InformationWeek
Defining The Business Value Of Technology
February 8, 1999
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| Inside the IT Value Chain |
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Business Value In Communication
Integrating a chain becomes the best way to interact with customers
By Rusty Weston
nalog ways of communicating remain reliable. A phone call, a fax, or an overnight express delivery are effective ways to interact with customers, suppliers, or business partners, whether they're in Miami or Madrid. But for competitive reasons, increasing numbers of businesses are turning to electronic value chains as a way of keeping communications open and perpetual.Value chains deserve their high-gloss title. In all, 62% of IT managers doing business in multiple countries use electronic networks, and another 17% plan to come online in 1999, according to a recent InformationWeek Research survey of 450 IT managers in five countries. But nearly two-thirds of these digitally savvy companies conduct electronic transactions in their host country only. One in three have global value or supply chains.
As you might expect, the obstacles to setting up and running global value chains are nothing to sniff at. Can these electronic networks help organizations solve challenges such as language differences, currencies, multiple time zones, and divergent culture practices?
The key is "listening to what your customers want," says Lisa Richard, VP of strategic business planning at Toshiba America Inc. in Irvine, Calif. Richard's organization constantly updates its value chain--an extranet that links its electronic imaging sales and distribution team to its resellers in the United States and Latin America.
Toshiba's extranet is prototypical of this technology. It uses the Internet, which lets customers log on from anywhere without custom client software. Toshiba's clients can view the site in their native language, thanks to software that translates the content into Spanish. The currency solution isn't nearly as high-tech: Every transaction is made in U.S. dollars.
Now that Toshiba's customers receive information virtually on demand, Richard says the extranet has raised everyone's expectations. Her solution: Richard's team will add 50 functionality enhancements to its extranet this year. She has learned that the value chain can satisfy customers "as long as you're dynamic and staying ahead of the curve."
Creating a global value chain isn't primarily a technology problem. More than half the respondents to the InformationWeek Research survey agreed their biggest challenges are finding the right IT personnel and training them. Other key issues include international legal or tax matters, telecommunications reliability, and overcoming language and cultural differences. Though topical, the euro conversion and currency instability rated low on this list of concerns for IT managers conducting business in multiple countries, among whom only 4% said they anticipated facing no obstacles.
Can value chains protect a company from a market downturn? That's doubtful. Using 1998 as an example, half the survey respondents said the market turmoil in Asia, South America, and Russia had no impact on their organization. There was also an even split in the number of companies that either increased or decreased the number of countries in which they operate. Another 8% conceded the market turmoil had disrupted product availability from suppliers, while 7% said the macroeconomic problems forced them to find new suppliers outside their traditional channels.On the upside, companies that push ahead with value chains find they benefit from cost savings (78%), shorter product cycles and faster delivery times (72%), and improved customer satisfaction (69%). Given such pervasive results, it's not surprising that these organizations give high marks to the importance of electronic purchasing and sales applications, scoring such applications a 7.8 average on a 1-to-10 scale, where 10 is extremely significant. Half of the respondents rated it an 8 or higher.
Tellingly, 80% of the IT managers say their organizations plan to spend more money on their value chains in 1999. Only 2% plan to spend less than they did in 1998.
But one technology, at least for the near future, will not be replaced by the value chain. The telephone remains king for customer relations, according to the survey. Talking on the phone is rated much more important than electronic supply networks for buying and selling, but the fast-rising digital solution has already overtaken the fax and express delivery as strategic tools. A year from now, the phones linking your organization to its customers may well be carrying more data than audio communications.
Rusty Weston is managing editor of InformationWeek Research.
Illustration by Matsu
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