Mining for e-gold

We tend to think of e-business applications as transformational, but not all of them involve a total overhaul of your business. E-business can also be used to enhance the value of what you already have, and that can be particularly valuable in a tight economy.

As companies switch from being manufacturers of goods to providers of services, they will focus more on developing and managing intangible assets. One of the more critical intangible assets any company has is its IC (intellectual capital), and e-business can be used to develop IC.

IC is essentially the company's know-how, and is typically contained in things such as patents, customer tracking systems, and the knowledge that exists in the heads of employees. In e-business, two main types of IC -- product innovations and customer knowledge -- can be significantly enhanced and supported.

Most product innovations come from inside the company, but customers and suppliers also provide important information that can lead to innovations. Because e-business provides a low-cost way to connect people across geographical and organizational boundaries, it provides a good basis for collecting and developing innovative ideas.

Trading partners often see problems and opportunities to which business leaders are blind. One long-established system capturing ideas from trading partners is Daimler-Chrysler AG's SCORE (Supplier Cost Reduction Effort), a great example of how a company can use e-business to tap into interactions already taking place. SCORE is pretty simple: A Lotus Notes-based system collects improvement ideas from the automaker's suppliers. Over the years, the system has resulted in thousands of ideas and cost savings in the billions.

Another way e-business can spur product innovation is by supporting virtual teams. Shared, online workspaces help teams, whose members are not co-located, to collaborate and retain a collective memory. These technologies also allow the company to recruit and retain good people who are not willing to live near existing offices.

Knowledge about customers is some of the most valuable intellectual capital. Specifically, e-business can make it easy for customers to provide information about themselves. An example of this is Lands End's My Virtual Model, which allows customers to create an online, 3-D model of their body to see how clothing fits before making a purchase. Shoppers who use the model are 19 percent more likely to make a new purchase than those who don't, and their orders are 16 percent higher, the company reports. E-business allows a company to customize communication and special offers, and then capture information about the customer's interests and preferences.

Because e-business greatly reduces interaction costs and allows companies to collect much more data than before, e-business can be used to increase the amount and value of a business's IC. Although intellectual capital may not be on your balance sheet today, it will become more tangible in the future, and e-business should be a key part of any plan for IC management.

Barb Gomolski is a research director at Gartner, a research firm in Stamford, Conn.

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