Untitled
Deriving eConomy from eCommerce
By Doug Mee
e-Business Risks
At this stage in the evolution of the "e" economy the information superhighway is visibly taking shape and its more of an information super-river than an interstate. Like a river the digital economy has taken the path of least resistance, lurching toward the most proximate opportunities emerging from incremental changes in the technological and market landscape.
The evolution of the current information infrastructure was not executed according to some master plan directly connecting individuals and markets in one brilliant stroke. The current networked environment evolved more from a Darwinian process of constant experimentation and change not unlike the evolution of the markets that the technology itself serves.
Like a river, the progressive evolution of the networked economy pushes in many different directions some of which create entire new companies, technologies and industries. The direction of a river is largely dependent on the contours of the landscape and the volume of water in transit. The landscape and water are analogous to market opportunity and technology. As new technologies emerge the super-river forces itself into new markets with inviting landscapes. Like a river the course of evolution is marginally predictable and vested with inherent uncertainties.
The trail of failed e-business projects and companies is testimony to the volatile and uncertain nature of the technology and market. Even the popular press is now focused on the growing body count of e-businesses with defective business models or ineffective execution. Many initiatives that are focused on productivity enhancements end up creating more costs than they eliminate. Executives evaluating e-business initiatives must make crucial assumptions about their markets and navigate through a universe of products and services to support the project. Any misstep in building market assumptions and project plans will compromise the viability of the initiative. Managing market and project risk is central to reducing the probability that the new e-business initiative doesn't become a costly experiment.
Market risk embodies the challenges that are external to the organization. Market risks emerge from changes in the competitive, technological and/or consumer landscape. All e-business initiatives make some assumptions about consumer and competitive behavior but often fail to consider alternatives. Most typically managers assume consumers will behave as they have predicted and competitors will do what they usually do. Defective assumptions are a leading cause of e-business failure and are more common when the business model is dramatically different than a successful existing model. Not surprisingly, ventures that are launching new business models face a higher degree of market risk than an old-line business that is extending an existing business process.
Project risks are the challenges posed to the timely and economic execution of the project. Project risks commonly originate internally and can be influenced by the organization and/or its vendors. If project risk is properly managed the initiative should permit the organization to exploit the underlying market assumptions. The scope of an e-business project may be extremely complex with casts of users, analysts and implementers that must come together to define project requirements, technology, vendors and timeline. Each link in the project poses its own unique risks. Common project risks may include staff turnover, inadequate skill level, incomplete requirements, etc.
Many tools exist for project owners to mitigate the market and project risks they confront. At the strategic level financial and market analysis of project assumptions can approximate project viability. At a tactical level there are numerous methodologies and tools for managing complex projects. Return on investment analysis and project management tools are a prerequisite to achieve a successful implementation but are not a guarantee. Effective management of existing and emergent risks is a key to successfully navigating e-business opportunities. Each and every project has its own set of risks and rewards and defies a one-size-fits-all solution. There are however certain common denominators that, when applied can help implementers avoid the mistakes of others and meet project objectives economically.
Select a Technology Standard
The market for technology products is extremely diverse. There is no one technology that is right for the entire scope of users. The requirements of a project should however, align with the characteristics of the technology. High volume transaction intensive projects may call for security and scalability attributes that aren't needed for a non-transactional static web site for example. Certain characteristics of the selected technology will be key in the ability to maintain flexibility and help to mitigate market and project risks.
Technological standards are a critical factor in the deployment, maintenance and enhancement of any e-business initiative. If the software and hardware components you select adhere to an accepted industry standard you will have numerous advantages over products that are proprietary in nature. Typically the pool of available labor is greater for standards based products. The flexibility to integrate diverse components is enhanced by a common technology standard. Products based on technology standards offer customers greater flexibility and they typically have a lower cost of maintenance and enhancement. Vendors offering a proprietary product can lock customers into their platform through high switching costs and typically more expensive to alter and maintain. By selecting a common technology standard as the backbone of an e-business initiative managers can reduce the risk that they will be unable to react to market changes in an economical and timely way. Standards further reduce the project risks posed by staff turnover, training requirements, integration and vendor-lock.
