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
(Rick Dove) Date: Wed, 20
Oct 1999