EBusiness - why is it not just another passing management fad?
ASSIGNMENT COVER PAGE
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Course Code:
(e.g. TMAN- - - -)
TMAN7012
Course Name:
(e.g. Marketing of Technology)
Management of e-Business Technology
Location where you study:
(i.e. Hong Kong, Singapore or Australia)
Singapore
Title of Assignment:
(e.g. Assignment 1)
Essay
Family name:
Ng
First name/s:
George
Your UQ Student Number:
S4002252
Your email Address:
[email protected]
Lecturer's name in full:
Dr Andrew Brent GRIFFITHS
Assignment due date:
2 September 2003
If late, was an extension granted by your lecturer?
(Answer yes or no only if this assignment is being submitted after due date)
500 - 3000
Number of pages including this one:
(Please number your pages like this:
page 1of 12, page 2 of 12, etc)
Introduction
At the peak of the tech bubble before March of 2000, IBM was advertising e-everything, putting a .com behind a business and having a web presence seemed an easy and 'fashionable' thing to do and a must have. EBusiness, with its fortunes closely linked to tech stocks that have bottomed out, was an unfortunate victim in a cycle of greed. (Kotler; "Marketing Management", pg 35) I remember vividly the picture of Steve Case of AOL in a suit and the CEO of Timer Warner in casual attire, announcing a share buy-out on the cover of Time magazine. Not everyone fared as well as Steve Case, buying Timer Warner's solid assets with AOL's own stratospherically overvalued stock. Most realized too late that the value of their tech stocks have plunged from dizzy heights to next to nothing. Along with that went the investor confidence in anything 'E', and a sensible return to fundamentals. The rest of the essay looks at why eBusiness is not just another passing management fad. And that it represents a set of practices that require significant forms of engagement by managers and their organizations.
EBusiness is not a fad
Using post 45 Kai Lim's definition of a fad, EBusiness is not a fad, is here to stay and continues to evolve. Firstly EBusiness is distinct from ECommerce, which is the conducting of business over the Internet with customers. EBusiness on the other hand is the web enabling of the business units in a company that allows it to conduct business over the Internet, which Anand concurs in post 69. This attempt at defining the differences between eCommerce and eBusiness serves to clarify doubts posted by Soon Koh in post 34. Examples of EBusiness applications include CRM, ERP and Supply Chain Management.
Far from being a fad, eBusiness continues to evolve along with the needs of businesses. While Jeff from post 3 speculates that eBusiness may exhibit faddish behavior but can be sustainable. I like to suggest that this would be the perception of investors who have been burned by the tech bubble and who swear never to threat in that area as Hassan in post 60 seems to agree with. The perception and the real benefits of eBusiness can be quite different. A good example is the IPO of Palm Computing in the spring of 2000, it reached $60 per share within a day, valuing the company at $54.3bn, which was $26.3bn more than its parent company, 3Com, which still owned 95 per cent of Palm stock (Cassidy, John 2002). As Andrew puts it in post 84, a companies' stock was rewarded according to the perception investors had, to the extend which the company is seen to be tech driven in its operations. Palm was perceived by investors as a hot tech stock to make money out of, and not so much that it possessed any highly sophisticated EBusiness systems.
Model for Sustainability
In Kai Lim's same post which brings out the ten rules of eBusiness and the use of technology as a strategic tool. They have evolved and are necessitated with a more competitive business climate. In agreement with Jason in post 50, these tools strategic as they are, are not sufficient by themselves. It's the interaction between companies' skills and its resources that has intrinsic strategic value (Schrage, 2003). Vincent in post 175 quipped along the same lines that E-business is only a fad to those companies who do not strategically align its technological acquisitions ...
This is a preview of the whole essay
Model for Sustainability
In Kai Lim's same post which brings out the ten rules of eBusiness and the use of technology as a strategic tool. They have evolved and are necessitated with a more competitive business climate. In agreement with Jason in post 50, these tools strategic as they are, are not sufficient by themselves. It's the interaction between companies' skills and its resources that has intrinsic strategic value (Schrage, 2003). Vincent in post 175 quipped along the same lines that E-business is only a fad to those companies who do not strategically align its technological acquisitions with that of its business and corporate strategies as well as its core competencies
As Beer and Nohria revealed, any kind of change is hard, and the change brought about by eBusiness is not an incremental change but a mix of both incremental and transformational new mindset change. As Abrahamson pointed out "..... companies should stop changing all the time. Instead they should intersperse major change initiatives among carefully paced periods of smaller, organic change using processes I call tinkering and kludging. .....". In the Cutter Consortium report named eBusiness: Trends, Strategies, and Technologies, a groundbreaking survey ranked 'benefits not demonstrated' as the number-one eBusiness obstacle, followed by financial cost and technological immaturity (OIA, 1995).
