1 E-What-Ever??? There are many terms currently that start with ‘e’ e-Commerce: limited to the...

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E-What-Ever???There are many terms currently that start with ‘e’• e-Commerce: limited to the transactions and

external exchanges between businesses• e-Business: has a similar meaning, but is limited

because of its proprietary origins• e-Organization or e-Everything are too general

to be practical• Net-Enhanced, meanwhile, is a broad term that

conveys the idea of exchanges over open electronic networks, and can cover any size or type of organization (according to your text, at least)

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Source # Driver

Environmental 1 Digitalization of media

“ 2 Inexpensive telecommunications

“ 3 Widespread diffusion of computers

Organizational 4 Increasing pressure on costs and margins, including globalization and commoditization

“ 5 Changing organizational models, including empowerment of workers, informating (data from automated processes) of key business activities, outsourcing and downsizing of many firms, partnering, cross-functional processes, virtual teams

“ 6 Rapidly shrinking cycle times

“ 7 Intelligent products and services GPS, web-enabled cell phones

“ 8 Demand for customized products and services

Table 1. Drivers of Net-Enhanced Organizations

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Driver 1: Digital Convergence (Figure 1.1)

Increasingly all forms of information, from voice to video, data to documents, are being stored in digital form and can also be transmitted anywhere, at anytime. This phenomenon is called Digital Convergence.

Example: Google’s agreement with major academic libraries to digitize most/all of their holdings.

Example: Paper checks are nolonger transported, only digitalimages.

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Driver #2: Inexpensive Telecommunications

• Deregulation and privatization of telecom networks combined with new technologies and increased competition are driving down the price of telecom services

• Low telecom costs make Net-Enhancement feasible by making networking affordable to a much larger population

• How many of you have a broadband home network?

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Driver #3:Widespread Diffusion of Computers

• Computers have become ubiquitous

• Ready access by people to computers is what facilitates Net-Enhancement

• A critical mass of users is essential for such a new technology to succeed

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Fig. 1.2 Real and Projected Growth of Home Computing in the USA

[Where is the saturation point?]

7Fig. 1.3 Typical Ratios in International Diffusion of Computing

(See “Internet Users in China Number Nearly 80 Million ”Required Readings: e-commerce)

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Driver #4a: Globalization Pressures on Costs and Margins

Globalization:

• Lower barriers to transnational commerce supported by Net-Enhancement

• Effect is to increase competition by enlarging markets

• Puts downward pressure on costs and margins

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Driver #4b: Commoditization Pressures on Costs and Margins

Commoditization:• Defined as the standardization of

products and services• Increasing the substitutability of products

by alternative producers, forcing down prices and rewarding economies of scale

• Reconfigures business environments allowing offshore firms to enter domestic markets

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Driver #5: Changing Organizational Models

The effects of Net-Enhancement on organizations includes:

Empowerment – power devolves to workers in the ‘front

lines’; increased exchange of info within/across work groups

Informating – digital flow of information enables new

decision-making tools; data mining of electronic business

exchanges also opens new business possibilities

Delayering – hierarchical organizations are ‘flattened’;

managers must communicate more efficiently with larger

numbers of employees. This also encourages outsourcing.

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Driver #5: Changing Organizational Models (cont.)

Partnering –firms now focus on their core competencies and

make strategic alliances with companies that complement

these strengths; all facilitated and enhanced by networking

Tele-work – knowledge workers are increasingly liberated

from specific locations through the use of broadband links

Virtual Teams – rapid cycle design and problem-solving

encourages greater flexibility of temporary teams for

specific jobs working in looser types of relationships.

