting the right e-business experience
at their employers, they can always jump ship. So which companies
should IT directors work for if they want to go beyond e-commerce
and business-to-business e-commerce into business
transformation?
One answer is to work for computer services firms because they
are most likely to expect to change their business in the next two
years and to avoid manufacturing companies because they are least
likely to expect to change.
Another more sophisticated answer is to use a checklist of
factors that distinguish innovators and early adopters from slow
movers. The EIU found that fast-moving companies have a number of
traits in common.
Fast movers are more likely than slow movers to expect to
generate more than 20% of their sales over the Web in three
years.
They plan to use the Web to enter new markets. They are also
more likely to use speed of product development; increase in market
share; and cross-sales to current customers as yardsticks for
measuring the value of e-business investment.
Fast movers also acquire people with specialist e-business
skills, use supply-chain excellence as a competitive weapon, and
integrate information flows to make their customers more
productive.
Another factor to look for, or to create, in your employer is a
recognition that Web-enabling an organisation means changing the
way it works.
The authors emphasise that change requires strong leadership
from the top but senior executives do not understand the issues.
They need to have a mentor to teach them about the Internet.
Goal sharing
There also needs to be an understanding that systems development
should be done in months if not weeks, not years. The increasing
use of middleware makes this possible, the report said.
One useful practice that requires no technical knowledge also
emerged at some successful firms. This was the promotion of
goal-sharing or cross-functional partnerships, which in practice
means getting buy-in from sales staff at the existing business.
For instance, at zoom.co.uk - the e-business arm of the company
that owns clothes retailers Burton and Top Shop - retail sales
staff get commission for online sales made by customers living in
their catchment area, leading them to recommend the Web site.
Another success factor is that Web-savvy companies regard their
e-business plan as a form of research and development whose costs
should be written off over years rather than as an immediate
expense.
Successful e-businesses regard the cost of not taking e-business
seriously as too high, a view that can be recommended to IT
directors when considering their careers.
E-business Transformation by the Economist Intelligence Unit is
available on 020-7830 1007, priced £425.