How Digital is Your Business?
An article by D. Richard Dance, CPA and Principal of SoftResources LLC
August 2001
In last month's review (August 2001), Richard Dance set the stage for this month's book, How Digital is Your Business?, by introducing e-books. The format of this review will take a two-pronged approach - one will be to discuss the book and its content using a Q & A format, and the other will be to discuss a few of my impressions about using electronic media as a way to read. These comments are contained within the sidebars you'll see in the right margin.
Introduction
In last month's review (August 2001), I set the stage for this month's book,
How Digital is Your Business?, by introducing e-books. The format of
this review will take a two-pronged approach - one will be to discuss the book
and its content using a Q & A format, and the other will be to discuss a
few of my impressions about using electronic media as a way to read. These comments
are contained within the sidebars you'll see in the right margin.
Contents
The e-book is organized as follows:
¨
Introduction
¨ 15 chapters (as outlined below)
¨ Epilogue
¨ Appendix A-E
¨ Acknowledgements & Index
What can this book say that is new and different?
For one thing, it's not a book about e-business. It's a book about digital business - an idea that began just eighteen months ago.
What is Digital Business?
The authors define digital business as a business "in which strategic options have been transformed - and significantly broadened - by the use of digital technologies."
What does that mean?
Page 16 of the book gives another definition of digital-business design (DBD). Perhaps this will shed more light on it's definition:
"DBD is the art and science of using digital technologies to expand a company's strategic options. DBD is not about technology for its own sake; it's about serving customers, creating unique value propositions, leveraging talent, radically improving productivity, and increasing profits. It's about using digital options to craft a business model that is not only superior, but unique."
What does this book do?
It makes available to the reader the economic and organizational implications of the success stories (as well as the struggles and setbacks) of companies that are leading the way towards the digital designs of the future.
What companies are featured in the book?
The book features case studies about ten companies heavily involved in the digital economy as follows:
| Dell | Chapter 4 |
| Cemex | Chapter 5 |
| Charles Schwab | Chapter 7 |
| Gateway | Chapter8 |
| Cisco Systems | Chapter 9 |
| GE | Chapter 12 |
| IBM | Chapter 13 |
| AOL | Chapter 14 |
| Yahoo! | Chapter 14 |
| eBay | Chapter 14 |
What do the other chapters do?
They focus on specific aspects of digital-business design, such as:
¨
The Choiceboard - Chapter 3
¨ 10X Productivity - Chapter 6
¨ Organizational Effects - Chapters 10 and 11
…and of course, what digital-business design is.
Probability of Long-Term Success?
The authors believe that a company's probability of long-term success vested with "the quality of business design." Now they add to that another success indicator - "the degree of its relevant digitalization." A quadrant table below shows the four possibilities. The northeast quadrant is the target zone.
|
High digitization, bad business design NW |
High digitization, great business design NE |
|
SW Low digitization, bad business design |
SE Low digitization, great business design |
The authors believe most companies have low digitization and bad business design (the SW quadrant). There is a digital ratio chart on page 27 to help you figure out where your company fits.
Why do most companies not reap benefits?
Just about every company has Internet or digital initiatives, but these efforts are more a jumble of activities such as setting up web sites, working on shopping carts, giving laptops to everyone, etc. This is not a coherent digital strategy. "Most companies are not reaping the benefits of digitalization because they haven't thought through the purpose of digitalization from the standpoint of the major issues facing their business".
What are the benefits?
There are eight benefits of digital business design:
1. The
basis of your business decisionmaking shifts from guessing to knowing.
2. The value proposition you offer to your customers shifts from a mismatch
(great or small) to a perfect fit.
3. Information flow within your company shifts from lag time to real
time.
4. Your customer service model shifts from supplier service to customer
self-service.
5. The use of your employees' time shifts from predominantly low-value-added
work to maximum talent leverage.
6. Your processes shift from a focus on fixing errors to preventing
them.
7. Your productivity growth pattern shifts from a norm of ten percent improvement
to 10X productivity improvement.
8. Your organization shifts from a collection of separate silos to an
integrated system in which information, ideas, and solutions are shared.
The important shift is how these eight benefits help you become more customer focused, talent focused, and profit focused. The authors believe that the net effect of these benefits is multiplicative, not additive.
What
else is in the early chapters of this book?
