• Business strategies and the Internet – different debates and viewpoints

• Formulating strategies – contribution by different scholars

• The tools for analysing the strategic potential of EC

• Preparing for EC • Implementing EC – the steps to follow • Managing change

Strategic Implementation of E-Commerce

Business strategies and the Internet

The debates and viewpoints– Michael Porter - operational effectiveness and

strategic planning– Mintzberg -plan, ploy, pattern, position and

perspective– Gary Hamel - business concept innovation – Szulanski et al - strategy making as an art– Eisenhardt et al - strategy as simple rules

Formulating strategies - contribution by different scholars

Boisot’s approach:– Use data to turn strategies into plans– Allow those at operational level to take action– Tackle challenge at local level – Use collective initiative to create a mission to

reflect long-term strategy.

Porter recommended:– Create unique activities– Make choices between what to do and what not

to– Create activities that interlock (fit)– Reconnect with strategy by finding distinct and

profitable products, and

Hamel’s Business Concept Innovation

• Core strategy - the way the firm uses to compete

• Strategic resources - how it utilises its resources

• Customer interface - how it interacts with customers

• Value network - its coalition with partners and competitors.

Configuration

Customer Companybenefits boundaries

The components of business conecpt innovation

Core strategy

Strategies for competition:Business mission

- overall goalsProduct/Market scope

- where it competesBasis for differentiation

- how it is different from other firms

Strategic resources

Firm-specific resourcesCore competencies

- skills and unique capabilities

Strategic assets- what it owns: brands, information etc.

Core processes- the activities of the people in the firm

Customer interfaceHow customers are reachedFulfilment and support

- how exactly customers are reached: the channels used

Information and insight- knowledge of customers and how it is utilised

Relationship dynamics- nature of interaction with customers

Pricing structure- how the firm charges customers

Value networkPartners who surround the firmSuppliers

- how suppliers add value to the firms resources

Business partners- how partners complement the firm’s product

Coalitions- how joining other like-minded

competitors can create advantage

Efficiency / Uniqueness / Fitness / Profitability

Building bridges between business components

Through BCI, a company achieves:– improved customer benefit– a configuration that can support its mission – a clear boundary between what can be done

internally and what should be outsourced.

Some other views

• Dyer et al– the co-existence of

competition and collaboration (sometimes referred to as co-opetition)

• Ghosh– pirate an industry’s

value-chain and become a powerful new force

– becoming a customer magnet through a process of taking small steps

CGEY report - a study of financial institutions

• Businesses need to take risks to create new products, and market and sell them

• They must provide an infrastructure by becoming one of the following:– commodity provider– infrastructure provider– market maker– superior performer– innovator – or a relationship manager.

Baker Hoque• In the international

arena one of three approaches can be used:– Predict and prepare -

the cautious route

– Use power to limit damage

– Build internal capacity by broadening scope

• To build an e-enterprise

– create a vision by bringing the firm’s physical- and virtual- strengths together,

– then build business and technology architectures based on that vision

– review, refine and recycle continually.

Strategy development for knowledge management

Different approaches:– Democratisation vs. centralisation of

information– Technology-based vs. human-based knowledge

management.

Steps of strategy formulation

Steps in strategy formulation

1.Declare anoverallvision

2.Determinestrategicobjectives

3.Gather &analyseinfo.

4.Developfuturestrategies

5.Produce alist ofe-comm.initiatives

Tools for analysing strategic potential

• SWOT analysis

• Value chain

• Critical success factors

• Return of investment.

SWOT analysis• The internal component - attempts to assess

a firm’s competencies, readiness and strength to face the new market, legislative issues and customer needs.

• The external element - assesses the position of the competitors, market trends and scope for extension, risk of substitute products and the possibility of new relationships with customers.

Value chain

Value-chain analysis assesses

– how e-commerce can influence the value added at each stage of the chain and

– how the company can improve it by taking over some of the tasks

by asking a number of questions.

Critical Success Factors

CSFs are the critical aspects of business processes, technology and management skill. They can operate at many levels:– industry-wide – organisation-wide– within a business unit and – at management level.

Examples of typical CSFs

• The commitment of the top management levels• The relationship with customers• The quality of the website• The competition in the market• The integration of corporate backend information

systems with e-commerce applications• The communications infrastructure• The security controls

Return On Investment

ROI is the cost benefit ratio which can be measured by:– using the balanced scorecard method to

ascertain growth in revenue– customer retention and acquisition rate– the quality of internal activities – cultural aspects such as the growth in learning

of employees.

