DHL E-Business White Paper 2000

Transcription

1 DHL White Paper 2000/ 1 DHL E-Business White Paper 2000 Author: Colum Joyce DHL Electronic Commerce Strategy Manager Introduction The Internet and its associated technologies are transforming many businesses and industries. The major business drivers of this transformation are the ability to reach more customers, offer new forms and levels of customer service, achieve mass customization or personalization of products and business process efficiencies. As more businesses transform their operations, fundamental structural changes in the market environment will follow. Emerging Impact of the Internet Presently the most visible impact of transformation is in the Business to Consumer environment. Analysts, however, generally agree that this will represent only 10% of the value of E- Business by The major economic transformation is occurring in the Business-to-Business environment. Over time, a greater and greater percentage of sales to consumers (both business and individual) will be conducted over the Internet. Businesses will rapidly replace many of the costly proprietary applications used for ordering, processing and customer support. The competitive advantage provided by lower process costs, greater speed of response, security of transaction plus guaranteed levels of service will attract an increasing number of businesses. Organizations and businesses failing to adopt the Internet technologies as their primary means of business coordination will rapidly become InfoNiched as their pool of accessible suppliers and customers diminishes. Internal Business Opportunities It is estimated that savings and efficiencies of between 5% and 20% of a company's revenue can be gained through the implementation of Internet technologies. These gains, to be fully achievable, also require integrated application suites and enhanced processes in support of procurement, business environment and customer relationship management. Internal business efficiencies are only achievable where an organization has a complete blue print for addressing the opportunities available. This Blue print analyses and aligns planned transition in all sectors of the business. It includes all supplier relationships and management integrated internal support applications designed to provide a seamless relationship and link between supplier and customers. It facilitates the focusing of appropriate levels of resource to support dynamic customer needs during and post transition. Presently most organizations are only addressing one of three areas required to become an E-Business. This is the customer-facing element of the equation. Large resources are being focused on generally cosmetic new channels that are underpinned by legacy applications and redundant or inappropriate business processes. To truly benefit from the transition to an E-Business, an organization must focus its effort, in a coordinated manner, to extracting value from its procurement processes, its internal business coordination, and information management processes. Failure to achieve a seamless flow of information from order through to the procurement process and then, in reverse, from production to consumer will increase costs to the organization. Cost increases occur because the business carries overheads imposed by legacy inefficiencies. As volumes increase these inefficient processes are activated more

2 DHL White Paper 2000/ 2 often thus reducing the overall business effectiveness. Returns to the transitioning business then disappoint and undermine future change plans. Managing External Relationships Businesses are an intermediary between a consumer, the supplier and the product required to fulfill the consumer's need. It simplifies and mediates the relationship between the parties. It is the facilitation of contact and simplification of support that is its value to both consumer and producer. In the emerging E-Business environment, the efficient, cost effective and flexible management of relationships in search of the best price to service ratio will be a key competitive advantage for a business. In exploiting the true capabilities of the Internet, an E-Business will, in the future, have no fixed relationships with any supplier. The relationships mediated through standard technologies and logical points of resource access will allow trade-by-trade relationships to be formed, fulfillled and then dissolved. Fixed time contracts will diminish, as these will represent an in-built inefficiency for the E-Business. Fixed contracts represent a constraint as they take time to negotiate, have assumptions that are based on existing information and are ineffective in projecting changes in underlying trading dynamics. The emergence of standards based integrated global information connectivity, and a critical mass of businesses utilizing these, creates an environment where customer requests for needs fulfillment are passed to the pool of potential fulfillment resources. The best price to service ratio is accepted for representation to the consumer. Once fulfillled, the relationships in support of the initial trade can be dissolved. In support of the product, additional relationships, linked to the life cycle of the product or service, are negotiated, accepted and monitored. Implications of Dynamic Relationships Most relationships within and between businesses today are on a contractual basis over an agreed period. These usually define the mutual business commitments for one or more years. Such contracts facilitate the present management of the relationship in an environment where inadequate information, applications and processes make the negotiation process long and costly. This means that a business looks to avoid the process of re-negotiation where possible. By 2005, the emergence of expert systems, standard communications, agreed business process definition and interchange, such as Rosetta Net, will provide the infrastructure for shorter and shorter contracts between businesses. Eventually the trade by trade dynamic relationship model will emerge. For businesses in this environment, skill and application suites will support nonhuman mediated learning pools. These learning pools will analyse the success of past relationships, mediate ones in operation and define relationship structures in support of the businesses strategic aims. These will include process effectiveness, customer relationships, customer satisfaction, customer retrading, product sourcing, supply and trade level margins. Business management in this environment will focus on the development of the overall business strategy and the creation of codified business rules that guide the applications, processes and metrics. Expert systems will provide feedback as to the level of success in achieving the business strategies and be capable of suggesting or automatically implementing alternatives to maximize customer satisfaction and business success.

