March 6, 2000

Printer ready

Seeking The Deeper Path To E-Success
Companies that use a combination of E-business best practices--and value commitment as much as investment--are realizing returns in terms of more customes, lower costs, and market creation

By Eric Chabrow

Related links:

sidebar: Buying A Piece Of E-Business: Eastman Invests In Partners sidebar: The ASP Approach: Experience Equals New Products sidebar: Who Calls The Shots? A New Management Matrix Emerges The Keys To E-Transformation (2/28/00) Industries Must Change Or Die (2/21/00)

And from our sister publications:

pubname Tune Up: Businesses adjust their strategies (1/3/00)

TechEncyclopedia

Need a definition of a technology term? Look it up here:

Send Us Your Feedback

n the foothills of the Smoky Mountains in eastern Tennessee, Larry Downes came to preach the gospel of the Web. On that February day a year ago, some 300 managers packed the auditorium at Eastman Chemical Co. to hear the co-author of Unleashing The Killer App: Digital Strategies For Market Dominance evangelize the power of the Internet.

In many respects, Downes was preaching to the choir. The Kingsport, Tenn., maker of chemicals, fibers, and plastics has been an IT innovator in the chemical industry; for instance, it was an early adopter of SAP's enterprise resource planning system. Yet Downes' testimony was a revelation about the power of the Net. "It was sort of a wake-up call, a realization that the Internet is big," recalls Mark Klopp, Eastman's director of digital business ventures.

A month later, Eastman hosted Dell Computer founder Michael Dell, who also exhorted top executives to transform their company in pursuit of E-business success. Eastman made the leap of faith. The company selected an E-business strategy team of top executives who made a pilgrimage to E-business success stories such as Cisco and Dell, as well as to some significant Net startups. By mid-year, Eastman began a crusade to identify inefficient industry processes and then invest in E-business ventures aimed at resolving them (see sidebar story, Buying A Piece Of E-Business: Eastman Invests In Partners). Last month, Eastman launched an Internet logistics service in partnership with a 10-month-old dot-com, which also involved a considerable investment.

Eastman is an example of a company deeply committed to E-business. There's no special formula for E-business success--inspiration can get the ball rolling, and, of course, there's nothing like cash to give a project momentum. Yet, the highest E-business achievers, like Eastman, are companies that combine above-average IT spending with a deep commitment to E-business best practices, according to a newly released study by InformationWeek Research. The Redefining Business 2000: E-Success study, based on 600 interviews with IT and business-titled executives, reveals significant business improvements among companies that adopt at least three of four ambitious E-business practices: implementing new customer-facing information systems; transforming legacy electronic processes to E-business models; refining value or supply chains; and, as Eastman demonstrates, reinventing corporate culture around E-business.

Three-quarters of the "deeply E-committed" companies say their Internet initiatives give them a competitive advantage, improve customer satisfaction, reduce operating costs, generate new sources of revenue, create new markets for products, and most important, increase profits. But those companies aren't typical--many companies are still in the earliest stages of E-business strategy. And there's still no consensus on how best to approach E-business. Is spending more the magic bullet, or is there a mix of business practices that can make an enormous difference? What role does partnering play in achieving E-business success? Acquisition? Spin off? These are issues and strategies even the most advanced E-biz-ambitious companies are grappling with.

One interesting insight generated by the survey is that no significant differences exist in the E-business perspectives and initiatives of IT managers and business-titled department managers. Both business and IT managers--the survey interviewed 300 of each--believe that IT managers are leading the way in E-business technology decisions. Even in companies that have separate E-business departments, budgets, and managers, differences in job functions and titles no longer imply divergent views or opinions about business goals or methods.

For example, the overwhelming perception among business and IT executives about implementing E-business solutions is that they create or maintain a competitive advantage (79%). Also, four out of five managers--business and IT--claim that E-business has boosted their customers' satisfaction. These perceptions will undoubtedly spur increased investment in E-business initiatives, at least in the near term.

However, those perceptions are dangerously naive, according to at least one researcher. Employing an E-business solution is more like anteing up to play the game rather than gaining an edge. "There's a lot of buzz about the Internet giving businesses a competitive advantage, but I don't know if businesses can claim victory yet. The battle's still on," says Mani Subramani, an assistant professor of E-commerce and knowledge management at the Carlson School of Management at the University of Minnesota in Minneapolis. "All the traditional measures come into play in the E-business arena, such as the quality of business, the brand, the quality of fulfillment processes. They're as important to competitive advantage as a Web site."

In terms of overhauling a company's strategy, the single most-effective effort is IT's more active role in the overall business, cited by 91% of the survey respondents. Using IT to create greater customer value was second, cited by 84% of respondents. More dramatic changes to a company's business model were cited by a smaller but still significant percentage, changes that range from partnering with dot-com companies (37%), to acquiring E-businesses to improve offerings (33%), merger or acquisitions (32%), spinning out E-businesses (30%), and equity offerings or IPOs (12%).

Whatever the approach, companies that meld E-business models with traditional ones are well-positioned to compete successfully because they've established brands, supply chains, and customer relationships. "If they're aggressive in using the capabilities of the Internet to transform their businesses, the bricks-and-clicks should beat out the clicks alone," says Booz, Allen & Hamilton senior partner Joe Nemec, who oversees the New York management-consulting firm's E-business initiatives.

The process of changing and evolving business models is unlikely to be smooth, even for well-managed companies. While business issues are significant, survey respondents say they trail the challenges posed by rapid changes in technology (83%) and adjusting to the pace of change (81%). Issues such as understanding customer needs and managing cultural changes are somewhat less pervasive, but remain a factor for more than two-thirds of all executives surveyed.

continued...page 2, 3

Illustration by Bryan Leister

Back to This Week's Issue
Send Us Your Feedback
Top of the Page

---