Only Build What You Can't Buy
Most managers who have evaluated e-business projects are confronted with the option of building or buying the applications to address their needs. The option of building an application, either in-house or through a consulting firm has the advantage of being specifically designed to meet unique requirements and business processes. Although a custom project can meet a majority of customer needs, the project is usually lengthy and complex posing expanded project risk. Alternatively, buying a pre-built application has the advantage of being faster to market and more reliable. Most commercial applications have ostensibly been through a process of customer acceptance and evolved to a higher level of reliability than custom projects. This of course, may not be true if you are the vendor's first customer, but the majority of applications have had more usage and iterative change than the typical custom project. Some projects demand completely custom solutions due to the uniqueness of their business processes and/or model. Many business processes are, however, relatively similar and share common objects and tasks making the acquisition of a pre-built application that satisfies eighty percent of a customers requirements possible. Addressing the twenty percent balance of customer requirements can mean the difference between achieving plan goals or being an also-ran.
Achieving reliability, speed to market goals and one hundred percent of user requirements demands a third approach to the build-or-buy question. Customers should seek proven applications for which there is a toolset and infrastructure that permits the extension and modification of the application. This approach combines the quality and deploy-ability features of a production proven application with the ability to customize unique business processes and functions. These extendable, or living applications permit companies to iterate on the application creating features and functions beyond what other users of the same application can offer.
Selecting a pre-built application that has a track record of reliability and performance and matches most project requirements can greatly reduce project risks associated with custom development. Additionally, market risks associated with time-to-market are reduced. Selecting an application that is designed to be extended and modified can further reduce market risk by cutting the time necessary to iterate and react to market changes. The ideal product should include a toolset that creates a common work template for business analysts, programmers and designers to further reduce project risk. The application approach combines the advantages of building and buying your e-business project.
Plan For Change
The common reframe about e-business projects is the only thing certain is change. The ability to iterate on projects and extend them to take advantage of new opportunities or counter competitive threats is mandatory. Whether market or technology driven, change is inevitable and project plans should accommodate anticipated and unanticipated events. By selecting products that conform to standards and assume an application approach managers can greatly reduce market and project risks. A blueprint that approximates future requirements and development options will ensure that the impact of all current and future decisions are measured against their impact on future capabilities.
The ideal solution should be designed for change with an underlying infrastructure based on an object architecture. The solution should be characterized by a compartmentalized design with components built for reusability. Modularity in design will greatly enhance adaptability and extension. An infrastructure that is designed for change will reduce both market and project risks.
Get eConomy
Customers can benefit from some of the best and most costly implementations in production today by acquiring the product-ized version offered by original vendors. By acquiring the application customers avoid the development overhead and benefit from the beta customers who acted as the crash-test-dummies for reliability, safety and security. With the additional benefit of compressed deployment times customers can better address market and project risks inherent in lengthy development cycles.
Products that conform to industry standards further expand project flexibility. Standards based platforms can take advantage of best-of-breed products through ease of integration and help to limit lock-in arrangements with proprietary products vendors. The internet itself was largely made possible through the adoption of standards, it is imperative that any technology selection be made with an eye to future compatibility, expandability and economy of maintenance.
The ability to customize and extend the foundation application is a key requirement in the current and future e-business environment. Planning for the iteration and the extension of each phase of an implementation is necessary to fine-tune any project. Any application that is selected should be built with this key characteristic in mind. A toolset and architecture that supports repetitive change and experimentation will reduce current and future market and project risks.
Deriving economy from e-commerce means building on the best-of-breed by adapting those applications to your business processes and not compromising preferred processes for those of the pre-built application. Optimal solutions should encapsulate a standards based run-time infrastructure, applications and tools. In this way customers can mitigate many of the inherent risks of embarking on a e-business initiative.