3 DHL White Paper 2000/ 3 In this environment, the key competitive differentiators will be the quality of the expert suites, integrated nature of the processes and the intellectual capital focused on the generation of innovative and flexible business rules. All will be focused in support of the dynamic business strategies and process efficiencies. In its ultimate form, the customer, operating in a businesses defined strategic framework, plays the lead role in defining the process and the fulfillment criteria they see necessary to fulfill their needs. Here the business provides the tools and the customer defines how these operate in support of their needs. This leads to the ultimate capability to manage customer expectation: self-definition, selfconfiguration and self-management. The most open, simplest to use and best value for time/money is the market leader in this customer defined trading environment. Instant Competitive Advantage The E-Business will operate to defined dynamic relationship rules, formulated and agreed on commercial terms, with the best of breed sources of process and talent. To be competitive, the suppliers must enhance their offer at each cycle of creativity or trade. This will increase the E-Businesses overall competitive efficiency as an organic part of their relationship strategy rather than through internal resource expenditure. Business Intellect Access The future E-business environment just described will place premium value on intellectual capital that is characterized by simplicity, flexibility, overall business knowledge and accessibility. business will not be just the pay-rolled staff but include all stakeholders and contributors in relation to a trade. It will equally include experience and intellectual capital sourced dynamically or contributed by past and present market participants. In today's environment, access to additional intellectual capital is by outsourcing or through staff acquisition. In the future, access to such capital will be through out-reaching. Out-reaching looks to establish a contributory environment in which any past, existing or aspiring stakeholder can participate in the development of a business process model within the strategic framework established by the business management. Here the strategy for a business is defined and is constantly contributed to at a tactical level by the business stakeholders. The returned benefit of contribution is in the overall efficiency of the business processes perhaps also augmented with personalized rewards. These could range from price reductions, contribution rewards, process efficiency return rewards or even equity related to single processes, services or even equity in the core business itself. Simplistic rewards related to employment would be rapidly replaced by rewards based on contribution to success. This long-term reward basis will extend and encourage additional contributors to the business success. In such a scenario the ability to attract and maintain intellectual capital contribution to the constant upgrade of the businesses processes and services will be a key competitive differentiator. E-Businesses implementing this model will not be just customer driven but stakeholder driven and geared to selfresolution of stakeholder needs in a dynamic fashion. In such a dynamic trading environment, the human capital resources of a

4 DHL White Paper 2000/ 4 E-Business Valuation In a business environment characterized by constantly changing relationships, flexible intellectual capital and dynamic ownership, market valuation methodologies will require adjustment. It is increasingly evident today that intellectual capital is a key market valued resource of Internet start up companies. Traditional businesses are just beginning to realize the value of their intellectual capital and are increasingly providing innovative means for acquisition, retention and rewarding of required intellectual resources. In the future, E-businesses will lack many of the asset-based criteria on which market valuation is presently based. They will be flexible, fast moving, open and constantly changing. Business models and relationships, relative value and environment will change hourly, daily or weekly. Consistency will be a disadvantage in such an environment. How then could such businesses be valued? Key internal business metrics such as customer re-trading and customer satisfaction will emerge as key indices of perceived business success and derive overall external market valuation of E- Businesses. In addition to this will be measures of the businesses access to, contribution and maintenance of, Intellectual capital pools for the evolution of their business processes and services. It is likely that valuations of E- Businesses will become increasingly granularised. This scenario sees market valuations for individual services and processes outside the core equity of the business. Contribution to process or service evolution will generate equity reward related to each service and process rather than a stake in the businesses core framework equity that will be quoted separately. Just as the existing physical economy generated equity markets related to its physical core value items, the emergence of equity markets related to processes and services will emerge. Equity related services such as customer relationship management, order taking, invoicing, process monitoring and individual value added services are likely to emerge. These will allow focused external financial and intellectual resources to be attracted to the business seeking to develop best of market capabilities. In such a scenario, the Core Business Framework equity will be valued in relation to its ability to manage the processes of capital and intellect integration to a development and exploitation process that brings fast competitive advantage and return on Stakeholder or contributor investment. In such an environment, the cumulative value of the parts becomes far greater than the achievable results from a presently integrated whole. This is not the case in today's value market. Such a valuation model also provides businesses greater valuation stability as the individual processes and service are to a degree insulated from the overall core framework equity value. This also allows businesses far greater resource generation flexibility as they set up and manage equity rewards for individual processes and services as key characteristics of the business process. This means the core framework equity is not diluted in search of additional resource but is increased in value where such an investment process results in a market competitive or leading service or improved process. E-Business Management and Personnel Management and personnel structures in today's businesses are focused on relationship management of suppliers,