Leaders are realising that another major eBusiness hurdle is not technology, but culture. Typically, sales people have been paranoid about losing their jobs to order-taking computers. At the start of eBusiness, some companies had to close their mail and printer rooms to force staff to use email instead or letters. Imagine how many large companies, like General Electric and Ford for instance, must spend on stamps each year! The promise of eBusiness is great, but limitations must be recognized. Many impediments stand in the way of progress in the adoption of web-based business models (Stephen and McGeary, 2002).
The main obstacles can be summarized as follows:
· Lack of Internet culture - Customer resistance needs to be overcome by converting customers to the Internet culture through education; pointing out the advantages, benefits and processes required, to make eBusiness successful. Here governments should also take responsibility by introducing the Internet into all schools, and IT skills training, at an early age, into all national schools' curricula Employees need to be seen in a new light - they need to be seen also as customers, as they are the ones who are employed to communicate with external customers, thus it is essential for companies to overcome any internal resistance to new eBusiness method adoption.
· Lack of awareness of potential eBusiness benefits or ' benefits not demonstrated' - In other words, it is difficult for most people, even for those within the IT industry, to keep up with the rapid speed of change, and developments of new technologies. Even at the best of times, people generally dislike change. If people don't understand the benefits of new processes and technologies, then they will not readily adopt new methods no matter how much money a company has spent on them.
· Lack of IT skills - There are not enough skilled IT specialists able to keep up the many imposed demands in keeping up with this speed of change. (Charles W. Wessner, 2001)
· Concerns over Internet security - Security issues regarding the Internet are still rife, particularly with regards to online payment, however with the introduction of wireless payment systems, which boast of being 'more' secure, and with more people getting used to online payments, we should see many of these fears decrease, yet I believe they will never totally disappear.
· Other Security Issues - Firewalls, viruses, hacking, site certificates, encryption and privacy policies are all still major areas of concern which are holding corporations back from entering the digital world too deeply as it makes them more vulnerable to corruption and breakdown.
· Costs of technology - New technologies are generally very expensive, and the standard of leadership that goes hand in hand with successfully implementing these technologies, does not come cheap either. (Jürgen,& Meffert, 2000)
· Constraints of technology - There are also ongoing concerns about Internet security, bandwidth, and quality service that must be considered by anyone thinking about relying on Internet-based applications to support critical business functions. However, as mentioned earlier, many of these concerns have been overcome and improved, yet many people are not aware that these improvements exist.
· Unresolved legal and regulatory issues - Many intellectual property cases regarding the Internet are still up in the air, as no one has yet found a suitable solution to policing these legal issues on a global level; each country abides (or should abide) by its own set of rules and laws.
· Limited internal technology skills - The demand for technical know-how is ever-increasing; however, most of the second wave eBusiness technologies offer state of the art self-help and easy to use interfaces offering online training and prompted suggestion tools.
Of course, companies need eBusiness strategies that consider the nuances of their specific industries, for their unique goals, processes, and requirements govern their business strategy. These are industry-specific implementation issues, like integrating legacy systems, general eBusiness readiness, culture and human element management abilities. (NRC, 2000)
Andrew in post 84 reiterated the need for a strong business case for IT investments and often IT department is blamed for business failure. Chief complaint would be unclear Return On Value/Investments - ROV/ROI analysis, it suggests adopting the following; (CIO Mag, Mar 2002)
* Consider and treat IT as a business within a business
* Align IT investments to corporate goals.
