Part IV: Finding a Home for eBusiness

Finally, we are ready to discuss ways to organize eBusiness. This article discusses the three models and the criteria used for eBusiness design


Finally, we are ready to discuss the organization design for eBusiness.

The four elements or eCapability

Much like business, eBusiness capability has four components:

  1. Strategy
  2. Processes or operations
  3. Organization
  4. Information Technology

Sometimes, the focus is only on eBusiness Strategy, eMarketing and eBusiness IT and for obvious and good reasons. These functions are analogous to the existing “brick and mortar” functions. The rest of eBusiness processes can be superimposed on the existing processes of an organization. eBusiness Organization is ignored because that discussion is often less logical and more political.

Additionally, there are new processes and skills required for eBusiness that did not exist for “brick and mortar” businesses – measurement and tracking. Traditional business did not have ready access to the amount of data that is available in eBusiness, unless they were disciplined enough to have integrated systems and/or data warehouses.

eBusiness provides unprecedented access to key data through web logs, ad servers, application servers etc. Analysis of this data is critical to the success of eBusiness. It must drive all decisions pertaining to eBusiness strategy, organization and processes. Consequently, it is also the glue that ties together the key elements of eCapability. Splitting eBusiness capability along functional lines is not advisable for this reason.

If you must split the eBusiness organization

The opportunity to split the eBusiness organization is at five key intersections:

1) Strategy – merging it with existing organization and processes for business strategy

2) Marketing – merging it with existing organization and processes for marketing

3) Operations - merging it with existing organization and processes for operations

4) Customer Service - merging it with existing organization and processes for customer service

5) IT - merging it with existing organization and processes for Information Technology

This is like splitting the human body into parts and hoping that they will work in tandem. The argument is simple: just because it hasn’t been done before doesn’t mean it can’t be done!

And to make another minor point, this organization converts eBusiness from being a business driver to a business enabler! This organization design ensures you will keep up with the competition, never leapfrog it.

The three eBusiness organization designs

Essentially, there are three key ways to organize eBusiness:

1) Decentralized: merge eBusiness functions with existing functions

2) Hybrid: merge some functions with existing functions and create a new eBusiness function

3) Centralized: Create a separate functional unit that handles all activities related to eBusiness

Within the extremes of centralized and decentralized organizations there are virtually unlimited options available to create a hybrid organization for eBusiness. Each option presents opportunities and challenges. As discussed previously, the choice depends on the specific circumstances of your company:

Evaluating eBusiness organization design

First, let us look at the pros and cons of each design:

 

Pros

Cons

Decentralized · Close alignment with business especially business units• Effectiveness in
vendor management• Faster decision making
• Excessive overall costs to due to fragmentation and
duplication• Variable standards resulting in incompatible systems, policies and procedures• Doesn’t take advantage of corporation-wide best practices

• No synergy or integration

Hybrid • Ability to tailor organization design to business needs and circumstances• Relatively quicker decision making• Relatively better economies of scale

• Relatively better at standardization

• Excessive overall costs to due to fragmentation and
duplication• Variable standards resulting in incompatible systems, policies and procedures• Doesn’t take advantage of corporation-wide best practices

• Lack of synergy or integration

Centralized • Economies of scale• Control of standards e.g. demand management• Critical mass of skills

• Standardized training, systems, policies and procedures

· Unresponsive to Business’ needs· Little alignment with business units· Does not meet every business units’ needs

eBusiness organization design selection

The specific circumstances of your organization will ultimately determine the eBusiness organization design best suited for your needs. Please try to avoid following “best practices” because that myth is created by consultants like me so there are billable hours finding them. The only unmistakable truth in the business world is: “best for the need.”

The determine the best design for your needs, please take a closer look at your specific circumstances and resultant requirements:

  1. Business Model
  2. Existing organization and processes
  3. Organizational maturity
  4. Industry maturity

As discussed previously, your organization has but one business model - eBusiness might fundamentally alter it but the fact remains that after it is factored in there remains one business model. The unique requirement this business model places on your business capability has implications for your organization and processes.

Another key factor is your existing organization and processes. For example, if your company operates as independent business units, how successful is a centralized eBusiness organization going to be? Don’t get me wrong. The capability will work great on paper but fail in practice.

Organizational maturity is also a key factor driving organizational design. Contrary to our best intentions, change happens in steps. You cannot get from here to the moon in one leap. Keep the big picture in mind but take baby steps to it. For example, if eBusiness is new to you, then you are better off pursuing a decentralized or hybrid approach. If you have convinced yourself that it is time to get all the benefits of a centralized organization then, among other things:

  • Make it clear to everybody and their brother that this is an executive mandate coming from the board and the CEO
  • Have the head of eBusiness report directly to the CEO
  • Clearly delineate the processes and their integration with the rest of the company

Industry maturity dictates the time you have to take the baby steps I suggested earlier. If your industry is moving fast then you might not have an option but to accelerate change. Fast change is not fatal, it just requires a different approach.

Four eBusiness design myths

  • eBusiness can be split into functions
    • As discussed previously key eBusiness functions are intertwined. To be effective and efficient, they must work in extreme collaboration. More than other disciplines, a process versus function based organization is more appropriate for eBusiness.
    • eBusiness functions require skill sets different from existing skill sets in most organizations. For example, online marketing is a discipline that requires different skills than its offline counterpart
  • “Effective” Governance can solve it all
    • Governance is a very powerful tool available to manage – monitor and control – eBusiness capability. However, it cannot be effective in the absence of appropriately designed eBusiness organization and processes. For eBusiness to be effective all elements of eBusiness capability must work in tandem. One can compensate for the lack of ability in the others only to a point – governance is supposed to be a glue that ties the other elements together; it should not be made of spit and gum or the results will be disastrous. (Try praying instead – it is cheaper and makes you look good!)
    • Governance is a reflection of the culture and attitudes of an organization. If it cannot design proper organization and processes, what are the chances of it having effective governance?
  • “Collaboration” can overcome design
    • In a corporate setting, is the natural tendency of people to work to their advantage or to those of others’? Not sure how to put this to you but how “collaborative” does your organization appear to you?
    • Sad but true: the entire reason for organization – structure and processes - is to reduce, indeed eliminate, the need for individual action to overcome routine issues. “Executive” decisions are relegated to a few and driven by the written rule, precedent and only in case of exceptions related to uncharted territory there is a need to make them. “Real work” i.e. execution of processes other than governance, is done at levels below “executive”. If people have daily discussions and debate on things that should not be debated, when will real work and progress be made?
    • Collaboration requires excellent organization not vice versa. Period.
  • Training can overcome the lack of existing skills
    • The fundamental questions with training are and always has been
      • Can some things be taught?
      • Can some people be taught certain skills?
    • Do you have the luxury of time?
    • The word catalyst has an important meaning for eBusiness organization design. Perhaps, one way to accelerate your move to eBusiness might be to introduce catalyst from the outside to bring about, indeed accelerate the change. As with science, in business catalysts require appropriate environment and care to work!

eBusiness organization design has either been neglected or an afterthought. If your organization wants to create value from the net, how it organizes for that endeavor will often, indeed invariably, determine its probability of success.

Sourabh Hajela is a management consultant and trainer with over 20 years of experience creating shareholder value for his Fortune 50 clients. His consulting practice is focused on IT strategy, alignment and ROI. For more information, please visit www.StartSmartS.com. Or feel free to contact Sourabh at Sourabh.Hajela@StartSmartS.com.


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Posted on 06/04/2009 by


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