Chapter Twelve Developing the e-Business Design: Strategy Formulation

© e-Business Strategies, Inc Introduction E-business requirement –Simultaneous melding of business strategy, enterprise apps, and technology implementation –None by itself sufficient Traditional corporations gullible of the “legacy effect” –Refusal to change can mean stagnation and losing ability to generate new value through innovation e-Business not a silver bullet; simply another technique for reinventing business –Intel

© e-Business Strategies, Inc Roadmap to Moving into e-Business Making e-business a reality involves three key components: –e-Business strategy Figure out why and what of customer value creation –e-Blueprint formulation How and when of customer value creation –Tactical execution

© e-Business Strategies, Inc E-Business Strategy Formulation In this phase, managers build awareness and make plan to create new customer value –Develop clear vision of what the customer needs are and what the customer is looking for –Be conscious of own abilities and limitation Includes –Knowledge building –Capability evaluation –e-Business design

© e-Business Strategies, Inc The Process of e-Business Strategy Formulation Three approaches to e-business strategic plan –Top-down analytical planning –Bottom-up tactical planning –Continuous planning with feedback Important question to ask –What result do I want? Strategic success dependent on business results you want, not on what Wall Street thinks –Managers are the change agents Define destination –When we are done, my customers will ________ –When we are done, my employees will________ –When we are done, my company will_________

© e-Business Strategies, Inc The Process of e-Business Strategy Formulation Top-Down Analytical Planning –Systematically define a vision of the business’ future to assess cost and prepare capital budget –Data-rich environment, numbers driven; Managers review alternative scenarios to identify most likely outcome and create strategy based on that –Serves well under stable business conditions; e- world is anything but stable –It’s single greatest problem: Separation of strategy formulation and implementation The never-seen-again strategic plan The no-goals strategic plan The no-feedback strategic plan

© e-Business Strategies, Inc The Process of e-Business Strategy Formulation Bottom-Up, “Just Do It” Planning –Frontline force taking on new importance in today’s environment with awareness of changes in customer needs –Organizations with hierarchical structures have few mechanisms in place for ensuring insights of front-line staff reach strategy makers –As a result, bottom-up strategic planning flourishing –Managers abandoning analytical rigor of traditional planning processes and basing decisions on solving immediate needs –Downside: Can result in fractured pattern of authority, with individual managers basing strategic decisions on their business units’ needs, not needs of the enterprise as a whole

© e-Business Strategies, Inc The Process of e-Business Strategy Formulation Continuous Planning with Feedback –In fluid business environment, best approach to allow strategy to evolve through discovery of what works and what doesn’t –Success dependent on feedback –Demand for quick success and max ROI often derails e-business projects undertaken by established firms –Trigger-point planning supports decision making in rapidly changing environments Lucent, Xerox, and Ericsson

© e-Business Strategies, Inc Knowledge Building Enables managers to understand priorities by gathering information on how customer needs change over time –Strategy must be based on fact, not opinions –Otherwise, right strategy for wrong problem Fact-based approach involves: idea generation, collection, and evaluation and screening Knowledge building generates ideas Ideas are screened for potential core strategic ideas Data collected should address key areas Data from these areas is segmented and analyzed to determine the key opportunities in each

© e-Business Strategies, Inc Knowledge Building Understanding the customer 1.Who are my customers? 2.How are my customer priorities shifting? 3.Who should be my target customer? How will the E- Business help reach my target customer segments? Customer value and relationship trends 4.How can I add value to the customer? 5.How can I become the customer’s first choice 6.How does my product reach customers? Technology trends7.Do we understand the environment and industry trends? 8.Do we understand technology trends? Supply chain trends9.What are the current priorities in the supply chain Competition10.Who are my real competitors? What is my toughest competitor’s business model? What are they doing really well? Core competencies11.What capabilities do we have today? 12.What capabilities and resources do we need to speed up our execution? Questions to ask when starting an E-Business

© e-Business Strategies, Inc Knowledge Building Who are my customers? –First, categorize customers into segments –What is important for each segment? Examine behavior in complementary markets What 5 new products in your industry have become popular in the last 5 years? What customer segments are buying these products? Why do they like these products or services? –Focus on distinctive customer service –Finally, ask who your customers are

© e-Business Strategies, Inc Knowledge Building How are my customers’ priorities changing? –What five things do your customers ask for most often? –Are your customers seeking experience, not just product/service? –How will you add value to them? –How has your customer changed in past 5 years, and what will be the change in the next 3? How can I add value to my target customer? –Customers want innovation, value and savings –How can a company provide increasing value for its customers while simultaneously reinventing certain parts of its business? –Rule breakers avoid focusing too much on competition, tend to be creative, and don’t let industry assumptions become barrier Starbucks, AOL, Yahoo!, Palm

© e-Business Strategies, Inc Knowledge Building How do I become customer’s first choice? –Every customer contact creates for the customer a moment of mediocrity, a moment of misery, or a moment of ecstasy; How do your customers experience contact with your firm? –You can be customer’s first choice if you dazzle them with unexpected service –What incentives do you offer your best customers? –How do customers make decisions about buying your firm’s product or service? –What has your company done to retain customers and deepen customer relationship?

© e-Business Strategies, Inc Knowledge Building How does my product reach the customer? –Understanding product distribution and marketing crucial to success Calyx and Corolla created the direct-from- grower model in flower industry –How are your company’s products delivered? –How many steps do they go through before they reach the customer? –How many of these can be eliminated? –How can this distribution and delivery process be streamlined using the Internet?

© e-Business Strategies, Inc Knowledge Building Do we understand environment and industry trends? –Take a fresh look at the environment and see how it’s changing –Define critical industry and customer issues so that decisions can be made against the backdrop of a broader context –Correctly position the firm within the industry and identify the most critical industry issues Do we understand technology trends? –What core technology are you betting your future on? –Is it going through a transition? If so, do you have a transition plan? –Are you putting all your eggs in one basket or are you diversified?

© e-Business Strategies, Inc Knowledge Building What are the priorities in the supply chain? –Do you understand what your upstream suppliers need from your company? –Do you know what your suppliers’ current capabilities are? –How can we better partner with them to deliver value more effectively? –Is there a channel conflict problem? Who are my competitors? –Competitors arent just the other companies in the same business –Which are your firm’s top competitors today? –Which are the five upstart companies that will become fierce competitors within next 5 years? –How sure are you that your firm understands competition?

© e-Business Strategies, Inc Capability Evaluation What do we want to accomplish? How should we structure ourselves to be most effective? What capabilities do we have today? What capabilities and resources do we need to acquire in the future?

© e-Business Strategies, Inc E-Business Design Data analytics, coupled with broadcast engine technology, foundation for proactive business intelligence –Anytime, anywhere, any place BI is proactive and data driven –Automates delivery of info to customers using exception conditions and recurring schedules as triggers for communication Traditional decision support apps do not personalize info –MicroStrategy’s DSS Broadcaster include new personalization and distribution capabilities New BI apps turning traditonal query-and-response paradigm of decision support on its head

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