* Secure corporate-wide buy-in on a value center model
* Recognize and plan for the cultural changes that will be required
Creation of Sustainable Value
Value creation in e-business is attributed to four primary and interrelated value drivers: novelty, lock-in, complementarity, and efficiency. (Amit and Zott, 2001) For eBusiness value to be realized, its adoption must first be perceived as an intrinsically strategic tool by senior management. The resource based view of the firm asserts that organizations compete by developing distinctive capabilities and competencies that provide sustainable competitive advantages. (Fahy/Smithee 1999) In their paper they discussed "... the essential elements of the resource-based view of the firm are the firm's key resources and the role of management in converting these resources into positions of sustainable competitive advantage leading to superior performance in the market place." I'd like to recommend that eBusiness is one such capability or competency for sustaining competitive advantage. Anand in post 90 talks about the change in management offered by eBusiness, the automation of various departments signal a new way of thinking about running a business. Suddenly eBusiness tools such as CRM allows a company to know customers better, sifting out the valuable customers, and creating new market opportunities. "At Wells Fargo, where 3.2 million customers are enrolled for online banking, the promise of e-commerce is being realized already. The bank's retail penetration, three times the national average, is the highest of any bank and a reminder that e-commerce can work" (Daniel S Levine , 2002) Well implemented web-based CRM systems tightly integrated to legacy systems can be a source of Sustainable Competitive Advantage. Yet others like General Electric and CISCO, goes further by giving web-based tools for customers to innovate products that they will buy. (Thomke; Hippel Apr2002)
In the paper "Strategy and the Internet", Michel Porter gives an incisive view of the state of affairs concerning the reality and hype of the Internet and its relevance to business and strategy. He argues that the Internet "tends to dampen profitability and has an overall leveling effect on business practices, reducing the ability of any company to establish an operational advantage that can be sustained." He contends that "the key question is not whether to deploy Internet - companies have no choice if they want to stay competitive - but how to deploy it". He suggested to gain a competitive advantage businesses needs to build on the proven principles of effective strategy and using the Internet as a complement to not as a replacement of traditional way of competing. He argues that "far from making strategy less important, as some have argued, the Internet actually makes strategy more essential than ever".
Conclusion
EBusiness is not a fad and continues to evolve in-step with technological advances. Firms have struggled with implementing eBusinesses due to the nature of the change being transformational in the way business was previously thought of. They have been lured by the promises of potential benefits but have not aligned these tools along strategic principles. This position is contrary to Steven's post 196 that eBusiness is not strategic in nature. Firms need to appreciate the obstacles in harnessing real value created by eBusiness through a sustainable model. They also need to look at IT departments in a new way, as revenue generating business units instead of cost centers. Real benefits have been realized by more and more companies in the area of CRM and others too will find their place as well.
References
Amit, Raphael; Zott, Christoph (2000). "Value Creation in e-Business."
2 CIO Magazine IT: A Brave New World March 2002 Robert Frances Group
3 Charles W. Wessner, Editor, Board on Science, Technology, and Economic Policy, National Research Council, The Advanced Technology Program: Assessing Outcomes 2001. pg. 88
4 Daniel S Levine "Phoenix rising" San Francisco Business Times; San Francisco; Jul 26, 2002;
5 E. Abrahamson, "Change without pain", Harvard Business Review, 2000, July-August, 75-9, esp 75.
6 Fahy, John; Smithee, Alan; "Strategic Marketing and the Resource Based View of the Firm", 1999, Academy of Marketing Science Review, p14-15
7 Kotler, Phillip; "International edition: Marketing Management: 11th edition"
8 John Cassidy, "Dot.con: The Real Story of Why the Internet Bubble Burst" Penguin 2002
9 M. Beer and N. Nohria, "Cracking the code of change", Harvard Business Review, 2000, May-June, 133-41, esp. 133.
0 Schrage M. "Why IT Really Does Matter" Aug. 1, 2003, CIO Magazine
1 Jürgen Kluge, Jürgen Meffert, and Lothar Stein The German Road to innovation. The Mckinsey Quarterly, 2000 Number 2: Europe. pg. 98-105
2 Porter, Michael, "Strategy and the Internet" March 2001
3 Stephen A. Merrill and Michael McGeary, Editors, National Research Council, Using Human Resource Data to Track Innovation: Summary of a Workshop. 2002 pg. 47
4 The Small Business Innovation Research Program: An Assessment of the Department of Defence Fast Track Initiative, 2000 Board on Science, Technology, and Economic Policy, National Research Council pg. 311
5 Thomke; Hippel ; "Customers as Innovators" Harvard Business Review Apr 2002
6 Marshalling Technology for Development: Proceedings of a Symposium, Technology and Development Steering Committee, National Research Council/World Bank Office of International Affairs (OIA), 1995. pg. 98-99
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