Dispatches: Once were cannibals

Companies will make a killing online, but the trick is to think outside the square. Electronic commerce is about much more than Web based inventory trackingLet's start by getting this thing into perspective. When the commentators and evangelists start talking about hundreds of billions of dollars of electronic commerce being conducted within a few years, it's all a bit of a fiddle.

They are really just saying that sales orders that used to be faxed or verbally phoned between companies are now being e-mailed or filled in via Web forms. This, you will agree, hardly constitutes a revolution. Like the move from postage to fax, it really represents a more efficient order transfer, and some significant cost savings, but it doesn't fundamentally alter the market.

To the layperson, electronic commerce conjures up imagery including browsing the shop front, making the order AND taking delivery of the product all via the Internet.

By this definition, Amazon.com is not revolutionary, whereas E-Trade.com probably is. With E-Trade you can peruse relevant information before you make the purchase, transact the deal and take delivery of the final product all in an online environment.

IT professionals are under pressure from company boards and executives to take the lead in introducing their organisation in what is commonly regarded as the New Order for business. But are IS professionals, trained in the manageable, measurable world of Return on Investment, necessarily well equipped to make this assessment?

Not always, according to David Kelly writing in US Computerworld. Kelly says the ROI approach, while fine for assessing bottom line questions like how much will I save, misses the whole point about electronic commerce -- and that point is opportunity.

With that in mind he says the real measure ought to be return on opportunity (ROO). "Designed to extend a conventional ROI, an ROO analysis helps organisations define and quantify potential top-line benefits of deploying new strategic business applications and technologies, including revenue, market capitalisation, increased customer base and decreased attrition.The challenge with measuring those opportunity benefits is quantifying them in dollars so that they can be used in the ROO calculation."

Revenue protection should not be ignored or disregarded out of hand, but it should not be the end goal and certainly not where existing revenues offer less potential rewards than new opportunities.

If there is money to be made in them thar hills, you can guarantee that eventually someone will figure out how.

One example that Professor Carl Pistorius, director of the Institute for Technological Innovation at the South African University of Pretoria, cites is that of the Swiss watch industry. The Swiss watchmakers dismissed the idea of digital watches, even though they had the idea first. Surely, they surmised, no one would want such a thing. The Japanese, schooled in cheap consumer electronics, were not blind to the opportunity when it arose. Subsequently the Japanese redefined the timekeeping industry and the Swiss were forced into a defensive posture, servicing a high-end niche.

Pistorius calls this sort of competitive threat a wave of creative destruction and suggests that smarter companies should be constantly on the lookout for left-field challenges.

Ride the wave, join the cannibals and dig it.

Andrew Birmingham is the Chief Operating Officer of IDG Communications.andrew_birmingham@idg.com.au

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