This essay is based upon the study of two articles on the Business To Business (B2B) Application with reference to their Business and IT Strategies. These articles have been indicated under “References”.
The first Case Study describes how the execution of the IT Strategy is the key to success. It describes the sudden growth followed with a fast decline in the B2B marketplace.
In the second case, an organization’s failure experienced in establishing a network with their Business Associates is described.
Scope of this Document :
Both the above article describe how the respective organizations failed in their B2B initiative. In this document, we try to analyze the different phases in the B2B development strategies in both organizations and conclude on the reasons and remedies for the failures – the lessons one needs to learn from their experience.
Relationship between Business Strategy & IT Strategy :
For any organization, IT Strategy can not be standalone – developed in isolation. It has to be driven by Business Strategy & Business Requirements. IT Strategy is formulated to implement various activities as envisaged by Business Strategy. Implementation of IT Strategy must bring about benefits envisaged by Business Strategy like boosting up operational efficiency, improving employee efficiency, enhancing business growth for the organization, projecting differentiation for the products and service offerings of the organization and other similar results.
This can only be accomplished if the Business and IT Personnel close the gaps between them, work hand-in-hand and formulate IT Strategies in complete sync with Business Strategies. To achieve this, IT Personnel need to look upon the IT Strategy from the end user’s perspective. These strategies also have to be for a fairly long term and be adoptable to change.
The Strategy Formulation :
Now we refer to the organizations covered by the articles. In the first article, the company aims to set up an Intranet within the company as well as an extranet covering its suppliers. The company envisages that since the suppliers can see their stocks and locate the items short in stock, they can offer the required products on their own and arrange to deliver the same quickly reducing the supply lead time. The company is right in thinking that this will result in more business opportunities for the supplier and simultaneously, enable it to reduce the cycle time for production – benefiting both in the process. In turn, the company has already put in place the Infrastructure having internal and external networks (LAN, WAN) along with the relevant software like CAD, PDM, ERP & Collaboration Software.
In case of the second company, its plan to create a virtual B2B marketplace where the Customers and suppliers can meet and exchange goods for money is also an example of sound business strategy backed by a sound IT Strategy.
Thus there are no problems in Strategy formulation – there is a complete sync between the Business Strategy and the IT Strategy in both above cases.
Strategy Implementation :
As seen from the articles, there is a clear gap in implementation in the first case. When the organization creates Intranet and Extranet, the entire chain of suppliers ought to be a part of the network. Unless this happens, shortage of a part may not be noticed by the concerned supplier if he is not on the network and the part will not be supplied, defeating the business need behind the IT initiative. In a collaborative strategy, everyone needs to collaborate with everyone else. Strength of the entire chain equals its weakest link.
There were issues encountered during implementation which should have been thought of and taken care of prior to implementation. For example, the technical compatibility between the company’s system & that of its suppliers needs to be ensured – not only now but even for future, considering the upgrades / enhancements at any link in the chain. This may call for investments on the part of suppliers, which should have been considered with respect to the prospects of getting additional business from this initiative. If there are no incentives for the suppliers to opt for such a venture, they will not prefer to go for the same. Also, what is costly but critical for buyer may not be perceived to be of a significant value by the supplier. Suppliers may also have to successfully counter a fear of possible layoffs in their organizations. Suppliers of critical or costly items are not necessarily the ones to afford such investment. Moreover, there are no statutory requirements as in case of EDI that compels the suppliers to comply, nor they are dealing with a giant company where they are virtually forced to comply in the fear of losing the valuable business or to earn a bad name while dealing with them. The expectations regarding acceptance of integrated application has turned out to be rather too optimistic. Thus these are practical difficulties that should have been anticipated and eliminated prior to implementation.
In case of the second company, the Business Strategy is to create a meeting place for prospective buyers & sellers, facilitate them to transact online and earn from the transaction fees which again, is a good Business Strategy equally matched by a good IT Strategy of creating necessary infrastructure for operating the same. It has created an efficient B2B marketplace but there are no suppliers taken on board to attract the customers nor there are customers whom the suppliers are attracted to target through this new medium. Launch of the B2B marketplace should have been done with at least a small number of suppliers and customers enough to get going initially. Moreover, at least during the initial stages, B2B marketplaces projected themselves as a meeting place whereby the core benefits to the customer of coming across a wide variety of choice, efficiency of operation, pleasant & rewarding shopping experience etc did not get adequately highlighted. In addition, B2B ventures must also maintain high standards of efficiency in delivery processes and highlight the same to prospects to win them over. This was also a flaw of implementation.
Strategic Processes :
Having reviewed the Strategy formulation & Strategy Implementation, we can pinpoint one flaw in the Strategic Processes common to both the articles – the Risk Analysis or the process to identify potential risks was absent. Had an attempt been made to identify what are the risk factors, what all can go wrong and to think of identifying the remedial preventive measures, the shortcomings discussed above could have been identified and eliminated right before the implementation stage.
IS Strategies are driven by Business Strategies and IS Strategies need to be synchronized with Business Strategies. They must facilitate achieving Business Objectives. Strategic Planning & formulation must be weighed by the anticipated benefits in monetary terms against the likely costs and strategy finalized only if it turns out to be profitable. Attempts must be made to translate subjective benefits into monetary benefits, for this purpose. It is absolutely critical to identify the possible risks, assess their likely impact and anticipate their probability of occurrence. The risks with high impact – higher probability of occurrence must be very carefully considered and appropriate mitigation planned to counter the same. Similarly, for all risk factors. Implementation must be worked out in overall phases, each phase divided into various activities to be carried out with each activity subdivided into a number of steps in appropriate sequence. Formulation of such a detailed and well thought of implementation plan must be a critical part of the IT Strategy.
Execution of the concept is key to success By Sawhney M. (2002)
Collaborative Computing and True Enterprise Architecture is still two years away : By Warthen, B.