1999: eCommerce, eBusiness, ePanic
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Rick Dove, Paradigm Shift International, www.parshift.com,

I concede. Nostradamus really did know something when he predicted that bad stuff would happen on the cusp of the millenium. I scoffed until I realized that Y2k had the potential to make him right. But even then, I figured that it was just a lucky coincidence – until I realized what was really coming down. Y2k is small potatoes.
   Right now, Internet sites allow you to download individual songs and cut your own custom-made CD. Thompson Learning will let a college professor construct a custom text book chapter-by-chapter from the Internet. Another company will take your electronic text and return it as a hardcover book, in as few or as many copies as you'd like, and do it at a reasonable per-copy cost. You can dial in and buy postage, use your printer to put it on envelopes, and say goodbye to stamps and postage meters. And if you like playing the stock market, you can now do it all by yourself, without the middleman.
   These are just a small sample of the things that were not commonly available last year. You didn't even think about these things last year. These are not just new toys in the market. These are new business models that are restructuring who gets to grow and who has to fold up shop.
   Want to buy a car? A recent survey found that 40% of all new-car buyers used the Internet in the process, and 26% of late-model used-car buyers did likewise. The customer is gaining control in the dealer transaction.

Putting an online portal
in front of traditional business practices
is not what this is all about.

eCommerce became big reality in 1999. Coverage in business and trade publications went from the occasional novelty and curiosity article at the start of the year to a dominating share of many magazines by mid-year, and the theme had migrated from novelty to panic. Like watching an atomic bomb explode in silence on the horizon and marveling at the swirling, boiling cloud, until a few short moments later the wind and heat wave turns you and all the other spectators into ashes.
   Amazon had already shown the disruption eCommerce could bring to established markets when it restructured the landscape of book and CD sellers. Now Toys-R-Us is under siege by the upstart eToys. Stock brokers and banks are scrambling online or on their way to offline permanency. New low-cost diagnostics are bringing the nurse-practitioner into the doctor's health-care turf. Online education is selling quality and convenience at affordable prices, making that B-school MBA an anachronism suitable only for the leisure class.
   Webvan, with its 330,000 square foot warehouses, 50,000 stocked items, and on-time to-your-door delivery, will take your supermarket order through a web page and deliver it for the same price as the local market.
   CarsDirect takes your complete order on-line (it sold 1,500 cars in September alone), and with several hundred million dollars of new financing, intends to be the world's largest car dealer. Out of nowhere. Overnight. A lot of dealers are on their way to early retirement.
   Being first isn't enough. National Semiconductor put their business-to-business sales catalog online as long ago as 1995. Phil Gibson, director of interactive marketing, said in a recent Information Week article: "I'm glad we started as long ago as we did, but I'm terrified at how fast things are moving. I can look at any of my competitors' Web sites at any time and see something I haven't thought of yet."
   Putting an online portal in front of traditional business practices is not what this is all about. This is not a new tune for an old instrument. This is a completely new instrument that can play music never before heard, by musicians unschooled in the classic scores.
   General Motors' Mark Hogan tells Business Week "We've come to realize that if we don't move with Internet speed, we could become extinct." Is this more Saturn-like lip service to an idea you can't escape, or does someone besides Hogan really understand that? And do they all understand that "The challenge is deciding not just what projects to initiate, but how we may need to evolve our whole corporate culture..." as John Keast, VP Pacific Gas and Electric, is quoted in Information Week. Does the UAW have a clue?
   Meanwhile Jac Nasser is trying to morph Ford 2000 into something that addresses local markets, denying that this is a remodeling job; and Schrempp is trying to stabilize a DaimlerChrysler cultural gap, denying that anything is other than on-plan with the merger. These two have people in the back room poking around with web stuff too, but where's the strategy?
   Only a few short years ago, business was learning about the "voice of the customer." Now it has to learn about the "voice of the market," which speaks in real time and only on the web. eCommerce doesn't just sell product, it trades information – about what kinds of people want what kinds of products – now. In the last three years, the percentage of on-line Americans has risen from 14% to 41%. Next year it is expected to hit 50%.
   This is just the tip of the ice berg. Actually, it's just the tip of the business. eCommerce is only the front-end part. The part that connects customer to producer. eBusiness adds the back-end part. The part that is the producer.
   The semiconductor arm of Lucent Technologies just went live with an eBusiness implementation combining Oracle's ERP applications with a compatible home grown MES (manufacturing execution system) and order management system of their own.
