e-business: big business or bermuda triangle?

A conference on e-business run by the International Bankers Forum e.V. of Germany in association with the Maleki Group took place in Frankfurt earlier this year. The conference was organized in the context of Global 24, a series of innovative fora that are held every year in the world's major financial centers. In Frankfurt, this conference attracted about 300 participants from a broad spectrum of society. Elsewhere, the conference reached viewers via television and the Internet. The special topics addressed by the panel members were (i) E-Markets: Creative Chaos? (ii) E-Labor: The Future of Work? and (iii) E-Politics and E-Security: Controlling the Uncontrollable? E-Markets: Creative Chaos? The panel members agreed that the Internet is applying strong pressure on markets by putting the accent on interconnectivity, transparency, and risk intermediation. They saw that, in banking, more complex financial services are in demand, and that this will force increased fragmentation of activity. Banks that cannot manage the transition will not survive, and scaling up (as in Germany and Japan) is not a solution. In general, the Internet calls for the development of a whole new range of management reporting, budgeting, and planning software, as well as associated support services. The age of five-year business plans is over, and individual business strategies now have to integrate knowledge optimization and application and system development. There are implications too for organizational structures and corporate cultures, which all too frequently obstruct change. One panel member remarked that established organizations employ highly capable people and then set them to work within business processes and business models that doom them to failure. An immediate requirement of management is knowledge of the Internet and a good measure of courage. But, the panel members accepted that, while new business processes and business models are already available, or can be developed without difficulty, the main obstacle faced by organizations lies in identifying clearly their respective roles in the value chain. Still, the members concluded that e-markets will in any event surely accelerate the shift of power toward consumers, causing fundamental changes in the way organizations relate to their customers and compete with one another. E-Labor: The Future of Work? The panel members noted the Internet's remarkable ability to both free and generate information, and predicted that the new supply of and demand for information will impact labor. First and foremost, highly qualified labor is required. This has implications for human capital formation and institutional arrangements for work. To address the former, continuous incubation of ideas and talent is necessary. But, people will increasingly be judged on results because the Internet greatly facilitates location of expertise and thereby favors the development of consultancy. Second, some panel members fretted about a possible rise in the number of keyboard slaves, especially among those involved in B2B (business-to-business) transactions. But, they recognized that individualization of work will place a higher premium on human touch in B2C (business-to-consumers) transactions. Third, since the nature of work will change, they wondered also whether we might not be at risk of creating digital elites, thereby accentuating further the divide between the young and the aged, and between developed and developing countries. (One panel member remarked that the Internet was bypassing developing countries and that poverty and the looming water crisis, for example, draw more attention there. He recognized, however, that information and communication technologies can promote economic growth.) No consensus arose on this issue, beyond an acceptance that a digital divide will appear if human capital is not leveraged, irrespective of age differences or the stage of development of national economies. (And, the panel members observed that the rate of change of technology had, thus far and in general, outstripped the rate of learning, even in developed countries.) Fourth, on a related theme, some panel members worried that universities, in the United States and Europe, are not investing enough to continue to exist in the digital age. Fifth, they observed that the Internet has implications for trade unions too. Unions will, for example, need to pay more attention to distance learning and to the establishment of labor standards appropriate for changed work environments. Lastly, the panel members wondered whether the Internet might not exacerbate unemployment among unskilled workers. But, they could only express general expectations that the new economy will boost demand and thus create additional employment opportunities throughout. In the opinion of the panel members, there will, after all, always be a need for manufacturing and delivering physical products. E-Politics and E-Security: Controlling the Uncontrollable? A propos e-security, the panel members reflected on the Internet's power to change the world into a global marketplace and examined whether it has to be regulated. In the affirmative, how can the right balance be struck? They identified trust to be a key issue, underpinned by the need for security. One of the panel members identified that the main difficulty lies in defining the kind of security desired, which in turn defines the kind of trust necessary. He noted that the Internet is used for a variety of purposes, and that this compounds infinitely the difficulties of ensuring security. The panel members agreed that the need for security has grown most recently, despite early sentiments in favor of laissez-faire. This warrants the early introduction of encryption products, a measure that the European Union supports too. But, they drew distinctions between the various dimensions of security, which they identified broadly as technical, economic, social, political, and cultural. In the immediate, this means that formulation and enforcement of regulations must start at the national level, although regulations will surely need to be transnational later on. (One of the panel members remarked that in the United States, discussions about security are now carried out at the state level. This does not offer the promise of an early consensus at the national level.) The panel members cautioned, however, that there is no universal solution to e-security. It is necessary that each user decide on the security he or she requires. Of course, this security varies according to the value given to the information exchanged, which means that trust does not have an exclusively technical dimension. Therefore, it is more appropriate to have market forces accomplish as much of the regulation as possible. On the subject of hackers, whom the panel members did not see as a major issue, there was a consensus that the adoption of simple rules of behavior by users, e.g., refraining from opening e-mail attachments sent by unknown parties, will reduce risks considerably. On the more elusive subject of e-politics, the panel members contended that there is no sign that the involvement of start-ups in politics (as in the United States) will supplant the political process. In all probability, people will still favor representation and will not wish to vote on each and every issue via the Internet. However, the panel members concurred that e-politics will force politicians and governments to inform themselves better, and that this will arguably lead to better decision-making. The conference covered much ground and the global moderator pulled together very different threads. His task was not made easy by the professional orientations of the panel members, which colored arguments somewhat and prevented a multidisciplinary assessment of how the Internet will impact markets, labor, security, and politics. I wish in particular that clearer conclusions had been drawn on e-markets. Irrespective of industry, e-markets will force organizations to rethink their products, relationships, and even their core capabilities. But, once again, a conference to discuss this subject did not succeed in defining the new paradigm underpinning competition and strategy. Practicing Syndication. To my mind, many of the new rules about competition and strategy can be found in reference to the practice of syndication, a way of doing business restricted earlier to the world of entertainment but which is now moving from the periphery of business to its center. Syndication refers to the sale of the same good to many customers, who integrate it with other goods and redistribute it. So far, syndication has been rare in business because fixed physical assets and slow-moving information have made it difficult, if not impossible, to establish fluid networks. But, fluid networks are becoming possible and essential. It is then helpful to depict organizations as fulfilling one or more of three roles. These are acting as originator, syndicator, or distributor. Originators create content, syndicators package content, and distributors deliver content. (ADB, one could say, plays all three roles simultaneously.) Through this lens, one can see how organizations could need to rethink their strategies and relationships in radical ways using hubs and webs. Core capabilities, for example, would become products to sell, not hide. The syndication lens would also help an organization to identify where it needs to integrate its virtual and physical operations, and where it needs to keep them distinct. (August 2000) Copyright ©2002 Olivier Serrat