Change in our Traditional Business
Higher-level business and information systems (IS) education is in a state of change, as the traditional curriculum does not coincide with business realities. There is also a lack of integration of all the “traditional” functional areas (e.g. accounting/finance, marketing, operations, management) in relation to evolving overall business models and strategies (Selen, 2001). It is not surprising that most of these new organization forms were conceived and launched by entrepreneurs.
While much attention has recently been focused on the problems facing Internet start-ups, the challenge of e-business affects a much broader constituency of organizations. For established companies, the key challenge is one of change. However, companies must also deal with a paradox in e-business change. As the “dot.com” crash showed, there is much strength in “bricks and mortar” companies. Evolving a new business model based around “e-enablement” must therefore avoid the “baby and bathwater syndrome”.
E-commerce is not the kiss of death for big, traditional brick-and-mortar business. However, it does means that business-as-usual is forever changed. Adaptation is imperative for survival.
E-commerce is the exchange of value electronically across enterprises or between enterprises and customers. Technologies such as Internet protocol (IP), web browsers, web application servers, and hypertext markup language/extensible markup language (HTML/XML) have made it possible. E-commerce creates new business life forms such as dot.com startups, new food chain intermediaries such as application service providers (ASPs), and innovative commerce transactions such as online auctions. Comparison between the dot.com companies and traditional business reveals two very different traits. Dot.com companies are characterized by little-to-no earnings and stratospheric market caps while traditional business are the exact opposite. What is evolving is a hybrid, called clicks and mortar.
Five Levels of Evolution
The evolution from traditional business to E-commerce means undergoing five levels of change.
o Level 1 (static) is merely putting information on the Internet. The customer grabs data from the web site with this low cost, HTML-based delivery methodology.
o Level 2 (interactive) is dynamic information delivery with 2-way communication. Customers can search catalogs for goods, check status of orders, and personalize content with such online merchandising.
o Level 3 (transaction) is integrating secure financial transactions into core systems like business-to-business (B2B) ordering, provisioning, billing, and payment. There are analytical tools and capabilities for personalizing information. This translates into better customer service and offerings.
o Level 4 (transformational innovation) is E-business where new products, services, and brands become available as offerings. Changes to the industry value chain also occur. Interaction is driven by the lifetime value of the customer. Highly personalized service across all delivery channels become routine. It requires both front end and back end system and business integration where both operate as one enterprise.
o Level 5 (self-adapting organization) is E-business plus. This is characterized by extended, leveraged knowledge management about partners and customers; continuous learning in decision making; customer value management; and value chain management.
Can Traditional Businesses Compete?
Traditional businesses can effectively compete for E-commerce because they are established. They have “the goods” when it comes to production and delivery capabilities. They also own “the content” when it comes to intellectual property, databases, entertainment, and well-known brands. They have a proven track record for working together with suppliers, channel partners, and complementary business partners. Their deal making skills, capabilities, and capacity are known from previous successes. Furthermore, they have the brainpower of skilled people and a system for managing customer relationships and production. Finally, their customer base is the most important asset of all.
Can Traditional Businesses Survive?
In 1998, E-commerce captured one percent of the US gross domestic product (GDP) of $32 trillion. By 2010, estimates for E-commerce are less than seventy percent. E-business is where the real action will be. Therefore, survival is a matter of traditional businesses making an evolutionary leap into the electronic medium. They must develop a new business sense, grow smarter, and add new capabilities conducive to the Internet. The business climate has just started to change and there is time to adapt a clicks and mortar strategy.
Growing smarter means
• using E-commerce for strengthening existing relationships and making new ones;
• creating a digital nervous network with reactive, intranet capabilities and systems;
• building intelligent, multi-channel relationship management processes, and
• applying advanced decision analytics that define the new E-business instinct.
Survival Plan and Strategy
Surviving and thriving the coming of E-commerce means executing a strategic plan. The plan should have the following steps:
• Empower a Chief E-commerce Officer who can pull together lines of business and lead them in one direction.
• Implement basic E-commerce capabilities immediately.
• Leverage corporate assets to do things that the dot.com challengers can not.
• Inspire a climate of creativity, technical sophistication, and optimism for transformation.
• Expect reinvention to be gradual but timely and with the continual motivation to succeed.
Change from Traditional way
The web doesn't change the importance of relationships in business, it just makes business relationships easier to develop and manage. All those things a company have been doing offline to build relationships and reputations now have online equivalents that are cheaper and more scalable.