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Driver #6: Rapidly Shrinking Cycle Times

• Competitive forces + technological improvements have led to dramatic reductions in production cycles

• This both increases customer satisfaction and brings down costs

• Net-Enhancement supports tighter task coordination, leading to increased process ‘seamlessness’

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Driver #7: Intelligent Products and Services

• Integrated circuit chips are increasingly imbedded in every manufactured item

• As a consequence, intelligent products and services are becoming increasingly common in all aspects of life and work such as: – GPS systems providing information to drivers

– Emergence of e-Books and the evolution of cell phones

– PDAs providing wireless connectivity to the Internet

– Radio frequency based chips (RFID) in products, completely automating the sales process, eliminating shoplifting, improving distribution system, etc.

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Driver #8: Demand for Customized Products and Services

• Increasingly customers expect to be able to:– exercise choice in products and services– receive the benefits of mass production

• Net-Enhancement permits a personalized response– creating a ‘market-of-one’ aka ‘mass customization’

• Current examples include:– Dell’s ability to individually configure computers for

customers online– Ernst & Young’s online consulting service which uses an

expert system to give small businesses advice on improving business practices

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Definitions of Net-Enhancement

• Net-Enhancement can be defined and understood from several perspectives

• The technical perspective emphasizes the evolution of the supporting technologies

• The information-based perspective looks at what network-based systems are doing in terms of the movement, storage and processing of information

• Organizational perspectives look at how organizations have changed and the new capabilities network-based systems have given them

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Distinguishing Characteristics of Net-Enhancement

The ‘ideal’ Net-Enhanced firm might be described as having the following characteristics:1. Adopts a global focus

2. Ties its IT to its strategic positioning

3. Avoids proprietary solutions and technologies

4. Adopts and selectively deploys information visibility

5. Creates strong links to its customers through proprietary data, its main source of competitive advantage

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Electronically Wringing Out the Costs In An Airport Vehicle Rental Business

•Replace physical processes with information that can be made available through the Web•Check-in counters and staff can be replaced with kiosks located in the airport terminal or via the Web•Once the customer has confirmed their choices, the order is confirmed by digital signature•Numeric keypads replace keys or key-cards•Automated inventory control to track cars entering and leaving, allowing maximum fleet utilization for the company

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Wringing Out the Costs In An Airport Vehicle Rental Business:

The key concept is a direct-to-consumer business model. Competitive advantage comes from:

• Customer perceptions of faster service• Lower overhead• Builds customer loyalty by offering services 24/7• Greater flexibility in services offered• Eventually even kiosks could become redundant

as Web-based, computer-orchestrated systems automate the process for the wireless customer

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Second Wave of Net-Enhancement

• The crash in dot.coms and telecoms is unlikely to have long-term effects

• Initial exponential growth (“contagion”) is followed by a period of consolidation and rationalization

• A further spurt of growth is likely at some point once the new innovations are ‘digested’ (see Figure 1.6)

(See “Booting Up For the New Net World”Required Readings: e-commerce)

20Figure 1.7 Nolan’s Stages of Growth Model

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Chapter 2. Principles of Networked Economy Businesses

Foundations of Net-Enhanced Organizations

Detmar Straub, 1st EditionCopyright © 2003 John Wiley & Sons, Inc.

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The Economic Paradigm Shift in The Information Revolution

• Business paradigm shifts occur when the very basis of doing business is redefined

• The Industrial Revolution, for example, happened when machines replaces human labor in the production process

• In the Information Revolution, computers replace humans in the repetitive processing of information

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The Economic Paradigm Shift in Net-Enhancement

The NE paradigm shift has resulted in 2 major changes:

• NE has dramatically lowered the cost of doing business by orders of magnitude. – In addition, unlike humans, computers are also ‘capable of

perfect accuracy’

• NE has also profoundly enhanced communications outside of the firm, allowing many new types of relationships between firms, suppliers, customers and competitors as well as new organizational structures such as virtual organizations.

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Figure 2.4 Cost Savings from Net-Enhancement

(See “E-Biz Strikes Again!”Required Readings: e-commerce)

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Disintermediation and Net-Enhancement

• Another part of the exchange cost is the relative efficiency of the marketing channel.

• Dell has used its network to avoid the physical distribution chain to sell directly to its customers.

