The Hindu Business Line : Winners of the future

Enterprising firms have taken to the `Brochureware' and e-commerce phases with success. But e-business and value-web creation, which are more productive, have remained relatively untouched.

IT is only a question of time before the digital economy resumes its outburst of innovation. Before Silicon Valley went bust an important thing happened. Organisations around the world woke up to the possibilities offered by the Internet and began embracing it to varying degrees.

There was a leap in the level of operation of many organisations resulting in savings and operational efficiencies of many kinds. But the possibilities had only begun. Especially in India, only the tip of the iceberg has been exposed. So much more remains to be uncovered and done. Firms, especially those that wish to become market leaders, have to prepare for what lies ahead.

So far, enterprising firms, new and established, embraced the phases of `Brochureware' and e-commerce. But the more fruitful, industry-redefining, even world-changing areas of e-business and value-web creation have remained relatively untouched.

As organisations began to play with the possibilities of the Internet, it was usually as a response to what was happening in the marketplace, or because it wished to implement a `me too' strategy. As a result they usually constructed a simple Web site which acted as `brochureware' by providing information about the company. At a further stage, companies began to incorporate interaction and transaction on their Web sites, thereby entering into the realm of e-commerce. Thus, Web sites began to function as an additional channel for the sales of their products by allowing two-way virtual, 24/7, global operations. For a company that is not technology-savvy, this is a substantial step, since fundamental issues such as channel conflict and space-time continuous operation are addressed, and their absorption into the company makes e-commerce operation a reality. As far as the possibility that is offered by the Internet though, this is still only a small step.

In the e-business stage, of which we had begun to witness more examples, entire processes that comprise a business go through fundamental redesigning centered on characteristics offered by the Internet. This is no trivial matter. The Internet gives rise to such characteristics as immediacy, globalisation, digitisation, virtualisation, internetworking, disaggregation, and convergence. Yet, today's organisations are inherently structured to almost oppose these characteristics. Instead of immediacy, organisations usually comprise bureaucratic policies or at best time-bound yet inflexible processes through which communication, transaction, and delivery take place.

Whereas the characteristic of digitisation demands a commonly agreed upon and functional basis, in organisations there tend to be many locally created procedures and protocols by which communication is impeded instead of enhanced. Globalisation implies a multi-faceted effectiveness in will, to be present in several diverse markets simultaneously - yet organisations are typically structured based on a single concept of customer or a single concept of market. Convergence implies the coming together of various distinct specialties or even industries to create a new product or service in the marketplace. But this kind of `out-of-the-box' thinking requires a completely flexible organisation that dynamically reconfigures its own internal processes based on the opportunities in the marketplace. Disaggregation implies an objective reconfiguring of the organisation, so that those parts of it that are not operating at cutting-edge standard can be dynamically replaced by those that are.

Thus, while the Internet-based economy is fundamentally instantaneous, fluid and supple; existing organisations that are the outgrowth of previous economies and paradigms are not. Hence, there is a need for process reconfiguration.

An example of an organisation that exists in the e-business stage is Boeing. Boeing sought to simplify customers' maintenance processes through the creation of BOLD (Boeing On-line Data).

Because information is hard to access, maintenance of aircraft is not as efficient as it could be. Repair solutions are too often open to interpretation.

Mechanics may replace a part from an airplane even when it is not the cause of the problem.

In 50 per cent of the cases when a part has been removed and replaced with another part, there's no fault with the original part. When BOLD went into production it incorporated not only the engineering drawings but manuals, catalogues and other information that used to be available only in paper format. This has radically simplified maintenance processes for Boeing's customers, resulting in increased customer revenues through increased equipment utilisation, and decreased costs through cycle-time reductions.

In the value-web phase of the digital economy, organisational processes go through more radical changes so that any single process may now be owned and operated by several distinct organisations, that each offer some competency or set of competencies, which when pooled together comprise that single process. This has clearly not happened yet. However, beginnings of it can be perceived when one views the expertise of a company such as Fedex being rented by other companies in entirely distinct industries.

Thus, Fedex is able to rent out its competency of logistics to other firms in such a manner that it seems that the renters' logistics function is their own, and not Fedex's. When such competencies can be seamlessly integrated into a value-web, then the whole notion of organisational formation will change, since organisations may only be created to address an express need in the marketplace. Thus, competencies in marketing, engineering, manufacturing, or logistics, for example, could come together as a value-web organisation to fulfil a real-time need, and then dissolve once the need is fulfilled.

Such real-time efficiency and effectiveness is clearly the path directed by the Digital Economy, and is the future that is likely to emerge. Corporations which prepare themselves for this type of operation would be the winners in the future.

(The author is a computer scientist and management consultant. Founder of Aurosoorya, The Golden Sun. He has consulted with prominent organisations from all parts of the world.)

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