This chapter is from the book
This chapter is from the book
This chapter is from the book
Business Drivers
The different business forces that are driving the e-phenomenon are shown in Figure 1–5.
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Figure 1-5 Business drivers
To Do Business All the Time
Many past major inventions—circular wheels, the steam engine, railroads, the automobile—have contributed to making great progress in trade and commerce. Then, theoretically, the e-design radio and television could connect the word electronically but it costs money to build broadcast radio and television stations. A lot of money. However, e-connectivity via the Internet has done what was simply not possible to do by other vehicles: It connected nearly the whole world in an easy, efficient, timely, and inexpensive fashion.
One of the early adoptions of the Internet by a mass audience was email. Email alone changed the landscape of global communication in a mind-boggling way. What used to take months, or even a few years in some countries, now takes minutes and the communication devices are so inexpensive that even economically depressed communities have access to them.
Therefore, the Internet enhances and supports business all the time, practically everywhere. Geography and time barriers are suddenly gone; in fact, time differences can be used very effectively to create continuous operations in manufacturing, programming, call center management, and customer service.
We have included the need for ubiquitous business as one of the business drivers; however, it is evident that technology is a very important component that catered to that need and may have even created it. The processes and people to support such businesses and technologies are also very closely tied together.
Figure 1–6 illustrates the acceptance of different technologies and shows how the e-phenomenon has been widely accepted worldwide to cater to business needs.
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Figure 1-6 Uptake of consumer technologies
To Do Business Affordably
Efficiency, specifically cost efficiency, is usually the focus of businesses. However, according to Michael C. Jensen:
Value creation does not mean succumbing to the vagaries of the movements of a firm's value from day to day. The market is inevitably ignorant of many of our actions and opportunities, at least in the short run.2
During the days of business process reengineering (BPR), one of the main objectives was to reduce handoffs, which resulted in decreased cycle time and less overall cost. In many business processes, this reduction e-designer stood in the way of increased inventory turns and decreased labor. The e-phenomenon, when properly harnessed, enables businesses to operate in a very cost-efficient way, without costly and dramatic reengineering processes such as the example described earlier (Figure 1–7).
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Figure 1-7 Illustration of the e-phenomenon's acceptance
The pursuit of cost reduction as a means of increasing operational effectiveness is particularly pronounced in certain products and industries. The distribution costs of anything digitized (e.g., software, music, video) can be very minimal. The Internet provides a very convenient, cost-effective way of distributing these products.
Generally, any adoption of software, whether packaged or custom, is an expensive proposition. Because the Internet is based on an "open" standard, the costs of application development can be drastically reduced. Any expense is generally in the knowledge base of designers and developers and not necessarily in the software itself. For example, Java is free to anybody who knows how to use it. However, complex application environments and platforms have demanded premium dollars. As the Internet development industry matures as a whole, these costs will steadily decline as well.
According to Michael C. Jensen, "Purposeful Behavior requires the existence of Single Valued Objective Function."3 Reducing inventory, or increasing inventory turns, is one of the main goals of business. Inventory can be reduced via several business models and operational efficiencies such as JIT, pushing inventory to suppliers, outsourcing warehouses, and efficient use of warehousing and logistics. Many companies are trying to reduce inventory by using the Internet and online shopping. Dell is a prime example of a leading company that has used online ordering directly by customers to reduce inventory significantly via accurate forecasting and super-efficient supply chain processes.
In the business-to-business (B2B) world, electronic catalogs are reducing costs in several ways. The distribution and printing expenses of catalogs are minimal; the associated cost of selling is also minimized. Complex procurement systems can interface with electronic catalogs and do fairly complicated configurations and pricing. This saves costs on both sides—the buyer and the supplier—in terms of labor, cycle time, and ease and volume of use. In addition, new information-passing technologies such Extensible Markup Language (XML) and electronic data interchange (EDI) allow expanded data interchange across the Internet, regardless of what permanent repositories and databases this information is stored in. In this way, disparate companies can exchange data in a universal format without the costly and cumbersome porting projects required in the past.
As these technologies take root and J2EE, .NET, and other advanced Internet programming technologies mature, doing business via the Internet will become as commonplace as doing business over the telephone. In fact, once data exchange across the Internet becomes standardized, Web technologies will be more ubiquitous than the telephone. The same data can be simultaneously sent over broadband, wireless, satellite, and even plain, old-fashioned telephone lines.