Basic Elements of an E-business Model

e-business-architectureThe emerging e-business market affords companies of all sizes and types the opportunity to leverage their existing assets, employees, technology infrastructure, and information to gain or maintain marketshare. For example, in the telecommunications industry, service, rather than technology, is now the key differentiator. With lower barriers to entry, new competitors are rapidly entering the market offering new services, such as online bill presentment and payment, and leveraging their unique digital assets.

Information technology research analysts agree that e-business is any net-enabled business activity that transforms internal and external relationships to create value and exploit market opportunities driven by new rules of the connected economy. However, today's e-business requires more. Industry analysts further point out that e-business involves the continuous optimization of an organization's value proposition and value-chain position through the adoption of digital technology.

The challenge for an organization is to turn the vision and the market opportunity into a viable business. Developing the marketing strategy and plans and designing and deploying the business solution is key. Those who successfully architect, develop, and deploy e-business solutions will need to formulate and adopt a comprehensive business plan. Because of the critical role of Internet technologies and integration requirements, it is recommended that organizations need a comprehensive planning framework—an actual e-business model. This structured planning approach enables the organization to assess, plan for, and implement the multiple aspects of an e-business.

Building an e-business (an integrated value chain) that leverages the Internet's communications capabilities is a complex undertaking. The complex integration requirements of the business solutions, all performing at extremely high levels of availability and scalability, require an e-business model architectural approach. The value chain (comprised of the traditional supply chain management functions, planning, procurement, and inventory management, coupled with the customer-facing functions, typically referred to as customer relationship management) has integration and performance demands that exceed the requirements seen in traditional businesses. In a successful e-business, all of these areas are tightly integrated to provide an organization the ability to quickly and efficiently sell, manufacture, and deliver products or services.

Furthermore, in a successful e-business, this value chain rests on a foundation that leverages the organization's existing core operational business systems, as well as meets the new business-critical operational requirements for reliability, scalability, flexibility, and 24 × 7 × 365 availability in a highly volatile, electronic marketplace. An e-business model includes three essential elements:

  • Solid strategies
  • Knowledge management techniques applied to a company's information and intellectual assets
  • Effective e-business processes typically grouped in the customer relationship management (CRM), supply chain management (SCM), and core business operations domains

Solid Strategies

Strategy and execution are key to developing and sustaining a successful e-business. Only those organizations that successfully integrate key business strategies and processes dramatically increase their efficiencies. To be successful, organizations must also form the right strategic relationships and develop efficient business processes with robust backend solutions that are able to meet users' demands for real-time service today and into the future.

In the past, businesses had the luxury of developing business strategies in the boardroom and IT strategies in the IT department. They then brought these strategies together to run the overall business. E-businesses cannot afford this luxury. The ability to react and change direction is critical. Speed is everything. Grounding the organization with sound, winning strategies is key.

In the new economy's competitive electronic environment, it is easier for an organization to be global, but it is also harder to maintain consistency in the levels of services offered around the world. E-businesses must be ready and able to adjust their business and IT strategies rapidly, depending on unpredictable competitors and market pressures. Today's e-business climate requires the continuous optimization of an organization's business and IT strategies. Because IT now has such a significant impact on every business process (from order taking to inventory to billing), both business and IT strategies are now developed in parallel.

The best example of this is Dell Computer. From the start, the company's business strategy was tightly aligned with its IT strategy, allowing Dell to successfully integrate every aspect of its business (from order taking to inventory to billing) with both its customers and suppliers. Dell vaulted to the forefront of its industry when it came to market with a winning strategy, the unique just-in-time-delivery model. Unlike traditional computer suppliers, Dell's business strategy was founded on the premise of zero inventory.

Similarly, online brokerage companies have been leaders in the area of integrating IT and business strategies. The rapid adoption of Internet technologies combined with market globalization, industry deregulation, and media convergence has afforded these companies the opportunity to gain share and create value in the e-business marketplace.

Turning an organization's intellectual assets into knowledge is a key business differentiator. In addition to a continually optimized business strategy, successful e-businesses must establish solid knowledge management practices. Knowledge management is the definitive way to leverage an organization's information and intellectual assets for business advantage. It is the formalized, integrated approach that every organization must take to "know" its business.

