Chapter Twelve

Developing the
e-Business Design:
Strategy Formulation
Introduction

E-business requirement
– Simultaneous melding of business strategy,
enterprise apps, and technology implementation
– None by itself sufficient

Traditional corporations gullible of the “legacy

effect”
– Refusal to change can mean stagnation and losing
ability to generate new value through innovation

e-Business not a silver bullet; simply another

technique for reinventing business
– Intel
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Roadmap to Moving into e-Business

Making e-business a reality involves three key

components:
– e-Business strategy
• Figure out why and what of customer value
creation
– e-Blueprint formulation
• How and when of customer value creation
– Tactical execution

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E-Business Strategy Formulation

In this phase, managers build awareness and

make plan to create new customer value
– Develop clear vision of what the customer needs
are and what the customer is looking for
– Be conscious of own abilities and limitation

Includes
– Knowledge building
– Capability evaluation
– e-Business design

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The Process of e-Business Strategy
Formulation
Three approaches to e-business strategic plan
– Top-down analytical planning
– Bottom-up tactical planning
– Continuous planning with feedback

Important question to ask

– What result do I want?

Strategic success dependent on business results you

want, not on what Wall Street thinks
– Managers are the change agents

Define destination
– When we are done, my customers will ________
– When we are done, my employees will________
– When we are done, my company will_________

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The Process of e-Business Strategy
Formulation
Top-Down Analytical Planning
– Systematically define a vision of the business’
future to assess cost and prepare capital budget
– Data-rich environment, numbers driven; Managers
review alternative scenarios to identify most likely
outcome and create strategy based on that
– Serves well under stable business conditions; e-
world is anything but stable
– It’s single greatest problem: Separation of strategy
formulation and implementation
• The never-seen-again strategic plan
• The no-goals strategic plan
• The no-feedback strategic plan

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The Process of e-Business Strategy
Formulation
Bottom-Up, “Just Do It” Planning
– Frontline force taking on new importance in today’s
environment with awareness of changes in customer needs
– Organizations with hierarchical structures have few
mechanisms in place for ensuring insights of front-line staff
reach strategy makers
– As a result, bottom-up strategic planning flourishing
– Managers abandoning analytical rigor of traditional planning
processes and basing decisions on solving immediate needs
– Downside: Can result in fractured pattern of authority, with
individual managers basing strategic decisions on their
business units’ needs, not needs of the enterprise as a whole

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The Process of e-Business Strategy
Formulation

Continuous Planning with Feedback

– In fluid business environment, best approach to
allow strategy to evolve through discovery of what
works and what doesn’t
– Success dependent on feedback
– Demand for quick success and max ROI often
derails e-business projects undertaken by
established firms
– Trigger-point planning supports decision making in
rapidly changing environments
• Lucent, Xerox, and Ericsson

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Knowledge Building
Enables managers to understand priorities by gathering
information on how customer needs change over time
– Strategy must be based on fact, not opinions
– Otherwise, right strategy for wrong problem

Fact-based approach involves: idea generation,

collection, and evaluation and screening

Knowledge building generates ideas

Ideas are screened for potential core strategic ideas

Data collected should address key areas

Data from these areas is segmented and analyzed to

determine the key opportunities in each

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Knowledge Building
Questions to ask when starting an E-Business
Understanding the 1. Who are my customers?
customer 2. How are my customer priorities shifting?
3. Who should be my target customer? How will the E-
Business help reach my target customer segments?
Customer value and 4. How can I add value to the customer?
relationship trends 5. How can I become the customer’s first choice
6. How does my product reach customers?
Technology trends 7. Do we understand the environment and industry trends?
8. Do we understand technology trends?

Supply chain trends 9. What are the current priorities in the supply chain

Competition 10. Who are my real competitors? What is my toughest

competitor’s business model? What are they doing
really well?
Core competencies 11. What capabilities do we have today?
12. What capabilities and resources do we need to speed
up our execution?

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Knowledge Building

Who are my customers?

– First, categorize customers into segments
– What is important for each segment?
• Examine behavior in complementary markets
• What 5 new products in your industry have
become popular in the last 5 years?
• What customer segments are buying these
products?
• Why do they like these products or services?
– Focus on distinctive customer service
– Finally, ask who your customers are

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Knowledge Building
How are my customers’ priorities changing?
– What five things do your customers ask for most often?
– Are your customers seeking experience, not just
product/service?
– How will you add value to them?
– How has your customer changed in past 5 years, and what
will be the change in the next 3?

How can I add value to my target customer?

– Customers want innovation, value and savings
– How can a company provide increasing value for its
customers while simultaneously reinventing certain parts of
its business?
– Rule breakers avoid focusing too much on competition, tend
to be creative, and don’t let industry assumptions become
barrier
• Starbucks, AOL, Yahoo!,
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Knowledge Building

How do I become customer’s first choice?

– Every customer contact creates for the customer a
moment of mediocrity, a moment of misery, or a
moment of ecstasy; How do your customers
experience contact with your firm?
– You can be customer’s first choice if you dazzle
them with unexpected service
– What incentives do you offer your best customers?
– How do customers make decisions about buying
your firm’s product or service?
– What has your company done to retain customers
and deepen customer relationship?

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Knowledge Building

How does my product reach the customer?

– Understanding product distribution and marketing
crucial to success
• Calyx and Corolla created the direct-from-
grower model in flower industry
– How are your company’s products delivered?
– How many steps do they go through before they
reach the customer?
– How many of these can be eliminated?
– How can this distribution and delivery process be
streamlined using the Internet?

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Knowledge Building
Do we understand environment and industry trends?
– Take a fresh look at the environment and see how it’s
changing
– Define critical industry and customer issues so that decisions
can be made against the backdrop of a broader context
– Correctly position the firm within the industry and identify the
most critical industry issues

Do we understand technology trends?

– What core technology are you betting your future on?
– Is it going through a transition? If so, do you have a transition
plan?
– Are you putting all your eggs in one basket or are you
diversified?

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Knowledge Building
What are the priorities in the supply chain?
– Do you understand what your upstream suppliers need from
your company?
– Do you know what your suppliers’ current capabilities are?
– How can we better partner with them to deliver value more
effectively?
– Is there a channel conflict problem?

Who are my competitors?

– Competitors arent just the other companies in the same
business
– Which are your firm’s top competitors today?
– Which are the five upstart companies that will become fierce
competitors within next 5 years?
– How sure are you that your firm understands competition?

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Capability Evaluation

• What do we want to accomplish?

• How should we structure ourselves to be most

effective?

• What capabilities do we have today?

• What capabilities and resources do we need to

acquire in the future?

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E-Business Design
Data analytics, coupled with broadcast engine
technology, foundation for proactive business
intelligence
– Anytime, anywhere, any place

BI is proactive and data driven

– Automates delivery of info to customers using exception
conditions and recurring schedules as triggers for
communication

Traditional decision support apps do not personalize

info
– MicroStrategy’s DSS Broadcaster include new
personalization and distribution capabilities

New BI apps turning traditonal query-and-response

paradigm of decision support on its head

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Review Question

Q1. How do you determine

competition?

Q2. How do we achieve long-term

focus in an increasingly competitive
and sometimes downright hostile
business and technology
environment?

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E-Business
Strategies, Inc
www.ebstrategy.com
contact@ebstrategy.com
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