Friday, February 16, 2001

Global 500 Must Restructure Now Or Miss Out On eBusiness

Today's organizational models do not support the focus and speed that eBusiness demands, according to a new Report by Forrester Research B.V.. To overcome this, Forrester advises that firms overhaul their existing corporate structure to support short business cycles. The result: companies will become a collection of autonomous business units, dedicated to different cycle lengths -- connected via an internal collaboration network.

Organizing for eBusiness will be one of the issues under examination at Forrester's eBusiness Forum Europe on February 26 - 28, at the Amsterdam RAI Conference Center. The Forum will feature Engelbert Suchla, managing director IT Planning and Control, BMW; Paul Timmer, head of eCommerce for the European Commission; Alex Gibbons, CTO, Transora; and Sally Davis, president, BT Ignite.

To understand how European firms cope with the organizational, process, and speed issues of eBusiness, Forrester conducted in-depth interviews with 20 board-level executives in Global 500 companies headquartered in Europe. These firms have an average revenue stream of
50 billion euros and compete on a global scale with multiple brands, both online and offline.

"If Global 500 firms only use the Net to get better control over their external business relationships but leave their internal structure untouched, the problems with speed and flexibility will get worse," said senior Forrester analyst Jaap Favier. "Because when Global 500 firms buy and sell up to 30% via eMarketplaces by 2004, the current model of a single eCommerce group will crumble under the pressure to support inter-enterprise technology and processes.

"As the pressure from external partners mounts, departments will demand real-time information in order to make instant decisions, and large firms today are not structured to provide this support: they lack focus on external markets, stagnate decision-making and fulfillment, and don't share information. Instant response to client and supplier needs will require entire companies to restructure to the eBusiness network (eBN) organization model. The new structure will form around business processes with different cycle lengths, defined as: The time it takes a business process to alter its output completely."

The explosive growth of eMarketplaces and the trend to outsource long-cycle activities like manufacturing, will force an internal shift to short cycles, shaping overall profitability, enhancing customer relationships and building corporate intelligence. Similar to investment banks and airlines, which have traded through electronic markets for decades, firms need to separate processes into business units with a particular eBN organization role and cycle length, enabling every manager to make decisions in the appropriate time frames. Every eBN unit will become more competitive in a specific market, select business partners on- and offline, contribute to the overall company bottom line, and develop its own unique information sources.

Due to the complexity of coping with reporting, staffing, accounting, and governance, firms need a stepped approach -- starting with the outward-facing short cycles to close the imminent gaps in client and supplier responsiveness, and progress outside-in with the medium and long cycles.

"Firms must first isolate short-cycle units by listing each industry that it sells or buys in, and set up a dedicated unit that will focus on the particular dynamics of that vertical," Favier added. "Companies must next dismantle medium and long cycles by appointing one medium-cycle unit unique to geographies. Finally, firms must implement new reporting structures by letting each eBN unit define its own board, with senior staff from inside the company and from the markets they serve. Once established, the units must negotiate and contract the exchange of products, services, and information between each other.

"The rate at which a company will complete these three steps depends on the demand posed by suppliers and clients for instant action and on internal inhibitors like staff resistance to change. For instance, a flat organization like Vivendi may complete the dismantling of processes in step one and two within a year. But Shell and E.ON, with complex matrix structures involving many verticals, must push themselves to finish in two years or become the dinosaur in their consolidating industries."

Airline Online PowerRankings
Alaska Airlines soars to No. 1 with a speedy reservation process and online refunds in the latest PowerRankings™ of airlines by Forrester Research, Inc. Forrester's PowerRankings combines survey data from online consumers and unbiased shopping tests to provide objective rankings of the leading US eCommerce sites. The companies that rank below Alaska Airlines are Continental Airlines, Northwest Airlines, Delta Air Lines, American Airlines, Southwest Airlines, United Airlines, America West Airlines, and US Airways.

While Alaska Airlines offers limited destinations, its reservation process is the quickest of tested sites for both first-time and repeat customers. Travelers can hold a reservation without entering a credit card number, and the site has a simple online refund process. On the negative side, not all email inquiries are answered, and terminal maps are hard to find.

Previous winner Continental drops to the No. 2 spot. It offers automatic login for repeat customers, integrated car and hotel booking, and the ability to check flight status by city name. But email support is dismal -- the only nonautomatic email response received during testing took two weeks to arrive and said to call for service.

Northwest finishes third with the quickest email responses of tested sites, automatic login for repeat customers, and features like airport maps. Shoppers can redeem miles for purchases online and check flight status by city name. But navigation changes between the main informational site and the reservation section, and the customer service phone number is hard to find.

Delta climbs from last to fourth place with the help of quick refunds and helpful service. But the site doesn't offer reservation holds, and the first-time checkout process makes buyers search for flights before and after registration.

"Alaska Airlines leaped to No. 1 by improving two critical areas: customer service and consumer satisfaction," said Tom Rhinelander, research director at Forrester. "And while consumers once again ranked Southwest highest, its bare-bones site and lack of email support drop it to sixth place overall. This is no surprise to Southwest, which has recently announced it will enhance the site."

For the latest PowerRankings, Forrester surveyed 20,000 consumers from the NPD Group's online panel. These consumers identified the eCommerce sites that they purchased from most recently and rated their experiences. A team of Forrester shoppers then evaluated the shopping experience on sites that have a statistically valid number of consumer respondents by performing a series of rigorous tests. The consumer data and Forrester shopper scores were then synthesized and weighted, with consumer views accounting for two-thirds of the overall PowerRankings. A complete set of PowerRankings results -- both consumer and Forrester shopper data -- is made available to all ranked companies free of charge.

News Tidbits (appears every day on the front page)
- Internet filter programs don't seem to be working. According to USA Today, "Despite years of tweaking, software programs that claim to 'filter' the Internet to protect kids from porn and other objectionable material still don't do a very good job, says Consumer Reports. The magazine's latest round of testing, released Wednesday, finds that most popular filtering programs allow access to one in five sites with X-rated and violent content."