Preparing for E-Commerce

The simple rules model– How to rules– Boundary rules– Priority rules– Timing rules– Exit rules

Need for policies

A firm should have policies on how to deal with:– Technology infrastructure– Security and privacy– Unforeseen problems– Human resources problems– The assessment of its effectiveness.

Implementation of E-Commerce• An inter-enterprise e-commerce architecture

comprises – backend IT and business processes

– customer-facing systems and

– the value-chain relating to these.

• It needs technology and people to complete the picture

• it responds to the ecosystem of other businesses.

E-COMMERCE ECOSYSTEM

CUSTOMER FACING PROCESSES

CORPORATE BUSINESS PROCESSES & INFORMATION SYSTEMS

Inter-enterprise e-commerce architecture

TECHNO-LOGY

VALUECHAIN

PEOPLE

Step-wiseimplementation

Steps in implementatiing e-commerce.

Organisation’sstrategic vision

Intial architecture

Project management

Industry-wideassessment

Step-wise refinement

Project development

.............................Initiative 1 Initiative 2 Initiative 3 Initiative n

Refinement ofarchitecture

Infrastructurebuilding

Infrastructure building

An effective infrastructure includes– An all-encompassing service for customers– An integrated value-chain– Integrated back-end information systems and

business processes– An infrastructure to support widespread

communication– An effective human support system for

employees.

Developing E-Commerce initiatives

• In-house development requires time and expertise but produces tailor-made systems

• Outsourcing has many advantages but can cause conflicts of control

• Component-based development using object-oriented software tools can be used to build standardised systems without the need for exceptional technical skills.

Approaches to systems development

• Traditional approach – hard and formal – did not allow much user involvement or ‘fuzzy’

specifications.

• Contemporary approach– ‘soft’ systems methodologies

Stepwise refinement

• Iterative design and implementation advocated by the soft systems methodology

• Initially, only a limited number of applications

• Improvements and additions made in stages based on user feedback

Managing change

• Two approaches – E (for economic value) which uses hard

measures – O (for organisational capability) based on

developing human capability to accept change.

• The sequencing of the two approaches is recommended.

Dimensionofchange

TheoryE

TheoryO

How to combinetheoriesE and O

Examples from ASDA

Goals Maxi-miseshare-holdervalue

Developorgani-sationalcapabi-lities

Confront theparadox betweeneconomic value andorganisationalcapability

ASDA’s new CEO Archie Norman started bydeclaring his main objective of securing valuefor shareholders through a process ofbuilding a culture of common ideas comingfrom the shop-floor upwards.

Leadership

Managechangefrom top-down

Enablepartici-pationfrombottomup

Set direction fromthe top and engagepeople from below

Norman stated his new pricing strategy andthen shifted power to the shop-floors. Heestablished a mechanism for direct dialoguebetween executive management andemployees in the shop-floor.

Focus Focus onphysicalstructureandsystems

Focus onculture:attitudesconductetc.

Focus on both hardand soft sides of theorganisation

Norman made hard choices such as freezingall wages and removing top layers ofhierarchy. He also spent 75% of his time atthe early stage of change as the humanresources director trying to win the supportof his employees by creating a culture ofegalitarianism and transparency.

Processtofollow

Establishplans andprograms

Experim-ent andevolve

Allow spontaneity Norman encouraged experimentation bysetting up three ‘risk free’ stores wheremanagers were allowed to experiment withoutthe risk of any penalties in case of failure. Across-functional team produced significantinnovations as a result.

Rewardsystem

Financial Commit-mentbuilding;paymentis usedas fairexchange

Use incentives suchas payment toreinforce change butnot to drive it

ASDA encouraged all employees toparticipate in changing the store. It rewardedthem by providing stock ownership and paybased on corporate and store performance.

Use ofconsul-tants

Consul-tants takean activepart

Consul-tantssupportmanage-ment

Consultants areused as expertresources toempower employeesand to shapesolutions

ASDA made limited use of four consultingfirms in the early stages of its transformation.They worked alongside management andsupported its leadership of change.

Management of change at ASDA using theories E and O simultaneously

Questions

• What are the debates surrounding strategies and strategy formulation?

• How do they relate to real-life business functions?

Case studies

• Edmunds.com

• Charles Schwab

• Lloyds TSB

• Autodesk

• NSPCC