Recent Discussions

Learn E-Business-Or Risk E-limination

21st March 1999      Tushar J. Mehta @ieee.org

Recently, there has been a flurry of discussion regarding e-commerce and its
implications.  The following editorial highlighting the significance of
e-commerce, was recently published in Business Week.

Editorial - Learn E-Business-Or Risk E-limination
Business Week, March 22, 1999.

Ever hear of ''channel cannibalization?'' ''Friction-free'' markets? How
about ''re-architecturing'' business models? Start learning. They're just a
few of a whole series of concepts driving the world of electronic business.
So different--no, alien--are they from the normal experience of the average
CEO that learning the Net's new rules of the business game is becoming the
key to survival for America's managerial class. Start with channel
cannibalization: Middlemen are being eaten alive virtually everywhere on the
Net. Companies are beginning to deal directly with consumers, and the need
for ''physical'' stores and other old-style distribution channels appears to
be diminishing. The potential cost savings on the Net are enormous, as are
the opportunities to customize products. But the transition can be tricky.
Cannibalize your distribution channels in stores too quickly, and sales are
lost. Move over to the Net too slowly--and sales are lost.  Friction-free
markets define another E-business characteristic: buyer power. It takes a
lot of time and energy to comparison-shop by going to different stores in
different parts of town. It takes very little to click a mouse and hit a
dozen Web sites offering the same item. Vast amounts of information about
anything anyone wants to buy are available, along with multiple vendors.
Friction-free markets translate into greater power for the consumer, more
variety, and lower prices on goods and services. At least for now. It may be
that efficiencies on the Net work so that players who set a kind of standard
come to dominate each field. As Brian Arthur, economics professor at
Stanford University recently put it at the World Economic Forum in Davos:
''For every 20 or 30 entrants, there will be two or three winners.''  But
for now, competition reigns. So new is the Net, and so fast is change, that
companies are morphing constantly. In a desperate search for profits, they
are continually redesigning their business models. Amazon.com Inc. goes from
an online bookseller to a Wal-Mart Stores Inc.-style purveyor of all kinds
of merchandise. Yahoo! Inc. goes from a search engine to a portal.
SpringStreet, a West Coast startup, goes from listing rental apartments to
quoting deals on furniture, insurance, and loans, and collecting fees from
Visa International and Ryder Moving Services on transactions made on its
site.
Who knows what will work? The Net is changing the shape of enterprise, the
speed of action, the nature of leadership. CEOs who succeed in navigating
this virtual world will be those who understand the nature of E-business and
constantly recraft their operations to adapt. We are basically in Year Two
of a transforming event. Grab hold, and hang on.


Tushar J. Mehta
email: [email protected]

23rd March 1999      P.K.Saha @poboxes.com

Tushar J. Mehta wrote
>How about ''re-architecturing'' business models?

What are te existing successful models and how are they to be "mapped" in to
new "models"?


>Companies are beginning to deal directly with consumers, and the need
>for ''physical'' stores and other old-style distribution channels appears
>to be diminishing.

Goods have to be stored before delivery. None of the three forms, namely Raw
materials, work in process and finished goods, can ever be eliminated even
with "just in time" inventory. Even Amazon.com, is making all losses since
the inventory is kept with the publisher who includes his margins for
inventory in the pricing.

>It takes a
>lot of time and energy to comparison-shop by going to different stores in
>different parts of town. It takes very little to click a mouse and hit a
>dozen Web sites offering the same item.

It takes no time since there are agents ( intelligent software) to do the
comparison. The question is overheads of the organisation with internet
savvy employees leaving and taking away all the organisational knowledge.


>''For every 20 or 30 entrants, there will be two or three winners.''

Depends on the economies of scale.

With best wishes,
P.K.Saha