5 DHL White Paper 2000/ 5 internal process owners, staff and customers. The structures, training and skills used to run a business today are variations on those required for running mass production, low knowledge capital businesses of the 19th and 20th centuries. They are based on a power and knowledge hierarchy that will be replaced by transient contractual relationships with businesses, increasing personal management of employment, skills, training, and interaction with legal and authority structures such as taxation, social security, health and pensions. New business neutral intermediaries will emerge to assist knowledge staff work and operate outside classic business frameworks. These will accelerate the trend to out reaching for skill sets on a project by project basis. Just as customer relations will be on a trade-by-trade basis, so to will the creation of projects and initiatives designed to enrich the businesses market offer. Core framework management for such E- businesses will be limited to the creation and strategic management of the core framework organization, its business rules and market access capabilities. They will consist of few personnel highly skilled in resource management, idea generation and skill set attraction to the fulfillment of the businesses aims. Large elements of existing core business structures such as personnel management, financial management, planning and support, customer relationship management, IS and IT will be delegated contractually, by the business or personally, to best of breed businesses in those specific fields. Present costly overheads in non value addition administrative processes will be outsourced whilst contracted personnel will be responsible for all self support with legal and social authorities in relation to their personal environment and planning. This evolution will remove the costs of supporting non-core business functions and the difficulties in accessing and attracting key ideas and development of skill sets for business growth. The ability to reward via equity or long term results linked payment for short term productive input to a product or service will radically change businesses strategies for talent attraction and retention. In such a business, a strategic management skill will be the ongoing identification and relationship management of the talent pool available to them. This is critical for an ongoing knowledge update of the pool in relation to business evolution and the pool member s availability at later times for product and service creation or upgrade. This process also serves the purpose of decreasing the integration time of pool members to a rapidly evolving business environment. This is today a major cause of product and service delays in time to market and poor fit to purpose of initial business service offerings. In such an environment, E-Businesses will, over time, create a pool of talent that is increasingly knowledgeable of the businesses strategic and tactical business aims. It will also be increasingly successful in bidding for the E- businesses trade as it occurs. The applications and talent pool in support of these support businesses will create their own efficiencies of operation as experience and knowledge grows. This offers the opportunity to establish primary and secondary suppliers and talent groups of choice related to the business development or operation. Over time the costs of interaction and relationship management will fall for all participants thus increasing the overall

6 DHL White Paper 2000/ 6 value of association to each individual entity involved. Downsizing for Unlimited Flexibility Future E-Businesses will be a small core of strategic managers supported by expert applications, managing relationship effectiveness and with access to a vast fluid talent base for business service evolution. Such downsizing of businesses to core business management increases, not decreases, the ability of businesses to formulate and implement flexible proactive and reactive market offers. The rewards of such cooperation to those chosen would be fixed fees for one-off input or participatory rewards in the ongoing success of the product or process produced. This will provide both the talent pool and the E-Business with the structures and the rewards required to adequately and flexibly exploit the emerging business potential of the Internet and its associated technologies. Author: Colum Joyce DHL Electronic Commerce Strategy Manager Copyrights: DHL July 2000 Present management structures to support business evolution slows that evolution because of structural inadequacies and organizational politics. The simple necessity of multi functional coordination, transformation and implementation of changes required within an organization absorbs large amounts of business resource today. In such an environment informal and formal processes introduce inefficiencies that undermine the businesses flexibility and responsiveness to change. The loss of controlled personnel is offset by the access to a greater overall talent potential in the external environment. This essentially means that any talent group or individual with the means to interact and operate to the stringent requirements set down can respond to the E-Business bid for participation and benefit from their successful offer. Thus, the core of the success for future E-Businesses will be their ability to attract best of breed talent and process supply on demand without the costs of retaining those resources for periods unrelated to their value as a contributor. The E-Businesses operating to such a model will not be a personnel or process owner but a facilitator and focus of accessible talent to a strategic or tactical business goal.