E-Business Success Rests On Four Pillars Of Wisdom? Or Folly?

It has become commonplace to observe that the Internet has changed the rules for doing business, both for better and for worse. Better, because it is the world's largest standards--based network, a platform for developing, delivering, and exploiting a myriad of advanced one-to-one communications applications--a paradise of opportunity for Web-knowledgeable VARs and integrators. Worse, because the Internet's ability to dramatically reduce, or even eliminate, the incremental costs of interaction between customer and vendor has resulted in an almost frictionless environment where the only constant is rapid and radical change, and customers often know more than you do. This lack of friction makes the rules of engagement in the Internet economy radically different from those of the traditional "brick-and-mortar" economy. They require a radical mindset that is difficult for many organizations to adopt or even understand. But understanding this mindset is the key to increased profits for VARs and integrators, who face a double dilemma. Not only must they understand the impact of the new Internet economy on their own business, but they must also understand its impact on their customers.

There are a host of Internet and e-commerce business books on the shelves out there, and it's very hard to know or judge if the authors actually know what they're talking about. In many cases you can't even judge them by their curriculum vitae, since, especially in Silicon Valley, the heartland of technological and business change, failure may indicate a visionary risk taker whose success lies in the future, while success may be the curtain call for someone who can no longer keep up.

Yet in my market research, I've run across data, based on the input from a variety of businesses whose e-business initiative run the gamut from nascent to mature, which indicate that at least one set of authors may be authentic gurus for the age of e-business. They are Amir Hartman and John Sifonis, managing directors in the Internet Business Solutions Group and the authors of Net Ready: Strategies for Success in the E-conomy [New York (2000) McGraw-Hill. ISBN 007-135242-2].

Cisco is one of the outstanding success stories in the e-conomy; based on their experience there and their consultancy practices, Hartman and Sifonis have delivered an engaging, if somewhat jargony, vade mecum to e-business success. I can't do much more than briefly highlight some of the more interesting aspects of the book in this review, but I urge interested VARs and integrators at every level to read Net Ready as a guide to their opportunities for increased profitability as the Internet continues to accelerate the business of business.

Even before buying the book, you can go to www.netreadiness.com and fill out the Net Readiness Scorecard to see where you stand now and how you can improve. Just reading through the questions, some of which will be discussed here, will give you a good feeling for the metrics of Internet success. In this review, I'll tend to emphasize the meta-issues of Net Readiness--not how VARs and integrators can become net ready themselves, but how, while doing that, they can position themselves to effectively serve customers who are either net ready or trying to get there.

The Four Pillars Of E-Wisdom

The authors identify four properties of successful e-business organizations, properties that distinguish these leaders from the vast majority of companies who have approached their e-business initiatives on an ad hoc basis with no way to measure their ROI and no understanding of the true cost of ownership imposed by the resulting system. These properties are leadership, governance, competencies, and technology.

Leadership

In Net Readiness terms, leadership measures the ability of a company's leaders to communicate their e-business vision to everyone in the organization. From top to bottom, employees must think in e-business terms and be ready to act in e-business time. The company's leaders have to encourage experimentation and responsibility, promote tolerance for ambiguity and chaos, teach employees that failure is part of learning to succeed, and, above all, focus everyone in the organization on what the authors call "ruthless execution."

Some of the most important metrics of net-ready leadership are a strategic plan that includes an e-business strategy, a 12/18-month e-business roadmap, an emphasis among senior management on generating competitive advantage via e-business technologies, good integration e-business activities with the overall business strategy, and a senior management team that is deeply involved in the development of the company's e-business direction.

For VARs and integrators hoping to serve net-focused companies, this implies the need for cultivating higher-level contacts, since the drivers of success are higher up the corporate food chain than the IT contacts that are the usual internal partners with an integrator. At Survey.com, we often hear organizations stress the need for vendors to communicate a strategic vision--this is even more important in the e-conomy.