To eliminate skepticalism from the above statement here are few examples of traditional business relationship-building tools and their more-scalable online equivalents:
Traditional Tool: Company Calendar
Online Equivalent: Twitter
Insurance companies, dentist office and accountants love to print calendars for their customers. They're nice gifts and they're a way of keeping the firm's name in front of customers all year. Of course, the firm ends up paying thousands of dollars for the printing and the mailing, and most people end up throwing out the calendars.
In the online world, there's a better way to keep your name in front of people. It's called Twitter: By creating an active Twitter account that provides useful information about your industry, you show-up regularly to your followers, provide useful information, and spend no money.
Traditional Tool: Golf Outings With Prospects
Online Equivalent: Facebook
In the traditional world, golf is a popular way to get to know and build trust with prospects. After all, if you see someone struggle through 18 holes, you see different sides of that person, which helps you understand the kind of business partner they'll be. Facebook is a far cheaper and less time-consuming way of getting to know a potential business partners. Just like on the golf course, you get a sense of what's important to them and how they spend their time outside of the office.
Traditional Tool: Chamber of Commerce Membership
Online Equivalent: Same, but companies get more out of it.
Online tools don't replace real-world participation in organizations like your local chamber of commerce, but they do allow you to get more out of them. Instead of going to a chamber event and spending time with the two or three people you know well, you can go to the chamber event and have meaningful interactions with the dozens of people you've connected with and built loose relationships with over Twitter, LinkedIn and Facebook. These relationships give your business more visibility in the community.
Traditional: Word-of-Mouth Hiring Recommendations
Online Equivalent: Same, except the word-of-mouth happens on Twitter, Facebook and LinkedIn.
In the traditional world, you might put ads in the newspaper when you want to hire somebody, but you know that your best recommendations will come from friends-of-friends. That's also true online -- only that online there's more scale. In the offline world you might tell five of your friends about a job. In the online world, a tweet about a job opening might be seen by 50 people who know you, and know what kind of person would fit your job opening.
Traditional Tool: Monthly Newsletter
Online Equivalent: Blog
Many small businesses send out monthly newsletters to keep their customers and potential customers up-to-date. The printed newsletter helps maintain relationships, but it's a hassle to pull together, and costs hundreds of dollars. You can do the same sort of relationship maintenance with a blog. A blog is cheaper, and it's not as hard to produce. Plus, with a blog, your articles get indexed by Google and show up in search engines, thus building new relationships.
Traditional Tool: Client Birthday Cards
Online Equivalent: Same, except with tools like Facebook they're far easier to manage.
Birthday cards are a great way to nurture relationships -- only you need to be very organized to pull them off. Not only do you need to know when you friends' birthdays are, but you have to remember the birthdays and actually write notes. Facebook solves this problem. If you simply subscribe to Facebook's bithday email, you'll get alerts of all the birthdays of the people you're connected to a few days before they happen. That means you can use the time you would have spent keeping track of birthdays to send more and more thoughtful notes. In other words, you can have more personal interactions with a larger group of people.
New Business Models for the Era of Rampant Change, Knowledge Enterprise, Pervasive Globalization, and Increasing Complexity
Why New Business Model?
The old principles no longer work in the new economy. Businesses have reached the old model's limits with respect to complexity and speed.
The real problem is "a ruinously dysfunctional mismatch between today's business environment and the classic business model... Quite simply, the wrong model may transform a company into the vehicle of its own death.
Changes That Call For a New Business Model
o Business environment: It evolves to one with profoundly more complex industry dynamics and fading industry boundaries.
o Competition: Today, the basis of competition is capabilities and knowledge.
o Value Creation: The value-added potential of many businesses is shifting toward knowledge, systemic innovation, and service-based activities.
o Extended Enterprise: Virtual integration, partnerships, strategic alliances and joint ventures, part of the extended enterprise, are becoming common parts of competitive strategy.
Web sites are under continual change and renovation. Experimentation and testing what works is “normal” on the Web but must be done at an aggressive pace. It is important to know where the business is going and how it is using E-business to either supplement existing commerce or establish new business. Be aware of the following common mistakes made when entering E-business:
Underestimating the marketing required to drive attention to your web site – also known as the “If they build it, they will come” fallacy.
Not getting partnership/supply chain relationships dealt with from the beginning.
Underestimating the E-business response volume and the absolute demand for supporting 24-7 infrastructure.