Business is changing. Besides oft-quoted statements like “eBusiness or out of business”, the transformation of the way companies interact internally and externally is going to create new opportunities for not just software and technology companies, but also for companies looking to tap into new markets. Amazon and Dell used technology to bring out change in their industries. We will see a lot of this. Only, this time around, change may actually be brought about by incumbents.
Writes David Kirkpatrik in Fortune:
Because of the Internet, says AT Kearney, companies now have the ability to strip down their business to its essence, to focus on where the greatest value creation (and profits) lies. Extraneous functions can be eliminated through partnerships and newly supercharged forms of outsourcing.
[Companies need to] realize that parts of a company create value and profit, while others don’t. Now, using the Internet, each business component or process can be individually farmed out and reconnected, Lego-like, to processes elsewhere at unprecedentedly low cost. This is outsourcing on speed. With this, only business functions through which your company can add genuine value will remain.
What this is doing is forcing companies to ask which business they are really in (or want to be). Cisco is an excellent example of a company which has leveraged the Net and its relationships with its partners – about 70% of Cisco’s hardware goes directly from these partners to customers, without a Cisco employee ever handling the goods.
The reason why this inter-connection of companies and processes can take place now is because, according to Don Tapscott, “with the arrival of the Internet, many transactions costs are plunging to zero.” Transaction costs occur when companies need to interact with entities for products or services, and comprise of search costs, contracting costs and co-ordination costs.”
Continues Tapscott, “Now, large and diverse sets of people scattered around the world can cheaply and easily gain real-time access to the information they need to make safe decisions and co-ordinate complex activitiesNew business models based on networks are the new keys to competitiveness and wealth creation. eBusiness is the central theme at the heart of business strategy.”
Technology and the Internet are at the centre of the revolution being brought about in enterprises. How the organisation interacts with employees, customers, suppliers and partners is where the action is going to be in the next few years.