Knowledge Management Techniques

Every business has both tacit and explicit knowledge. One is undocumented, and the other is documented about what is "known" in the company. This knowledge may include information about products and services or information about how the company works with a particular supplier. No matter what type of knowledge an e-business has, the company must put into place processes for organizing that knowledge.

Knowledge management includes managing intellectual capital, such as best practices, critical business processes, and operating metrics. Establishing ongoing processes for acquiring, organizing, and distributing this knowledge about customers, products, and processes is critical to success. The business domains, CRM, SCM, and core business operations, are dependent on this information and these intellectual assets.

Effective E-Business Processes

In every successful e-business, the business process domains (CRM, SCM, and core business operations) are an integral part of the continuous optimization process. The advantage and, thus, the return on investment for an e-business integrating its business process domains is that it extends the organization's business directly to customers and suppliers.

When business process domains are integrated, they can increase productivity and improve customer and supplier satisfaction. For example, when a repeat customer views a successful e-business's Web site, an integrated CRM system presents that individual with offers or items of interest based on previous orders. After the customer places an order, this same e-business allows that individual to view the status of his order in real time as it moves through the supply chain.

Business process domains are aggregations of core business processes. Although there is growing popularity of business process domains as their own entities (CRM, SCM, and core business operations), they are commanding a mind-share in the marketplace (and each has attracted various vendors and products to support it). These domains must operate together as a key component to the overall e-business strategy

In a successful e-business, convergence is the driving connection of all of the business process domains. When there appears to a customer or a supplier to be no barrier between departments, the business process domains are tightly integrated with the business and IT strategies.

1. Customer Relationship Management

Customer relationships are becoming a more important factor in differentiating one business from another. In order to stay competitive, e-businesses in every industry have begun to analyze these relationships with customers using CRM solutions.

In the past, customers would place an order via the telephone and wait until the company's purchasing department processed and shipped the order. Today's customers place an order electronically and then demand to be able to check the status of their order within minutes.

CRM enables an organization to adopt a comprehensive view of the customer and maximize this relationship. These CRM systems enable a business to identify, attract, retain, and support customs centers, direct mail, and retail facilities. In an efficient e-business, there are CRM processes in place to handle:

  • Analytical CRM: The analysis of data created on the operational side of the CRM equation for the purpose of business performance management; utilizing data warehousing technologies and leveraging data marts
  • Customer interactions: Sales, marketing, and customer service (call center, field service) via multiple, interconnected delivery channels and integration between front office and back office
  • Operational CRM: The automation of horizontally integrated business processes involving "front office" customer touch points
  • Personalization: The use of new and traditional groupware/Web technologies to facilitate customer and business partner communications

2. Supply Chain Management

Integration of the SCM functions is emerging as one of the greatest challenges facing today's e-businesses. SCM is the integration of business processes from end user through to original supplier. The goal of SCM is to create an end-to-end system that automates all the business processes between suppliers, distribution partners, and trading partners. The new mantra for this process, according to industry analysts, is "replacing inventory with information." In an effective e-business, the following SCM independent processes must be highly integrated:

  • Demand management: These are shared functions, including demand planning, supply planning, manufacturing planning, and sales and operations planning.
  • Inbound/outbound logistics: These include transportation management, distribution management, and warehouse management.
  • Supply management: These include products and services for customer order fulfillment

3. Core Operations

E-businesses also need to develop and operate complex transaction processing systems that support their core business operations. These core operations include the operational systems that support their particular business, such as claims processing, trade execution, enterprise resource planning (ERP), and enterprise resource management (ERM).

Whether a company is just beginning to transform its business into an e-business or is an e-business strengthening its market position, organizations must put in place architectures that support large and complex integrated solutions. E-businesses must address the performance requirements for reliability, scalability, and high availability. These systems also require a high level of flexibility, integration, and often the added complexity of operating in a global business environment. These e-businesses need to integrate their customer relationship management, supply chain, and core business operational systems such as enterprise resource planning, accounting, and general business support systems to operate efficiently.

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