TORONTO (04/27/2000) - e-Profit: High Payoff Strategies for Capturing the E-commerce Edge By Peter S. Cohan Amacom, 2000, US$27.95 To embrace the benefits of e-commerce for their customers, employees and shareholders, business leaders need to overcome their fear of change. Many managers are afraid their business will be the next one to be "Amazoned." These same managers feel they lack appropriate methods for determining how e-commerce will affect their companies' competitive position.
So writes Peter S. Cohan in his latest book, e-Profit. In an effort to help business managers devise an e-commerce plan of action, Cohan analyses various methodologies that executives can use to guide their organizations in a change process that will help them realize the expected returns from e-commerce. Cohan observes some organizations like to embrace change to maintain market leadership, and others like to resist change until their customers drag them into the "new world". For example, Charles Schwab was much more willing to cannibalize itself while Merrill Lynch was dragged slowly into the field by defecting customers, Cohan writes.
Furthermore, Microsoft Corp. was quite willing to develop an electronic procurement system on its own initiative that would not only demonstrate a new product its commercial customers might buy, but that would also save Microsoft money through purchasing efficiencies.
According to Cohan, e-commerce initiatives induce different change processes depending on two factors:
- the source of the e-commerce strategy: is the e-commerce strategy coming from internal experimentation, or as a response to an external threat?
- the extent to which the e-commerce strategy alters the company's business model: does the e-commerce strategy complement the existing business model, or does it force the company into an entirely new way of doing business?
After taking these two factors into account, four possible change processes emerge (incremental, imitative, reactive and controlled), each of which demands a different approach to managing change. Companies in the incremental category invest in e-commerce applications likely to increase efficiency in the performance of an internal activity that does not have much effect on the company's relationships with its customers.
The pace of this type of e-commerce implementation will be set by an internal timetable instead of in response to an external threat that is moving faster than the company might normally proceed. An example of an incremental change process would be a company that decides to use an electronic ordering system to purchase office supplies, such as Microsoft and its e-procurement system.
Businesses in the imitative category also invest in e-commerce applications to increase internal efficiencies without having much effect on customer relationships. However, the difference with this category is the business is facing an external threat to its position in the market, and therefore may be forced to rush its e-commerce implementation. In this circumstance, there is a danger the e-commerce application may not achieve the full benefit that might be gained if the pace of the implementation was more deliberate, Cohan warns.
Companies who invest in e-commerce strategies that will significantly impact on their relationships with customers fall into either the reactive or controlled category, depending upon whether the force driving the e-commerce strategy comes from an external or internal source, respectively. The pace of the reactive implementation process will be set by the way tension is resolved between the company's desire to maintain the business model that led to its past success and the company's fear of losing further ground to an upstart competitor.
An example of a company who has taken a reactive approach to the change process is Merrill Lynch. Businesses in the controlled category have the advantage of being in control of the roll-out of their e-commerce application. The implementation's pace will be determined as the company works in collaboration with its customers to develop a Web-enabled business process that creates superior customer value.
Cohan goes on to outline his specially developed E-Commerce Change Management Process, which provides an implementation methodology for identifying the type of change facing the company and devising a change process specifically tailored to the type of change. Business executives looking for advice on managing change effectively as they take their companies on-line may find Cohan's e-Profit a good place to start.