Governance

Governance, which is basically the operating model of a company, helps structure it to respond to market pressures. Governance determines how authority, roles, responsibilities and accountabilities are assigned, defines decision processes, determines policies and standards, sets goals, and decides on the metrics that measure those goals. Although the term implies bureaucracy, it is not a recipe for additional hierarchy--the last thing needed in the fast-moving e-conomy. Good governance makes it possible to drive e-business initiatives in a rational manner, in accordance with overall organizational goals. Some of the most important metrics of net-ready governance are concentrating on web-based application development, assigning responsibility for e-business application development to business units rather than centralized IT, a high level of spending on e-business relative to other IT spending, management of e-business activities by combined IT/business unit teams, and clear accountability and proper resource levels for e-business projects.

This has interesting implications for VARs and integrators. Most important, it demands an even higher level of business-specific knowledge, since Line-Of-Business (LOB) managers become a more important part of the implementation team. It also implies more freedom to spend money on e-business initiatives and a more rapid sales cycle, since authority in a net-ready company tends to be decentralized.

Competencies

Competencies are almost a meta-aspect of Net Readiness: they are the ability to coordinate and balance the other aspects of leadership, governance, and technology. Competencies enable a company to deal with five challenges (detailed in an earlier book by Sifonis):

* Complexity. In the Internet, boundaries are fluid; ambiguity rules. Competitors today may be partners tomorrow.

* Concurrency. Everything tends to happen at the same time, ruling out serial thinking or action.

* Coherence. It's critical to maintain the integrity of an organization while encouraging rapid adaptation.

* Connectivity. Informa-tion must be shared to be exploited--with allies, partners, associates, and customers.

* Coordination. Relation-ships are the name of the game with mutual understanding of explicit objectives and responsibilities.

Some of the most important metrics of net-ready competencies are agility, the ability to react quickly to changing market conditions, experience in building and managing multiple strategic relationships, iterative enhancement of e-business offerings, and "ruthless execution" of e-business initiatives (e.g., three month projects, three to six people).

Again, we see the implication of shorter sales cycles, an increased emphasis on rapid delivery of completed projects, and the necessity of building partnerships to deliver the needed functionality to customers. Smaller VARs and integrators will need to build themselves into "virtual" systems integrators, creating a smaller equivalent of an Arthur Andersen through partnering with complementary firms.

Technology

In technology the news for VARs and integrators is very good indeed. As the authors note, "it's hard to make a bad technology decision because the technology has such a short shelf life." In other words, they encourage companies to use the "Ready, Fire, Aim" technique in choosing a technology for an e-business initiative. Their other critical piece of advice is "Buy, Don't Build." There's the e-conomy opportunity for VARs and integrators in a nutshell.

Success in the e-conomy requires a robust, organization-wide technological architecture that let managers implement e-business initiatives rapidly without having to justify incremental improvements in the computing infrastructure. Above all, this requires a total reliance on standards--here's the payoff for all those TCP/IP courses. The emphasis is on flexibility and customization. Some of the most important metrics of net-ready competencies are a strictly standard IT infrastructure, on-time delivery of functional e-business applications, strong IS/IT operations capabilities, flexible Internet solutions, and an emphasis on actively upgrading backend systems to meet future Internet requirements.

So for VARs and integrators, the good news just keeps on getting better. The opportunities are almost limitless. Yet you'll face the same fundamental problem that your customers do: in the age of the Internet, customers are becoming more demanding. They have access to more information, are better informed, and know that it's always possible to get it faster, cheaper, and better. Like a poem, the search for a solution is not so much finished as abandoned; the closer you are to the customer, the more likely they are to stop their search with you. That close partnership, as the authors constantly point out, can make the cost of switching to another VAR or integrator prohibitive. Willing lock-in.

In this brief review, I've only covered Part One of the book. Hartman and Sifonis go on to illustrate their prescriptions with copious examples from the success stories (and failures) of the Internet economy. They define and explain various business models and throughout give advice on how to think about specific problems, how to weigh alternatives and your options, and how to deal with the complexity of the e-conomy without being paralyzed by a plethora of choices difficult to distinguish. Although the writing could be clearer in spots, overall the book is an excellent introduction and guide to the e-conomy jungle and will doubtless repay careful reading and rereading. The only thing lacking is a bibliography for further reading. I suppose they intend for readers not to read more, but to go out and do it--ready, fire, aim!

Dave Trowbridge is the senior analyst of Survey.com, a market research firm specializing in data-intensive reports on information technologies, where he monitors operating systems, portals, and various aspects of business intelligence.