By William W. Rutherford
E-BUSINESS.COM -- LEADERS SEE AND FEEL THE NEED FOR FAST DEFENSIVE STRATEGIC MOVES
E-business strategies are now powering forward. Leaders I speak with today are moving quickly to implement new and highly effective competitive solutions. Itís no longer something merely talked about, progress is fast. A key point is that current actions are driven more by an understanding of "defensive" requirements than with the more typical offensive strategies" in mind.
Why an e-business Defensive Strategy? Most companies have a lot to lose. Itís not just Amazon.com and Yahoo! anymore. Large customers, suppliers and aggregators are very quickly taking the advantageous high ground on this new battlefront. Leaders are finding that many of their customers are like GM or Ford -- both have recently announced that all the goods and services they buy will go through their websites by the end of the year 2001. In all industries, this capability will be a great equalizer between established suppliers and new contenders. Itís moving the procurement process to a much more robust data-intensive world, leaving little room for relationship selling, and in this case, greatly benefiting GM and Ford.
As customers to thousands of suppliers, both GM and Ford expect to save billions of dollars. Furthermore, they plan to view suppliers with slow sales figures as less competitive and will most likely use this information to go looking for replacement suppliers. GM and Ford are not strategic thought leaders. They simply represent a huge industrial base that is following much of the thinking going on in your large customerís minds.
Want to sell to other industrial customers such as GE or Lucent? Better get familiar with their B2B (business-to-business) link-up. Even the US Government demands a connection (they first required Internet connections thirty years ago, starting much of this process). Leaders have caught on that their customers are brandishing e-business as a powerful price reduction tool.
Many leaders further see many suppliers moving to the center of the fray --whether itís Fidelity, Oracle, Caterpillar, IBM or AT&T; today one can buy almost anything through the web. Itís only a matter of days, weeks or months before acquiring services, chemicals, commodities, energy, insurance and telecom bandwidth no longer needs human interaction. Large suppliers are fighting for control of their piece of this supply chain. Small and new suppliers see it as a new way to compete on a far more equal footing.
The most powerful driver behind todayís leadersí aggressive defensive strategies, however, is their realistic view of what the aggregators can do to their markets -- web sites that will collect your and your competitorsí customer orders and then bid them together out to the industryís lowest bidder. This is the logical next step beyond the "supply chain" sole-provider systems that many companies have put in place over the past several years. Aggregators offer customers the opportunity to reduce costs beyond what a customerís own volume would other-wise qualify for. In bidding this business out to the industry, they can quickly diminish the value of those companies not winning the bids. Furthermore, it offers small customers an equal seat at the table with their larger competitors -- potentially bringing with them a second level of product price restructuring.
My wife just used a retail version of an aggregator, Mercata.com, to acquire a branded item she was interested in. The product she wanted to purchase had a suggested retail price of $124.99. The lowest price she could find was $89.00 on Buy.comís site, which included free shipping -- not bad for starters. However, in going to Mercata.com she joined the aggregator group with the item priced at $74.00, and 24 hours later completed the purchase at $69.00 with no taxes due and free shipping included. Leaders are on target when they see aggregators playing a powerful role in redistributing value. Thatís why theyíre pushing their companies to deploy preventative strategies today.
e-business Offensive Strategies are much, much more straightforward. Here, leaders and companies can be in the drivers seat by deploying more efficient and effective ways of selling, procuring, supporting and delivering products and services -- with the opportunity to capture these value-added results for themselves.
is Chairman and CEO of Rutherford Consulting.
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