• Thereby avoiding assemblers, wholesalers, retailers.• The effect is to lower costs and make a company

more competitive by passing on these lower costs to its customers, giving the company a competitive advantage.

(See “Who's Afraid of China?”Required Readings: globalization)

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3 Principles of E-Commerce

• Principle 1: Substitution of Less Expensive, More Effective

Information-Driven Processes for Physically-Driven Processes

• Principle 2: Use of Open Systems Architecture and Standards

• Principle 3: Enhancing Products and Services with Information

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Figure 2.8 Scale Economies

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Marginal Costs nearly Zero

• Microsoft enjoys huge increasing returns to scale.• Once the company has recovered the fixed costs of

R&D, the marginal cost of replicating its products approach zero.

• This also applies to distribution and payment costs incurred through using the Internet

• Furthermore, these processes are scaleable in a nearly infinite way allowing profits not possible in traditional processes (see Google AdSense keyword advertising)

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Chapter 3. Structures, Frameworks & Classes of ‘Net’-

Enhancement

Foundations of the Net-Enhanced Organization

Detmar Straub, 1st EditionCopyright © 2003 John Wiley & Sons, Inc.

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Supply and Demand-side Structures of Net-Enhancement (Figure 3.1)

• A starting point for thinking about the structure of Net-Enhancement is to consider the relationship between net-based suppliers and net-based users:

• In many ways the structure of the technology is driven by demand for networking capabilities that pulls new products to the marketplace.

• Innovation also sometimes pushes new, untested products into the market.

• An efficiently functioning NE industry also innovates to overcome the developmental obstacles it faces such as introducing compression techniques to shorten download delay.

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3.1 Implications for Managers

• Generally, network hardware has commoditized. – Users may identify with brands but tend not to distinguish

between different aspects of the Internet’s hardware infrastructure.

• Software is the driving force in the industry.• Services also play an important supporting role.

– payment services in particular are regarded as crucial to the success of E-Commerce.

• Co-opetition is an important part of NE strategy. – The model also shows a fine balance between groups

competing with one another and those that are cooperating.

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Figure 3.10 The Hex Model of NE (Watson and Straub 2002)

• The yellow ribbon running through the figure is the classic “supply chain” through which stakeholder firms exchange goods, service and information.

• The Hex Model of NE shows how each firm in the supply chain has suppliers or can be a possible supplier.

• With NEOs, many of the steps in the supply chain can be outsourced, blurring the boundaries of the traditional firm with respect to inventorying, shipping, servicing goods and/or providing various services.

• Any firm or intermediary can deal directly through electronic connections with, and supply services to, customers or any other stakeholder, so the boundaries of the firm may become blurred.

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Classes of Specific Interactions between a Firm and its Stakeholders:

1. B2B (Business-to-Business): While transmission of shared transactional information over proprietary EDI networks is decades old, the web has significantly reduced the cost, while expanding the level of interaction

2. B2C (Business-to-Consumer): Increasingly, firms are deriving revenues or cost savings from Websites that connect them directly to their customers

3. B2G (Business-to-Government): Firms need to communicate with government for many different reasons, which can be expedited by the Internet

4. Intranets: Facilitate communication within a firm. May or may not be connected to the Internet. Differs from other collaborative applications in that they use Web-based interfaces

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Dimensions of EC Media

• EC Media types differ according to the following three dimensions:

– Richness measures the “multimedia-ness” of the media.

– Social presence: do the senders and recipients convey a human presence?

– Interactivity: does the media allow for real-time interaction?

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EC Media & their Characteristics (Table 3.5)

• E-mail is a ‘lean’ channel because it uses only data and text to convey meaning. HTML helps in some cases.

• Web pages can be ‘richer’ through the addition of a visual dimension.

• Web pages can also have audio and video elements, but may lack ‘social presence’.

• The richest media allow all three: such as face-to-face meetings which allow for facial expression and intonation in real time.

• Given this, we may ultimately expect video, virtual reality and holograms to be the dominant media.