By Haapaniemi, Peter; Huler, Scott; McDermott, Michael J.; Benchley, Robert S.
Chief Executive (U.S.)
Innovative ideas and strategies go nowhere without the structure and culture to sustain and nurture them.
With all the attention paid to e-tailing, online auctions and Web-company IPOs, it's sometimes easy to forget a simple fact: the New Economy is still just that-new. And in the coming years, we can expect to see it having an ever-greater effect on business.
Indeed, global e-commerce will reach $6.8 trillion in 2004-about 8.6% of the world's economy, notes Cambridge, Mass.-based Forrester Research. That growth spells new opportunities for selling goods and services. Before charging into the electronic marketplace, however, leaders need to get their organizational houses in order. On the technology front, for example, companies must have internal systems that can connect with customers and suppliers, back-office systems that can match the speed of front-end Web sites, and security tools and practices that will earn the confidence of online customers.
The issues go far beyond technology, though, and drive deeply into a company's organizational structure and culture. Are people trained to make decisions and improve quality? Do processes frustrate customers who are becoming accustomed to immediate action? Do reward systems promote innovation, or punish it? In short, streamlining the organization for the New Economy is a multifaceted challenge.
There is, of course, no single "right" formula for getting an organization ready for the New Economy-but there are guidelines and principles that leaders should keep in mind as they take their companies forward.
COMPRESS TIME AND DISTANCE
As any executive knows, there is a lot of waste in traditional business processes. In the New Economy, companies need to use intranets, databases, networks and other tools of e-commerce to support the redesign of processes, and build links that can cut down on interactions that simply don't add value. For example, leaders should look for opportunities to standardize and connect financial, operational and other systems in order to simplify and speed up company-wide comparisons and analyses. They should integrate Web and call-center systems with back-office ERP systems to make customer information accessible to frontline employees. And they should use technology to enable employees to serve themselves-to update their own HR files, for example, or to report travel expenses.
Extending processes beyond organizational boundaries can go a long way toward streamlining the business. Companies can let customers, as well as employees, serve themselves-in essence, transferring some internal "work" to the customer. By allowing customers to use automated Web and phone systems to get product information, track orders and so forth, companies can also shift such activity to automated electronic channels, where the transaction costs are a fraction of those associated with "manned" traditional channels.
Linking systems and processes with supply-chain partners can lead to vast improvements in planning and coordination-and, therefore, business performance. According to the Bostonbased research firm Aberdeen Group, sophisticated supply-chain management can help reduce inventory levels by 50% and decrease overall cycle time by 27%. Companies can also turn to eprocurement, which essentially involves creating an intranet-based electronic catalogue of goods, and allowing employees to make their purchases online. This accelerates the process and lets the company maintain control by ensuring that purchases are made using the right suppliers and corporate guidelines. It also can reduce the price paid for goods by 5% to 10%, according to the Aberdeen Group.
Overall, there are lots of opportunities to improve processes in the New Economy-and the choices can seem overwhelming. Stephen Sprinkle, Deloitte Consulting's global director for strategy, innovation and eminence, advises CEOs to get started by focusing on two key areas: customer self-service and e-procurement. …