   They have 10 plants scattered around the world, plus a few outsources. Work-in-process typically moves from plant to plant in successive stages of completion. To take an order and commit a delivery date they need to know what kind of plant capacity is available, and what kind of material inventory is on hand – in all plants, everywhere.
   It used to be a lot of phones calls, faxes, and emails, with people in different time zones, typically sleeping when you're working. A good situation got an answer in 24 hours. That's no longer good enough in the semiconductor business. A customer is on the phone and wants a commitment now. Not a manufacturer's promise. Not a salesman's wish. A commitment. "Can you produce what I need, and deliver it when I need it?" The wrong answer and he'll make another phone call to someone else; but he will call you back the next time. An incorrect answer, on the other hand, destroys trust and stops the phone calls.
   Lucent now has a web browser view that shows exactly the status of every bit and piece of material and every bit and piece of work-in-process across the entire enterprise, with 60-second accuracy. The web interface minimizes training: most people already know how to navigate through information space with a web browser. And everybody authorized has access to the same information.
   That wasn't enough for Lucent. They also capture every single production transaction as work-in-process is transformed into finished goods. When a schedule isn't met, they know why. They know really why. And because they know, they can fix it now.
   But that's just the start for Lucent. They're on the way to putting the customer in the driver's seat. Forget about purchase orders and blanket order releases, Lucent is being asked to operate directly off of their customer's MRP. Some still want to place orders, and they'll do that themselves through the same web-browser interface that lets anyone authorized interrogate capacity availability, monitor work-in-process, and issue changes.
   In the semiconductor business 5 to 10% of the fabrication capability is working on prototype runs. This is the real driver for making parametric production data available instantly through the web. Designers need to know exactly what happened with a test run, and they need to know it now, not tomorrow or next week. They also need a collaborative interface that can facilitate the interpretation of data and the resolution of design or process problems immediately, no matter where the collaborators are, no matter who issues their paycheck.
   Joint development projects are another eBusiness application in Lucent's plans: real-time collaboration and progress tracking among teams of remote designers and process experts.
   They're also moving dynamic pricing to the web. A customer who wants to pull deliveries forward can see for themselves how the prices change, finding an acceptable cost/time tradeoff based on contracted capacity commitments and uncommitted capacity availability.
   That's just the defensive price of entry into the eBusiness world. Everything is happening faster, but it's still the same old things happening. That's not sufficient. The offensive killer applications in the eBusiness world sneak up and change the whole business model.
   An eC/eB strategy is not built with the same bricks and mortar, the same business practices, and the same market view that brought yesterday's customers and yesterday's profits – no matter how pretty the weberizing. And a strategy isn't built with the same ideas that everyone else is implementing.
   Strategy builds on hard-to-duplicate activities and resources, and their interactions and combinations, so that it cannot be duplicated by another company. It builds on strength, uniqueness, and complexity to develop a sustainable advantage. In eBusiness this includes a brand image built by getting there first with a new business model, and dominating the market's mind share. Amazon is a case in point. eToys may well become a case in point.
   Being first is not enough, but it will build a dominate market position in the short run; and if the strategy is rooted in a hard-to-duplicate, and ever evolving, business infrastructure, it can be sustainable.
   How you don't do this: Hire any of the growing number of eBusiness technology implementers to build you a web site presence, backed up with the latest and greatest eBusiness connected infrastructure. They will do an excellent job of giving you the best that is commonly available, consistent with your willingness to invest and implement. For you and everyone else similarly willing.
   A technological approach gives you an accelerated version of your current business model. Like graduating from street-stock drag racing to Bonneville Salt Flat jets: similar game, but mistakes are even less forgiving.
   How you do this: Find a new unserviced need and build a strategy to fill it, based on a unique combination of business resources that you either have or can obtain or can build. Then go hire the implementers.
   The point: Homework is required. Like it or not, all business is back to square one. The eGenie has opened the door for a new and superior definition of the business model in all industries, and an era of model exploration and re-redefintion that will create turbulence in the markets for a decade or two, while we get a handle on the possibilities. If you're not willing to play this game seriously, start thinking about your exit strategy.

