From e-Business to Services: Why and Why Now?
What to Expect
Today, the state of the art in business technology is moving from the pioneering efforts of e-business to a more complex theme of services digitization. Services digitization is the ongoing transformation of paper-based transactions into new integrated multi-channel processes. Services digitization may seem like just another "hot fad." Peering closer, however, you will find a significant difference: Digitization does not center on technology, but rather on capturing value through improved productivity and performance. Digitization gives every company the ability to reallocate their resources totally.
In this chapter, we set the stage for the rest of the book. We begin by looking at the five business, technology, and management trends that are causing the migration from e-business to services. We then show that services digitization is a concrete strategy that leading companies are executing against using the concept of a services blueprint. We illustrate the logic behind a services blueprint with two in-depth best-practice case studies of GE and Wal-Mart.
We are often asked the questions: Is e-business over now that the dot-com bubble burst? Are we going back to the old ways of doing business? We don't think so. The changes set in
motion by the Internet are irreversible and will take time to diffuse through organizations. Migrating from old to new ways of conducting business is a continuous, open-ended process. It's not a journey your company can opt out of if you hope to remain competitive.
The transformation of twenty-first century business is under way. At the heart of this wide-ranging transformation is the use of technology to digitize complex services. Some firms like Intel are well into this journey. Intel's mission is to be a worldwide, 100 percent e-corporation. This five-year effort began in 1999 with Intel selling products online, shooting to more than $1 billion in online sales per month within the first year. Since then, Intel's digitization efforts have expanded, and Web-based services are the preferred method for operating and conducting business with its customers, suppliers, and employees worldwide.1
Other firms are doing the same. They are systematically creating new services by rewiring and integrating existing business processes. Consider the following examples:
GE is saving billions of dollars by improving and digitizing various sales, general, and administrative (SG&A) processes while some of its competitors flounder. Is GE's strategy of moving back-office services (call centers, payment processing) to India and China dramatically lowering overhead costs?
HSBC Holdings PLC, a Hong Kong-based financial services firm, is thriving and buying U.S. banks while its peers lay off thousands. Do its sophisticated global financial operations, linked by advanced network technology, allow it to keep costs under control?
Southwest Airlines is able to control its operating costs, despite all the turbulence in the airline sector, while competitors struggle and declare bankruptcy. Has Southwest's strategy of continuously digitizing core spend management and customer-facing processes separated it from the rest?
Eastman Chemical is able to digitize its supply network and lower raw material costs while its peers in the chemical industry suffer from high costs. Is the lack of effective supply chain management one of the root causes leading to the poor performance of its peers?
Amazon.com is thriving by becoming the online service channel for big retailers like Circuit City, Target, Office Depot, Toys "R" Us, and Nordstrom. Are the retailers implicitly acknowledging that Amazon.com can digitize processes (order-to-return, target-to-engage) better than they online?
What makes some companies so much better at new services design and digitizing business processes than their competitors? What business trends are they seeing that others are not able to perceive? How are they leveraging technology? What unique process, application, and infrastructure capabilities are they developing? These are the questions that form the basis of this book. Are they relevant? Well, just look around you. Market leaders in every industry are quietly incorporating as much digital technology into their products, processes, and services as possible. These firms are beginning to see financial resultsbetter operating margins and lower costswith the added plus of real-time interaction with the customer.
Clearly, the nature of competition is morphing, but how and why some firms are better at evolving into digital companies is not fully understood. What is known is that the macroeconomic transformations taking place are real and profound. Due to customer pressure, organizations are transitioning to a multi-channelbrick, Web, mobile, and teleservices economy. However, there are many emerging perspectives on services. Some view it as a technology issue (Web Services). Some view it as an online process issue (e-services). Some view it from the customer perspective (value). All these views are relevant and pertinent. We need a frameworka services blueprintthat ties all of these viewpoints together. Not having a clear services blueprint invariably leads to suboptimal decisions that waste time and resources.
Before we talk about the services blueprint, how can we be sure that the trends are pointing toward services? This is an important issue, as it lays the foundation for the rest of the book.