Michael Dell said, "If you take a business that is a bad business and put it on-line, it's still a bad business. It just becomes an on-line bad business." The rest of the first chapters help you think thorough the most important ways to advance your business in DBD.
What is a choiceboard?
As the authors define it, a choiceboard is "an interactive on-line system that allows individual customers to design their own products and services by choosing from a menu of attributes, components, prices, and delivery options. The customer's selections send signals to the supplier's manufacturing system that set in motion the wheels of procurement, assembly, and delivery."
Choiceboards encourage up selling, cross selling, and repeat business. One of the nice features of the book is the way the authors point out benefits every few pages. It makes you a believer in their concepts.
When does a choiceboard fail?
A choiceboard fails when customers don't know what they want. Then a set of questions must be asked up front to educate the consumer on their choices.
What is different about this book's case studies?
Several things. At first I was not looking forward to reading the case studies, for they are usually dry and factual. The items that I appreciated in this book were as follows:
¨
Historical perspective
¨ Interviews and detailed customer experiences
¨ Comparative charts
¨ Insights and benefits throughout the case study
¨ Summary tables
¨ The distinction between "bits" and "atoms"
¨ Ideas for your business sprinkled into the case study
¨ The financial outcomes
¨ Future issues these companies face
After I read the first case study I was hooked. They are good and relevant.
What is 10X productivity?
10X Productivity Improvement is defined in the book as "more than an incremental growth in efficiency. It is a fundamental change in the way companies do business. It liberates resources to serve customers, leverage talent, grow the business, and help toward achieving strategic leadership."
A digitized business design can enable 10X productivity rather than the usual increments.
Is
there something I didn't like about the book?
Yes. Page 194, Figure 8-1 seemed to expand the focus far beyond the previous case study companies into other areas that weren't as pertinent as previous chapters. In fact, I felt that Chapter 8 on hybrids was an anomaly whereas all the other chapters contributed together for the book's benefits.
Was there a chapter that pleasantly surprised me?
Yes. Chapter 11 on the active customer. The section on frustration was valuable. I liked the discussion on the two crucial ingredients of insight and courage. The digital obstacles checklist was also valuable.
How does the book end?
The authors
discuss a preliminary sketch of the organization of the future where the CEO
has a CIO partner that both speak a common language and much more.
Are the appendices worth reading?
Yes and No.
If you wish to become a digital business, Appendix A and B are a must-read. Appendix C, D, and E are not, but the web links at www.howdigitalisyourbusiness.com are.
Who is Mercer Management Consulting?
Slywotzky and Morrison work
at this company (Weber is a writer). It has 400 consultants in twenty-three
offices spanning four continents. If I were you and felt I could use them, I'd
contact them. They're good. This book and five other agenda-setting books on
business strategy tie into their consulting firm's practice.
Conclusion - Why you should buy this book
Since I began reviewing e-business books, I can make the following recommendation as to what I've read so far. If I could only buy two books, I'd buy:
1) e-Business 2.0 Roadmap
for Success (see review, June 2001). Foundational and educational.
2) How Digital is Your Business. It will move you to action.
This replaces my earlier recommendation to buy "e-Strategy, Pure and Simple" (reviewed April 2001), and, of course, I'd save up some money to buy my book, "Elements of e-business: Unlocking the Formula for Success" when it's published by John Wiley & Sons sometime in 2002.
Where
to Obtain the Book
It can be purchased directly from the following sources (suggested retail for the e-book is $19.95):
Amazon.com's web site (www.amazon.com)
for $15.96.
Booksamillion web
site at (www.bamm.com) for $17.96.
Barnes and Noble web site (www.bn.com) for $19.95.
Contentville.com web site (www.contentville.com)
for $16.76.
This book is also available
in hardcopy format. Suggested retail is $25 U.S.
Information about SoftResources
This article was written by D. Richard Dance, CPA and Principal of SoftResources, an unbiased software selection firm that works with over 7,500 software packages in 50 different categories of software, such as Accounting, Manufacturing, Distribution, Customer Relationship Management, HR/Payroll, e-business, etc. It also helps large and small clients select from over 2,500 software implementation vendors and Value Added Resellers (VARs). Then it performs contract negotiations so clients get a fair deal. SoftResources consults with companies all over North America in almost all industries including commercial enterprises, governments, non-profits, and school boards. Check out the company's web site at www.softresources.com for more details.
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