EXTENDING THE COMMERCE CHAIN

Global 2000 emphasis has shifted from dot-com ebullience to leveraging the Web for competitive advantage by extending internal supply chain management to numerous trading partners, using the Web across all aspects of the product life cycle. Through 2001, companies will continue to create more mature ERP systems as they finally begin to deliver internal collaboration. By 2002/03, early wins of indirect-centered e-procurement will be extended to direct procurement, with much dependence on private Net markets. By 2004, sell-side architectures will not only link to highly optimized internal supply chain algorithms (available/capable/profitable to promise), but also will be routinely "onboarded" to strategic marketplaces (2-3 per industry). (Barry Wilderman)

KM AND PORTALS: CHICKENS AND CHICKENS

Many inquiries about knowledge management (KM) coincide with portal deployments. Since most enterprise portal initiatives typically have a considerable KM component (oriented around collaboration, content indexing/submission, search and categorization, and expertise location), and because KM initiatives alone are much more difficult to justify (and garner acceptance), we believe that these two should go hand in hand. Some KM endeavors can precede a full-blown portal implementation, but for widespread deployment/acceptance (and both strategic and tactical integration), we recommend a combined approach. (David Yockelson)

 MANAGING THE BIAS IN APS

Despite vendor claims to the contrary, all planning systems have some built-in bias, given the business assumptions a company makes when setting planning rules (e.g., lead times, change over time) and constraints. Users often encounter "solution drift" (i.e., deterioration in quality of plan) over the life of an advanced planning and scheduling (APS) system, because they fail to institutionalize a process for review and adjustment of planning assumptions. Companies should at least set up a monitoring process to evaluate key metrics and make appropriate adjustments in planning parameters. Over time, companies should evaluate closing the loop between planning, execution, and analytical systems, so that automatic adjustments to planning parameters can be recommended to the user. (Dwight Klappich)

TRADEOUT DIVES TO DOVE

Used-industrial-equipment Net market TradeOut, after recently selling off its consumer retail business, was acquired by DoveBid, a traditional auctioneer (it dates to 1937) turned Web marketplace. Even though TradeOut's business model sounded plausible, its decline illustrates a point we made in 2000: in this business (as in many others), the winners will be the content owners. Dove owns auctioning, lessor, and product "content," making it hard to beat once it turned on the electronic "engines." Indeed, the TradeOut acquisition gives it greater Web/customer presence that augments its existing portal relationship with Yahoo. (David Yockelson)

RESOLVING TAXONOMIES AND BUSINESS PROCESS CONFLICTS

Organizations often begin creating enterprise taxonomies with the best of intentions, but begin to hit brick walls caused by the existing organizational boundaries (and politics). In creating taxonomies, organizations should develop processes for handling conflict resolution by either agreeing to redefine the organizations' standard definitions of terms, or separating differences into multiple layers of taxonomies (e.g., industry, enterprise, line of business, workgroup). We believe organizations not attempting to address these taxonomy conflicts effectively now will adversely affect their ability to manage both structured and unstructured data effectively in the future. (John Brand)

DESPITE DOT-COM CARNAGE, SERVICES WITH STRONG BUSINESS MODELS PROSPER

While the overall tech sector moans about reduced earnings and low-growth or no-growth earnings forecasts, some of the biggest names in areas such as movies, travel, games, and individual auctions keep raising their expectations. The stock prices of these companies reflect their high hopes.

Even as the tech-saturated Nasdaq composite index has shed one-fifth of its value since the year began, shares of auction king eBay have nearly doubled in value. Travel Web site Expedia has more than quadrupled. Game software publisher Electronic Arts and computer-animation specialist Pixar Animation Studios have seen their market capitalizations rise by more than one-third. Nvidia, the fastest-growing maker of 3D graphics chipsets, has risen more than 150%.

Success on the Web is not limited exclusively to business-to-consumer (B2C) sites. For instance, auto-industry exchange Covisint recently reported that its auction site had handled transactions totaling $33B in the first half of 2001. This very strong growth surprised auto industry analysts.

"The issue is not whether the site is focused on consumers, businesses, or even employees," says META Group analyst David Cearley. "Sites with a strong business model are growing and prospering, while those that do not have a viable business model are failing."

That business model must have four solid anchor points:

1. It must clearly define its target audience.

2. It must be able to map a compelling value proposition to that audience.

3. It must have strong financial business model.

4. It must have strong differentiation in the marketplace.

Web businesses also tend to succeed when they create a marketing channel where none previously existed. For example, eBay provided a way for individuals to tap a nationwide market rather than be limited to the classified ad coverage of a local newspaper. Another winning strategy is to enhance an existing distribution channel - for example, Covisint in the automotive industry - especially when sponsored by the largest players in that industry.

However, what typically has not worked is outsiders or newcomers assuming that Internet technology can be used to unseat established players in an existing, mature market. Many mature markets, while perhaps appearing inefficient from the outside, are actually based on many years of evolving interpersonal relationships and business processes that have been optimized to that market's unique requirements.

"The successful services are often extensions of things that customers are already used to," says META Group analyst Jack Gold. "Service designers should be careful that they to not make radical changes that confuse rather than attract users."

Entertainment, travel, and online auctions are all areas that are interesting and familiar to consumers. However, at the height of the Internet craze, many Web business models focused only on generating visitor volume and gathering visitor information. Profitability and differentiable value to the visitor was secondary, at best.

The inevitable and harsh consolidation is sparing those that looked beyond this simplistic and financially unsound model. The business-to-business (B2B) space has also had an overabundance of the "if we build, it they will come" mentality, and the shakeout will continue. The survivors in both markets will be those that have used a sound business model to create online businesses that take unique advantage of the Web to deliver clear value that customers are willing to pay for - either directly or indirectly.

User Action: Companies considering providing Internet services, or investors looking for potentially successful Web companies, need to focus first on creating a strong business plan. It is not enough just to launch a new service with lower prices - particularly when those lower prices undermine profitability - and hope that the competition will go away. Nor is simple convenience or a catchy Web name enough. These provide low, and often temporary, barriers to competition.

"Business challenges, increased expectations, and opportunities for Web-based business remain," says META Group analyst Val Sribar, "as do the risks of not changing."

Although doing business on the Web does not guarantee success, we believe the organizations that ignore it completely are following a risky path. Companies that develop a successful Web strategy based on a strong business plan which complements existing channels are in a position to gain market share against their competition. A solid business plan that balances multiple channels, which may include the Web, storefronts, and mail order, is the best approach.