1999 RKDove - Attributed Copies Permitted
Essay #059 - Originally Published 11/99 in Automotive Manufacturing & Production, Gardner Publications

Would you like to offer some thoughts or add to the dialog? Your sending of a comment automatically grants us permission to edit and post at our discretion. Send your comment to
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From: dbritton@earthlink.net (David Britton) Date: Tue, 19 Oct 1999
Great paper! I wish you would make it more clear that eCommerce is a subset of eBusiness. I realize that most people believe that eCommerce includes general ledger, but if everyone starts with eBusiness as the objective they will get into less trouble.
Regards, Dave Britton

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(Rick Dove) Date: Wed, 20 Oct 1999
So many things to say, and so little time/space (in a monthly two-page column). The voice-of-the-market concept could use more discussion as well -- it's very different than the voice-of-the-customer concept, and even more dangerous to the unwary. And so is the need for each business entity to regroup and look at itself as a start-up. A lot on eStrategy needs to be said before enough people will understand how different the business model really can and will be, and how the business world has just been thrown up in the air like a bunch of Pick-up-Sticks.

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From: jring@amug.org (Jack Ring) Date: Mon, 25 Oct 1999
Just read essay 59, which has been sitting on my desktop for a couple of weeks. Good stuff as usual. I am sending a copy to Rob Hummel, Time Life Books.

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From: orjrh@orntsrv103.micro.lucent.com (Hoyer, James R) Date: Thu, 11 Nov 1999
Well done.

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From: nkrumae@sbu.ac.uk (Ernest Nkrumah) Date: Thu, 11 Nov 1999
The success of e-commerce depends on the customers, who is the end user of the businesses products. Should not the developers of e-commerce be more concern about the business-customer side of e-commerce than the business-business?

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(Rick Dove) Date: Wed, 20 Oct 1999
For an excellent presentation of the customer's commanding role in the success of eCommerce, as Ernest Nkrumah so aptly points out, I highly recommend the just-out Harvard Business Review article by Philip Evans and Thomas Wurster: "Getting Real About Virtual Commerce", Nov-Dec 1999.

However, the value of looking through your customer to their customer, and perhaps through them ad infinitum to an end user, depends upon the product. In the essay example we used a semiconductor manufacturer. Perhaps if the semiconductor manufacturer was Intel-like, with an "Intel Inside" product positioning, there would be some "marketing promotional" value to gain in the eCommerce design. On the other hand, if the company is a semiconductor foundry which provides outsourcing manufacturing services to another semiconductor company which provides chips to Nokia for their cell phones which they sell to the man on the street, I think not.

Each case needs to be looked at individually - especially in the business-to-business arena. Right now there is a lot more attention on the commercial end-user side of the public eCommerce debate, so many of the developing ground rules are aimed there. The business-to-business side is a lot more diverse and a lot less discussed.

On the other hand, perhaps we are simply tilting at the definition of "end-user". Is an end user the last person in the chain before an assembled collection of parts is sent to the junk yard? Or is it the person who makes the brand-name purchasing decision? For instance, is an end user for a memory chip the owner of the desk top computer, or Dell Computer who assembled the computer and may have specified the memory chip to use, or an outsource board manufacturer like Solectron who may have chosen the memory chip source? Anything short of the desk-top computer owner here is a business-to-business interest.

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From: gsinc@gen-strategies.com (W.M. Jaworski), Date: Fri, 12 Nov 1999
"Can you produce what I need, and deliver it when I need it?" [R. Dove]
Context is required to understand 'deep meaning" of such (trivial or impossible to satisfy) request.

"The eGenie has opened the door for a new and superior definition of the business model in all industries, and an era of model exploration and re-redefinition that will create turbulence in the markets for a decade or two, while we get a handle on the possibilities" [R. Dove].

For some industries (Amazon?) quite trivial (narrative?) models of ordering and delivery are satisfactory. For others (Lucent?) business dynamic models of 'requisite variety' are needed to help the enterprises to survive (and grow) in ever changing and more demanding (hostile?) environment. Graduates of "B-school MBA" programs will not welcome or promote "an era of model exploration and re-redefinition" even in presence of the friendliest GUI. I suspect that success of Amazon results not from super intelligence of its management but rather from low agility level of competition. Regards W.M. Jaworski

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From: "Stephen C Wooldridge" swooldridge@yahoo.com Date: Mon, 22 Nov 1999
Rick, Just wanted to let you know how much I enjoyd reading this article. Now, if I could just get a few people in my organization to read it and understand the urgency created by the pace of change in technology.
Thanks. Steve

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